What is RFID Technology and How Does It Work? A Guide for Retail

RFID technology and its counterparts, like near-field communication (NFC) and Bluetooth low energy (BLE), are reshaping logistics, inventory management, and fulfillment. 

With RFID, McKinsey estimates retailers can unlock up to 5% top-line growth from better inventory control, and achieve a 10% to 15% reduction in inventory-related labor hours. 

Want in on the action? Learn how RFID technology works, its advantages for retailers, and how you can use RFID technology in your store. 

Examples of RFID tags and technology in retail

Retailers are always looking for ways to test and implement technology to operate more efficiently, set themselves apart from the competition, and improve the shopping experience.

Most retailers see RFID technology as a clear path to more accurate inventory counts, but some innovative retailers use it for more than simple inventory management.

Not sure how radio-frequency identification technology could fit into your business strategy? Here are four innovative examples of how RFID technology can be put to work in retail.

1. Baroque Japan

Baroque Japan, a Japanese fashion retailer, recently introduced an RFID-based application from RFLocus that locates and provides visibility of inventory in 150 of its 700 stores. 

The P3 Finder app enhances the existing RFID solution and enables Baroque Japan to serve the demand for buy online, pickup in-store (BOPIS) by keeping inventory counts at each store accurate and up-to-date. 

The app is integrated with Sensormatic’s TrueVUE Cloud software, which enables Baroque Japan’s staff to find items required for restocking in stores more easily. The P3 Finder app uses 3D radar to show the item’s location in the warehouse and store, and enables staff to understand how close they are to any items at any given time.

2. Ralph Lauren’s virtual fitting rooms

Luxury retailer Ralph Lauren created its own in-store fitting rooms. Customers step into interactive fitting rooms to try on their merchandise for size.

A virtual screen uses RFID technology to read data from inside a clothing tag. It uses that data to present an overlay of the product on a live image of the customer.

These fitting room mirrors allow shoppers to get a 360-degree view of what they’re trying on, and with a simple gesture even to change the color or pattern of the clothing. 

It also helps the retailer provide a level of personalization that can build loyalty and keep customers coming back for more.

3. Advanced Apparels’ RFID stock locator

Retailers are investing millions in integrated RFID solutions that minimize out-of-stock situations, provide real-time merchandise location data, and improve the customer experience. The technology allows them to track their inventory throughout the retail supply chain, from the warehouse shelves all the way to the sales floor.

Clothing wholesaler Advanced Apparel is one of the brands using RFID technology in this way. The merchant uses RFID to pinpoint where its goods are located within a warehouse—down to the rack or shelf it’s stored on.

This use case is a huge timesaver for brands with thousands of SKUs. In Advanced Apparel’s case, searching 6,000 SKUs for a single item is unproductive and not cost-effective. 

The best part? Advanced Apparel added its own direct-to-consumer website earlier this year to co-exist with its wholesale deals and dropshipping partners. Now that the brand uses RFID to store and locate goods, it has an always-updated inventory count to sell omnichannel.

4.Unilever’s Ice Cream Shop

Unilever’s Ice Cream Shop mobile stores in West Hollywood have partnered with Robomart to offer on-demand ice cream deliveries, which will be tracked via radio frequency identification (RFID) technology. 

Robomart’s temperature-controlled vehicles, which are each filled with RFID-tagged ice cream products, will be available for order through an app.

The system will enable real-time inventory tracking and purchasing data and provide product tracking and sales data analytics. Customers can order ice cream any time and pay for goods using the Robomart app. 

Integrating RFID into your retail store

The retail industry is still in the early days of mass RFID adoption. Granted, the cost of implementing RFID technology is a worry for some retailers. Yet with the lower barrier of installation and the rising impact of shopper expectations, acceptance is inevitable in the coming years.

If you’re unsure, start small. Use RFID tags to locate inventory in your storeroom or warehouse. Analyze your peak shopping times for each store. And if you really want to push the boat out, create a virtual mirror that scans RFID tags and overlays what the product would look like on a customer.

Remember: Technology isn’t something to fear. When humans and RFID technology work together, merchants can save time, become more productive, and save money.