International Study: Widespread RFID Implementation, but Challenges Impede Integration

RFID has the clear potential to transform the retail supply chain through real-time product tracking and identification and elimination of human error, but the industry is slow to embrace the new possibilities it offers—and technical and human challenges are impeding industry-wide RFID integration. So concludes an international survey conducted by Deloitte and Retail Systems Alert Group. The survey, “RFID: How Far, How Fast: The State of RFID,” provides the most recent snapshot of how 122 retailers, distributors, CPG companies and apparel manufacturers view RFID adoption and innovation in the 2004-2005 timeframe. It also provides initial insight into industry-wide investment and expectations for RFID in the next five years.

“Despite the hype surrounding RFID as the technological answer to most retailing challenges, there is still much that needs to be addressed before this technology will be able to sustain its reputation,” says Tom Friedman, president of Retail Systems Alert Group. And according to Mike PreFontaine, partner in the consumer business practice at Deloitte, many are still assessing the opportunities in RFID and thinking about where this technology could strategically take their businesses. “To some extent it will be a case of wait and see where the majors go with it first. In the next one to two years we expect to see major activity from the heavyweights, and this will pave the way for the small and medium sized enterprises,” says PreFontaine.

Highlights of the survey include:
• Three in four companies expect increased revenue from RFID within the first five years of implementation. Within Europe, revenue expectations are somewhat lower than elsewhere.
• Calendar 2004 budgets for RFID seemed low, and were somewhat lower in Europe. Most companies allocated less than $500,000 for RFID directly. This is the case for European firms as well—except for Distributors, whose allocations average $2-4 million. Most companies believe they allocated sufficient money for RFID in 2004.
• Generally, few manufacturers expected to tag more than 50 SKUs in 2004, but no European manufacturers say they tagged any SKUs during this time period.
• Although European manufacturers and retailers do share roughly similar awareness levels about technology standards, participants in other regions have somewhat different levels of standards awareness.
• Most companies are not looking at SKU-level implementation until layer adoption issues, i.e., technology standards, cost, and distrust of IT departments, are resolved.

The survey was released as part of the Retail RFID Technology Symposium, held at the 6th Annual Global Retail Technology Forum, March 15-17 in Barcelona, Spain.

Retail Systems Alert Group is a global research and events company. For more information, visit http://www.retailsystems.com. Deloitte refers to the associated partnerships of Deloitte & Touche USA LLP and subsidiaries, the U.S. member firm of Deloitte Touche Tohmatsu. For more information, visit http://www.deloitte.com/us.

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