CUSTOMERS’ BENEFITS INSIDE THE RETAIL
            STORE WITH RFID TECHNOLOGY



                            FREDDY BROFMAN...
Table of content
Reasons why not using RFID technology on the retail environment   1
Reasons why to use RFID inside retail...
Customers’ benefits inside the retail store with RFID technology

RFID technology has been criticized for not having any c...
It can be observed that the arguments against deploying RFID inside the retail store
are based on the data capturing capab...
What RFID can do, when deployed on item level, is to provide the customer with the
information on a smart price tag on the...
For example, expiration dates of the products could be immediately displayed to the
customer without requiring him to sear...
Conclusions

The ideas presented on the present paper are only ideas where RFID can benefit
both the retailer and the cust...
Collins J. (2005) “The $69 Billion problem” RFID Journal. March-April 2005 issue.
Also available from: http://www.rfidjoun...
Upcoming SlideShare
Loading in …5
×

Customers benefits in RFID technology

451 views
401 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
451
On SlideShare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
10
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Customers benefits in RFID technology

  1. 1. CUSTOMERS’ BENEFITS INSIDE THE RETAIL STORE WITH RFID TECHNOLOGY FREDDY BROFMAN LUÍS KLUWE AGUIAR October, 2006 Contact: freddby@yahoo.com Contact: luis.aguiar@rac.ac.uk European MBA in Food and Agribusiness Senior lecturer in marketing and Student international business Royal Agricultural College Royal Agricultural College Stroud Road Stroud Road Cirencester, Gloucestershire Cirencester, Gloucestershire GL6 7JS GL6 7JS United Kingdom United Kingdom Disclaimer: The ideas presented here are from the authors and not the institution.
  2. 2. Table of content Reasons why not using RFID technology on the retail environment 1 Reasons why to use RFID inside retail stores 2 Conclusions 5 References 5
  3. 3. Customers’ benefits inside the retail store with RFID technology RFID technology has been criticized for not having any customer benefit when deployed on retail environment (Albrecht et al. 2005). The argument of the present paper is that when RFID is deployed correctly it can create huge benefits both for the customer and the retail store. Even though item level tagging is a couple of years away; it is recognized by the retailing industry and different authors that return on investment will be reached once it is done (GMA 2006; Roberti 2006a). The present paper will not address a technical discussion on RFID technology. It needs to be understood that passive RFID technology refers the unique data found on a passive chip (also know as tag) to a database by means of radio frequency. The data usually is a unique serial number that when correlated to a database creates information that can be used in different ways (Brofman 2006, Anon. 2005a, Anon. 2005b, and Anon. 2005c). Robeti(2006) states that the amount of data that can be generated by the technology has to be handled carefully. This is because the technology can gather a high amount of the data valuable for use in Customer Relationship Management (CRM) and direct marketing applications. Even though a future with RFID implies a high amount of customers’ data being captured, there are other benefits that RFID technology can bring to the store and its relationship with customers that are not related to current retail CRM practice applications. The document is structured as follows; first a summary of the privacy issues used against deploying the technology on retail environment is drawn. After, ideas on why adopting the technology can create a win-win situation without gathering customers’ information are analyzed. Finally a conciliating conclusion is made. Reasons why not using RFID technology on the retail environment The main opposing reason to the deployment of RFID technology derives from the data gathering perspective. RFID has the capability of relating the customer’s identity to a unique product code by means of database correlation or within a loyalty program (Brofman 2006). This argument has been used by privacy activists against deployment of RFID technology on retail environment in two ways: • Firstly, RFID has the ability of locating a person’s position inside a store and associating it to a database. Therefore, the technology allows creating a huge database of pick-ups and left-behind products, as well as consumer’s location and time spent on corridors. • Secondly, misleading reason is that RFID could create dynamic pricing. The used argument is that dynamic pricing (the ability of a seller to change prices on real time), is going to be used to charge the maximum price that a buyer is willing to pay for an item, making the price fluid enough so that each customer is priced with the maximum he/she is willing to pay. The argument used against RFID technology is that consumers who have loyalty cards associated to that specific shop could be profiled according to their profitability. This could encourage retailers to offer more profitable customers with lower prices and it is likely that non-profitable customers would be charged with higher prices. 1
