Can Item-Level RFID Provide A Solution To Retail’s “Inventory Distortion” Problem?

An interesting study was just released this week from IHL Group that spotlights the staggering costs of the “inventory distortion” caused by retail out-of-stocks and overstocks.

According to the early released stats, the industry’s “$800 Billion problem” is costing retailers nearly $118 for every man, woman and child on the planet. However, highlights from the report also suggested that fixing “inventory distortion” (or out-of-stocks/overstocks) presents the opportunity to increase same store sales by 9.2%. 

I think it goes without saying that these are some startling numbers. However, based on recent statistics highlighted during our 2010 tekSESSIONS event, I think it might be time for retailers to take another look at the many solutions that item-level radio frequency identification (RFID) tagging can provide. 

One of the speakers at tekSESSIONS 2010 was Chris Warner, Senior Product Marketing Consultant at Motorola. Warner gave a presentation illustrating that, among the many benefits of RFID technology, the average retailer has the potential to increase their inventory accuracy to an astounding 99.9% with item-level RFID tagging (up from 65% accuracy pre-RFID), and reduce their out-of-stocks 60% to 80%.

Back in July 2010, we published an article about how some big-box retailers like Wal-Mart and American Apparel were finding success with their (RFID) item-level tagging pilot programs. Interestingly enough, Warner also noted in his presentation that other retailers are engaged in significant RFID efforts, but haven’t yet publicly announced their efforts.

Since then, Aberdeen Group’s 2011 Store-Level RFID Benchmark study uncovered 40% of 125 survey respondents are planning a pilot store as part of their RFID roll-out strategy, and another 10% indicated multi-store deployments.

With benefits such as faster floor replenishment, better location visibility, reduced theft and enhanced inventory accuracy, I have to believe item-level RFID tagging may have the potential to not only help retailers gain a competitive edge, but to also recover some significant costs.

So, what do you think? Does item-level RFID tagging provide the solution to retail’s “inventory distortion”? Join us online in our LinkedIn group, Retail tekSPERTS and give us your opinion! We’re always online, so if you’d rather just stay up-to-date on the latest developments in retail/hospitality technology, you can always follow us on Twitter @tekservePOS or connect with us on Facebook.