How RFID is reinventing retail stores in the Middle East

Retail has changed dramatically over the last two years and especially in the Middle East where the focus is now on inventory. Middle East retailers have been talking for many years about radio frequency identification (RFID) as a technology that’s ‘nice to have for stock taking’, but times have changed and so have retailers’ views of RFID. Retailers now also need to pick products – even fashion items – and fulfill customers’ e-commerce orders direct from stores, and they can only do this if they know exactly what’s in each store. This is where RFID really helps them win.

It empowers retail stores to transform into flexible distributed fulfillment centres, as boundaries between e-commerce and in-store inventory dissolve and merge to offer ‘perpetual inventory’ to meet the demands of omnichannel customers.

Blended channels present a distinct challenge to retailers that have historically managed brick-and-mortar and e-commerce fulfillment separately. The popularity of fulfillment streams like buy online, pick up in store (BOPIS), curb side pickup, delivery to other stores and same-day home delivery add even more operational complications.

The rise of RFID in retail

RFID is a technology that enables digital data to be encoded in RFID tags or smart labels and read rapidly without requiring line of sight to the read device to identify and track objects. In a sense, it automates the reading of the product ID.  It has traditionally been used to count stock, but it can also create intelligence as well as visibility.

According to a 2018 ABI research report, stock taking is a routine process that retailers may only do twice a year and, in a fashion environment, the count is typically only 65 per cent accurate. This means that 35 per cent of the time, fashion retailers won’t find the right products across their stores. So, picking products becomes hit and miss – and frustrating for the retailer, store staff and customer.

Now, retailers are trying to balance this increasingly omnichannel customer demand by taking a single view of e-commerce and in-store inventory to ensure they have enough of the right products to fulfil orders from wherever makes most sense. Physical retailers have an advantage over pure plays because they can leverage stores both for brand experience and as distributed fulfilment centres.

A new way of managing inventory

Accurate inventory visibility is necessary for all types of retailers if they are to ensure customers have access to the goods they need when they need them. Given the increase in online shopping, retailers must be able to meet demand for online orders using stock from both warehouses and stores that may be closer to the customer. So, they need insight into inventory and point of sale (POS) data, if they are to monitor and actively manage what is still in store and available for customers shopping both online and physically in the store.

More use cases are appearing in which retailers are embracing this analytics-driven approach to inventory management, with RFID adopted as the main technology to support and improve this process. A unified or perpetual inventory vision has been a long-term goal for many retailers. However, it must now be a priority if retail businesses are to thrive in the future.

Being able to track the location, condition, timing, accuracy and speed of inventory in near real time makes it easier to streamline processes and drive more efficient workflows. Retailers can see inventory levels and locations at all times in stores and warehouses and take fast action to help reduce ‘out-of-stock’ situations, improve sales and increase customer satisfaction and attach rates in omnichannel models.

In the US, both department store and home improvement chains are now viewing their stores as distributed fulfillment centres, and we are seeing this increasingly in the Middle East as well, where RFID is gaining more traction as retailers seek to achieve this state of ‘perpetual inventory’. For example, ceiling-based RFID sensors can read what the retailer has in store from the moment it arrives at the back of store, to the point it leaves at the POS. With the right technology deployment, the retailer can also see what item of clothing (a belt or pair of trousers, for example) has been picked up and tried on – and ultimately what went into the shopping basket. This information can be compared to the POS conversion rate: what item was tried on, what combination of items were tried, and what was actually sold. This data can then be shared with merchandisers and category managers in real time, enabling better analysis of range performance.

Of course, this information has been available to track online shoppers visiting digital stores in the past, but not widely applied in the physical store. The perpetual RFID store moves brick-and-mortar retail in this direction – to the point where big retailers are now asking how they create more digital engagement with in-store customers based on data about what’s happening both in that moment and collectively over time.

Grocery retailers who are now promising delivery in 15 minutes will also look at the proximity of the store to customers, its product range and assortment, and decide that it needs to adjust the in-store inventory range accordingly. For example, a convenience store might carry 2,000 items for rapid delivery, and a bigger inventory range could be available for scheduled delivery and in-person shopping – so two different types of distribution from one store.

As retail becomes even more complex and shopper behaviours continue to change, it’s becoming more challenging to ‘know our customer’. Fortunately, as RFID takes on a growing role in the omnichannel retail environment, it will become easier to ‘know your stock.’ This is fundamentally important and will help improve retail performance and the shopper experience through the availability of perpetual inventory.