The holiday retail sales season by most accounts was characterized as volatile – with huge surges at the start and end of the season, and big dips in the middle. That’s obviously good and bad for retailers. How to smooth out the peaks and valleys surely will be discussed at the National Retail Federation’s “Big Show” this month.
This also gives us an opportunity to illustrate how an industry can think differently about RFID to help address this problem. As we asserted in our 2012 prediction that data and apps will rule RFID for the next 10 years, when companies hear the term “RFID”, they shouldn’t be thinking about readers and tags, but rather about processes. Here’s how it can be done within retail.
Real-time Data, Real-time Decisions
The age-old challenge in retail is how to maximize razor-thin margins. The newer challenge is sustaining increased sales in brick-and-mortar stores. Technology is essential, but it has more of an advantage for online retail.
A key to optimizing sales and margins is making near real-time decisions about merchandising, assortments and promotions. It’s easier to do this on the web because of data available from such things as what items people are clicking on, search queries, etc. Retailers can change what gets promoted on the fly with this information.
But how can this happen in physical stores? Point-of-sales systems provide data as to what people buy in the store. This has been where innovations in terms of data warehousing and analytics have come. There’s a lot of consumer behavior that takes place before the check-out though, and data from this activity can help make even faster decisions about assortment and promotions on the floor.
There are project-level RFID implementations in retail that we have highlighted here that can be broadened to make a process-level impact. For example, last month we wrote about how a department store in Japan is the first to use RFID-based interactive hangers that trigger a display of a model wearing a garment that a customer selects off a rack. The idea is to make the item more appealing at the point of interest.
Those hangers could do a lot more for a retailer, however. The mere fact that someone picked the item off the rack shows an initial level of interest, which can be captured as a new set of data; like clicking on an item online. If a person takes it to the fitting room to try it on, where there is another RFID reader, the system can capture this as additional data related to the level of interest in an item. If the item is left in the fitting room, the retailer can know this immediately, as well as if the item is taken from the fitting room to the check-out counter.
This is as valuable as the data that can be mined from web site clicks and searches and allow in-store managers to change assortments and displays much more quickly than before.
Processes and Solutions
When we say that we should reshape the way we think about RFID, we mean that we should not fixate on the need to prove the technology, but rather think about ALL of the processes that can be improved with the availability of RFID data. As the example above is intended to illustrate, retailers should think about how they can get data about shoppers’ behavior from the moment they walk in a store and the kind of analysis they can do to optimize processes accordingly.
Specific processes can be gleaned with the help of McKinsey’s recent Big Data report, which looks at retail as one of the industries where more value can be created from new data sources like RFID systems. These include in-store behavior analysis, customer micro-segmentation, assortment optimization and placement and design optimization.
Beyond the process identification, retailers can benefit from the availability of full RFID solutions that help them incorporate data generated from RFID systems with the data warehousing, analytics and mostly home-grown software applications used to manage operations.
We’ll continue our series of posts about how other industries can think about leveraging RFID data by looking more closely on healthcare and the in-transit markets. In the meantime, what are some other ways retailers can use RFID to enhance existing processes?