  4. 4. It can be observed that the arguments against deploying RFID inside the retail store are based on the data capturing capability of the technology, not the technology per se. Creating a database of customers’ every step inside the store has to be carefully analysed because the economic value of such information can overpass its costs. Making a customers’ profile of pick-up and left behind products may not have immediate economic sense since what it is actually bought is fundamentally what matters. Also, the argument does not take into account market share. Since the more segments of customers you encourage to buy from a store with a diverse product range the greater market share the company will have Therefore, dynamic pricing could benefit both the consumer and store. A non-profitable customer could be encouraged to buy high-quantity/low-quality-low-priced products and, conversely a profitable customer to buy high-quantity/high-quality-reasonable-priced products, therefore increasing market share and profitability. The eligibility of what price a customer would get for a given product would be found on the person’s profile, loyalty and money spent on a particular store. It is worth noting that because the opposition to the RFID technology has used the CRM enhancement capabilities to slow the deployment of the technology, the other benefits that the technology can bring when deployed on retail site have been blurred. Furthermore critics’ literature points out that the deployment of RFID item level tagging inside a store eliminates the benefit-of-the-doubt inside the store. Refraining, the technology exacerbates the idea that everyone is a “shoplifter”. The technology has the capability of locating the products inside the store and once it finds that the product has been picked up it automatically communicates to the checkout that such an item has to be paid for. This shows an economic incentive for companies to approach the RFID technology and for customers and employees an incentive to feel comfortable inside store. In a society where CCTV cameras are ubiquitous, having this type of technology inside a store could improve customers’ and employees’ privacy locating products instead of locating persons. Germany’s Metro and P&G example has shown that products can be easily located by combining the technologies (Roberti 2005). After presenting their arguments, privacy activist have stated that there is no real benefit for customers on the technology. However, they fail to address some interesting ideas for enhancing the retail experience of customers inside a store and save both customers and stores time and money without having the need to correlate the information to a database. Reasons why to use RFID inside retail stores Among patents, there are good ideas that are related to the use of RFID technology inside retail environment that can benefit both the customer and the company without relating the customers’ information to a database. Moreover, some ideas do not need the technology to be deployed on item level to benefit the customer. These ideas are available through bar code technology and some retailers have them already in place. One of the ideas is to use the technology for shelf availability. Nowadays, customers that want products, which are not available, have to ask for the product to employees just to find out that the product is available in the back-room or in another site. This type of process has low percentage of satisfaction because it gives the customer the assignment of searching the product and the waiting for it. (Collins 2005) 2
  5. 5. What RFID can do, when deployed on item level, is to provide the customer with the information on a smart price tag on the shelve space assigned to the product. Letting the customer know the product is available at the back of the store or at another location in real time. As opposed to other technologies this saves time and efforts to the customer to search for the information. Another reason why to deploy the products with RFID technology is the accuracy of the information about the product, RFID has the benefit that it can display the information the moment the customer picks up the product from the shelve on real time. Currently, these applications do not need deployment on item level, but have the benefit over bar code technology in that it eliminates the task for the consumer to ask for the information; it is simply displayed when the product is picked up. As different authors state and the industry knows (Roberti 2006a, GMA 2006), the benefits for retailers will come from item level deployment. The present document will present some win-win reasons that do not need to relate the technology to databases in order to have a positive return on investment. Some of the ideas come from the National Cash Register Company (NCR) a US$ 6 billion company that aims at providing solutions for companies with their interactions with consumers. In 2004, NCR published an article of 50 ideas were RFID could benefit the company some of them do not relate the technology with its customer data capture capability, these ones are replicated here among others. (NCR 2004) Retail products cycle and RFID innovations (Figure 1) CCTV cameras roll redefine Price tags replacement Shelve Shelve Notifications life time checkout Retail Bill of material product cycle for personal use Returns Checkout Product information Faster Checkout Source: Proposed by the author The benefits presented here can be allocated on the retail products cycle in four stages, the first benefit starts on the shelve lifetime, the second ideas can be prompt while the trolley is in transition from shelve to checkout. The third one is in process in the checkout and the forth one comes when there is a product return. (See figure 1) One of the short comings of bar code technology was that in order to generate substantial savings for retailers to use it, price tags were removed from the products (Brown 1997), this generated anxiety from different consumers organizations at that time. If RFID is deployed on product level consumers could gain electronic price tags on their products, eliminating the necessity of searching a bar code reader to confirm a price or promotion. Smart shelves, monitors or trolleys can give that information on real time when the product is picked up. 3
