On adoption of the 'next big thing'

It has been said that in the short run we often over-estimate the impact of the introduction of a new technology (leading to hype), but under-estimate the impact in the long run (leading to the ‘this changed everything' feeling). Examples of this phenomenon often quoted are the internal combustion engine, and the Internet.

Well, I think I've got another one - the introduction of Radio Frequency Identification (RFID).

It was not so many years ago that everybody was suggesting that RFID chips would be on everything and anything revolutionising supply chains, consumer shopping experiences and ending privacy.

I'm sure that I'm one who could be accused of adding to this hype. As CEO of GS1 New Zealand I lost count of the number of invited presentations I delivered from 2005-8 on RFID (GS1 is behind the most ubiquitous RFID standard - the Electronic Product Code or EPC).

The strange thing is that the airwaves and the consumer blogs are not full of news - let alone hype - around RFID these days. However, in 2012 the number of RFID chips sold is solidly in the billions and chipped products are all around us. And there is no fuss. If it is not on consumer items, then EPCs are appearing on luggage tags in airports (to automatically route bags through the conveyor systems) or on animals.

At the recent GS1 General Assembly I was privileged to see an RFID transformed environment at the mega retailer Macy's. A $35b retailer across Macy's & Bloomingdales brands, they are progressively rolling out apparel and accessories with EPC chips. Where possible RFID is installed at source (=the manufacturer); else tagging is done at the DC or receipting. The aim is to ensure that the right size and right colour of each and every item is in the right place at the right time with the ultimate aim of on-shelf availability. The most interesting application to me was on shoes. At the store we visited, they stocked almost 5,000 models of shoes (with up to 300,000 shoes available for sale on any given day). And in a department store like Macy's if "you can't win on cosmetics and women's shoes you can't win". Of course, the game in shoes is to ensure that sample shoes of every style and colour are out on display; no good having stock in the back if a customer does not know that it exists! Assisted by rapid identification by EPC 2 Macy's store associates can check all 5,000 samples are ‘present & correct' within 1 hour. Macy's now leads the industry with a very low percentage of ‘missing' display shoes. Achieving such tasks manually or even with barcodes is a humungous task; RFID allows Macy's to repeat this task 5 times per week to drive a very positive ROI.

If you think of what RFID can solve - the ability to identify multiple (up to 500 per second) items at the same time without line of sight and from a distance - apparel and general merchandise is absolutely the best match for RFID and a proven deliverer of return on investment. Item-level identification by RFID is one of the major drivers of growth in the chip market. Most major US and European retailers are using it or rolling it out.

Is there any fuss? Are there lots of conferences and presentations on the transformational effect of RFID? No. And in some ways nor should there be. Businesses are doing what they do best - implementing to get business benefit.

The strange thing is that in NZ and Australia there is vey little implementation of EPC/RFID in this sector or the grocery sector at present (who funded most of the RFID R&D). Most ‘action' is in the agribusiness sector. I'm not sure why, but I must find out!

Written by Dr Peter Stevens, CEO - GS1 New Zealand

Published in FMCG