Report • 06.01.2013

RFID: Making up for the drawbacks when compared to eCommerce

How the technology is changing the retail industry

With RFID-Tags, an accelerated inventory process leads to a higher productivity...

In the past few years, competition in the retail industry has clearly increased not least because of the growth of online retail. More and more customers use the opportunity to go online before they buy something to get information about the products or to compare prices. Today, ordering directly with the Smartphone is often already convenient, mobile and fast.

Items on the Internet are often even less expensive, since online retailers don’t have to pay for store leases and have less personnel expenditures. They are able to pass these savings directly on to the customer. To be able to compete with this, brick and mortar stores have to present themselves and their products particularly well. That’s because from a customer’s point of view, out of stock and empty or poorly sorted shelves convey an unprofessional impression.

Simple inventory with RFID tags

Auto-ID technology avoids this with an identification that is based on RFID. Taking inventory is simple and quickly done via automatic identification of every single product. In addition, shelf restocking is accelerated, because if it is apparent how many items are still on the shelf at any time, the staff only needs to replace missing articles and doesn’t have to needlessly tote a lot of merchandise through the store, since this is also an avoidable disruptive factor for the customer. ”Labeling products with RFID transponders makes continuous inventory and a subsequent optimal availability of all products in a store possible“, Andreas Löw, Marketing Director for RFID specialist Feig Electronics, also points out in our interview on this focal topic.

Employees are better informed

Due to the gained informational advantage, productivity in the store increases drastically. Thanks to the accelerated inventory process, employees have more time to service customers and for selling. This way, consumers appreciate the expert advice and view shopping as a pleasant experience.

Ralf Sander, Sales Director EMEA Central of Motorola Enterprise Mobility Business, stresses in a professional article on the subject:”Companies that utilize RFID solutions benefit from clearly more efficient work processes and more productivity across departments. The product availability can be increased and delivery times optimized. Retailers can fulfill consumer wishes faster and create long-term customer loyalty through optimal service as well as a large range of products.“

RFID and data protection issues

There are still data protection concerns, not just on the part of customers but also with employees in manufacturing, retail and logistics, since employees become easier to monitor with RFID. Even if companies for the most part “only” record item-based data, RFID transponder readouts can be linked with date and time as well as the location of the reader. This way, behavior patterns of individual employees can be easily reconstructed. In light of this, many associates are rightly concerned. Several years ago, the German Federal Office for Information Security (BSI) already pointed out that the constitutionally guaranteed right to “self-fulfillment” can be highly restricted because of the obtained data.

The “transparent customer”

RFID use also permits complete surveillance of people, who wear an RFID chip. While employees intentionally use their employee badges and other chip carriers and transponders, this appears quite differently on the part of store customers. Almost any purchased product can be outfitted with an RFID chip; however, the customer may not be aware of it. An even more detailed surveillance can be achieved with a personalized debit card. This doesn’t just apply to the stores themselves: wherever there are RFID scanners, the wearer is registered. If a labeled product is passed on or given away, stores can even trace what people the customer is in contact with.

Whether the customer is really being followed at every turn or not, is almost irrelevant. In light of recent data protection debates, just the possibility alone already causes uncertainty. This fact is also the reason that is still standing in the way of nation-wide use of RFID in retail, despite the many advantages.

Retail’s reaction

Commercial enterprises and retailers have to take advantage of the benefits of RFID to stay competitive. However, for customers to also embrace the technology the advantages have to be communicated accordingly and drawbacks need to be eliminated or at least minimized.

That is why the RFID tags that are attached to sold items, are typically deactivated by retailers so the person’s actions can no longer be traced based on the information carrier. However, the tags are not really disabled; the important data (particularly the globally unique EPC number) can still be read out after deactivation. It helps if the RFID labels are positioned in a well visible spot, so that the customers themselves can simply remove them by cutting them off after purchase.

The technology is slowly being accepted

Despite the apparent drawbacks, RFID technology is slowly but surely being accepted. The convenience and timesaving potential, for instance by using self-checkout counters at the supermarket, are the main reasons that concerns about data protection have taken a backseat. The acceptance of the new technology however can only be further increased if the technology’s benefit is clear and if there are corresponding higher safety precautions.

Communication is key

Retailers have to respond to these concerns by the public and communicate all pros and cons of the technology. One way of educating customers fully would be with information brochures for instance and information desks in the stores. The Metro Group is also following this path:”We voluntarily committed ourselves to comprehensively inform our customers where and why we use RFID. If requested, after the purchase customers have the option to permanently disable the transponders or to have them removed“, explains Dr. Gerd Wolfram, Managing Director MGI METRO Group Information Technology real,- future-store, in our second interview on RFID in Retail.

Transparency is essential at any rate. Each customer should be able to understand at any time, which of his/her data is being stored and processed. In addition, the retailer also needs to give him/her the chance to object to the collection and use of his/her data. If the customer nevertheless still has data protection concerns, the option of truly deactivating the RFID tags needs to be available. As prior cases have shown, sloppy handling of sensitive customer information leads to a hard to correct loss of trust with the customer. However, if the company enters into an open and honest dialog with the customer, both can benefit from the clear advantages the use of RFID brings.

Daniel Stöter, iXtenso.com