RFID Gives Brick and Mortar Retailers Advantages Over Ecommerce

Bricks and Clicks

July 25, 2016

“It’s very hard to launch a brand these days that’s just online only.”

After being credited with closing of an untold number of bookstores around the world, Amazon opened its first physical, brick-and-mortar store last November. The bookstore, in Seattle’s University Village, resembles other high-end chain bookstores, but its origins in e-commerce have flipped the online vs offline retail debate on its head.

Amazon is not alone in their strategy. In the last few years more than 20 online retailers, including Warby Parker, Bonobos, Birchbox and Casper, have established physical stores. Claiming the move will allow them to market their products better, many retailers are forging closer relationships with their customers, and even increasing their online sales.

Another truth, however, is that online real estate has become very crowded and expensive. L2 Inc, a research firm that tracks digital brands, estimated that Macy’s alone spent $6.4 million in paid search listings for the top 1000 apparel-related keywords just in the first quarter of 2015.

“It’s very hard to launch a brand these days that’s just online only. It’s an incredibly difficult and crowded e-commerce environment,” said a senior retail analyst at Forrester Research, who noted there are now over 800,000 online stores, all attempting to attract customers through the same “Google gateway.”

A decade ago the battle saw online retailers able to offer lower prices and the convenience of shopping from home. Brick-and-mortar retailers survived by moving online or because many shoppers still preferred to “touch and feel” products before purchase. Now the retail battleground lies in “omni-channel” retailing.

Through omni-channel retail, merchants aim to provide customers with a seamless experience whether shopping online, on a variety of devices, or at a traditional retail store. Omni-channel retail is no easy feat but has been made possible by the use of radio frequency identification (RFID) technology, giving the level of supply chain visibility needed to put this complex system in place.

Omni-channel bridges the divide between online and offline retail, giving the consumer the ultimate level of choice. Through omni-channel the consumer may do their product research online, reserve their purchase, but prefer to collect the product in-store rather than wait for delivery. Conversely, the consumer may use omni-channel to browse and purchase products in-store, then have the products shipped to their home rather than carry them around for the rest of the day.

“By replacing barcodes with an RFID system, retailers can now take stock twice a month, leading to accuracies of 95% or higher.”

However, for omni-channel to be successful, real-time inventory and location data need to flow seamlessly through the supply chain to the consumer and back the other way. This is where RFID solutions come in, by providing a means to accurately track inventory, the technology allow retailers to minimize out-of-stock situations, increase consumer trust and reduce lost sales.

Prior to RFID, inventory was generally taken just once or twice a year, providing stock accuracy as low as 60%, making omni-channel nearly impossible. By replacing barcodes with an RFID system, retailers can now take stock twice a month, leading to accuracies of 95% or higher, according to a study by Auburn University.

Back at Macy’s, the new omni-channel strategy “allows customers to shop anywhere, anytime, and any way they choose”. The retailer realized that their brick-and-mortar stores were ideal for fulfilling smaller orders, essentially functioning as inner city warehouses.

Macy’s launched its P2LU (pick-to-the-last-unit) omni-channel fulfillment program, which aims to make the last unit of an item in any store available for sale and easily located for order fulfillment, a system only possible with the highly-accurate inventory management provided by RFID. Through RFID enabled omni-channel, Macy’s has been able to reduce $1 billion in inventory from its stores.

The high cost of rent from brick-and-mortar stores was once a disadvantage against e-commerce competitors. Now, through RFID solutions and omni-channel retail, stores are doubling as well-located warehouses and “touch and feel” shopping experiences, giving brick-and-mortar retailers the upper hand in the battle for consumers, and forcing online retailers into the physical world.

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