  6. 6. For example, expiration dates of the products could be immediately displayed to the customer without requiring him to search for the information inside the package, not to mention special care that the customer must have. Dynamic prices could be used to change the price of products that are about to expire. Another great benefit of RFID technology is that it can redefine the roll of CCTV cameras. They could be activated only when products are picked up or left down on the shelves, no more cameras that are active all day to track customers inside the store without any reason. Therefore, reducing “voyeurism” from security personnel and as stated above giving customers and employees their privacy back. One of the most revolutionary ideas that could benefit the customer inside the store (and at the same time affect the whole supply chain without having to access customers databases) are the notifications or precautions that the customer needs to know before purchasing the product that can be displayed on real-time. If the product is about to expire or contains raw materials that cause allergies, the information can be prompted on a screen when the shelve or the trolley detects that a product has been chosen. This can generate more responsible consumers and companies, since consumers should be more careful on what they buy and companies more careful with the products they sell. If item reading and correlation is possible a value adding service that can benefit both parties is to give some “recipes” or “suggestions” and “bill of materials” ideas to the customer, therefore encouraging the customer to buy more. Another benefit of RFID tags deployed at item level is its checkout efficiency increase, where no more queues will be needed at the checkout counter, saving time for both retailers and customers. Still this idea is considered to be the Nirvana of RFID for retailers (Dillman 2003). Right now the retailer Metro has a self-checkout system that has both barcode and RFID reading capabilities (Collins 2004), it has to be noted that RFID tags are killed at the checkout counter. The problem of self-checkout systems is that it assigns the checkout process to the customer, who must understand how the system works. The Nirvana of RFID technology will come once the constellation of products inside the shopping cart can be read without having to remove them from the trolley at the point of sale (POS) a reality according to NCR’s(2004) document. Item level tagging can create a win-win situation both for retailers and customers on product returns. It can benefit the retailer by knowing that the product was sold by the store, while the checking-out time can be reduced benefiting the customer. In order to keep this future of the technology without having to kill the tag IBM has developed a clipped tag that reduces the reading range of the antenna after the customer scratches-off part of the circuit (for more details see O’Connor (2005)). As it can be observed tracking products along its retail cycle has an attractive appealing for the customer and the company, it can redefine the roll of other technologies and furthermore it can generate win-win situations inside the customers’ retail experience. What is more this can be done without relating the technology to a customers’ profile. 4
  7. 7. Conclusions The ideas presented on the present paper are only ideas where RFID can benefit both the retailer and the customer without relating the unique item number to the shopping person’s profile. Privacy activist tend to dismiss the technology on retail environment since it has the capability of tracking persons inside the store. However, they have forgotten that RFID technology and CRM applications are two separate ideas. When the unique number is coupled with the persons’ profile in a database the benefits of the technology increases for both retailers and customers and it can generate more real-time information for customized sales. Product tracking on the retail product life cycle with RFID technology can bring potential direct or “rough” saving for both companies and customers. Determining this savings will ultimately depend on each company business case. Even though, the saving for customer has to be quantified. Common sense indicates that if the technology is used to give the customer the savings he desires according to its profile, then the technology can create loyalty to the retailer and increase the customers’ well-being. As a recommendation the economic benefit of the ideas for both retailers and customer must be studied, the rough savings should be directly associated to the technology being deployed on retail environment. References Albrecht K. and McIntyre L. (2005) “Spychips: How major corporations and government plan to track your every move with RFID” First editon. Nelson current Anonymous, (2005a) “The Basics of RFID technology” Printed in RFID journal. http://www.rfidjounal.com [Date accessed: 6th of September 2006] Anonymous, (2005b) “The history of RFID” Printed in RFID journal. http://www.rfidjounal.com [Date accessed: 6th of September 2006] Anonymous, (2005c) “What is RFID?” Printed in RFID journal. http://www.rfidjounal.com [Date accessed: 6th of September 2006] Brofman (2006) “Loyalty programs redesign among RFID lines, some examples from industries” Available from: http://www.rfidjounal.com [Date accessed: 6th of September 2006] Brown S. (1997) “Revolution at the checkout counter: The explosion of the Bar code” First edition. Harvard University Press Collins J. (2004) “Self checkout gets RFID upgrade” Printed in RFID journal. http://www.rfidjounal.com [Date accessed: 6th of September 2006] 5
  8. 8. Collins J. (2005) “The $69 Billion problem” RFID Journal. March-April 2005 issue. Also available from: http://www.rfidjounal.com [Date accessed: 6th of September 2006] Dillman L. (2003) “Wall-Mart spells out RFID vision” Retail systems 2003/ VICS Collaborative commerce event [Conference speech]. Wall-Mart. Available from: http://www.rfidjounal.com [Date accessed: 6th of September 2006] Grocery Manufacturers Association GMA (2006) “GMA information technology investment and effectiveness study” Available from: http://www.gmabrands.com [Date accessed: 6th of September 2006] National Cash Register NCR (2004) “Navigating the NEW ERA of RFID” NCR Available from: http://www.ncr.com [Date accessed: 6th of September 2006] O’Connor M. C. (2005) “IBM proposes Privacy protecting tag” Available from: http://www.rfidjounal.com [Date accessed: 6th of September 2006] Roberti M. (2005) “Spychips Revisited” Printed in RFID journal. http://www.rfidjounal.com [Date accessed: 6th of September 2006] Roberti M. (2006a) “RFID gets Itemized” RFID Journal. March-April 2006 issue. Also available from: http://www.rfidjounal.com [Date accessed: 6th of September 2006] Roberti M. (2006b) “Be careful what data you collect” Printed in RFID journal. th http://www.rfidjounal.com [Date accessed: 6 of September 2006] 6

×