In Markets

Expert Opinion: RFID and the importance of shrink data to combat theft and losses

Shrinkage is a worldwide phenomena that has serious repurcussions for the retail industry if not checked and solutions put in place. Theft from casual shoplifters and organised crime syndicates is also on the rise. RFID can help reduce these incidences. Retail in Asia met up with Benedict Chua, Product Director Asia-Pacific for Checkpoint Systems at their recent Innovation Summit in Hong Kong to discuss what the probems are and what solutions the industry can implement.

RIA: What’s the biggest security risk facing retailers in terms of shrinkage and theft?

BC: Asia Pacific retailers reported an average shrinkage of 1.28% of total sales in 2014. Apparel retailers and Departmental Stores tend to report higher numbers. Emerging countries like India also tend to report higher shrink numbers.

What this underlines is that shrinkage is real and not addressing it can adversely impact the bottom-line. To combat shrinkage effectively, awareness of shrink data and high-risk merchandise categories is important. This can guide the correct application of Product protection solutions. As with any effective use of product or technology solution, the people side is important too.

As such, I would characterised the biggest security risks to combat shrinkage are; not having a good awareness of shrinkage, lack of implementation of Product protection solutions and poor operator compliance when using the “tools” on hand. We incorporate many of our global Best Practices into a Product Protection Program. This has enabled the retailers to come on-board in the least amount of time and with the greatest chance of success.

Retailers today also recognise there are various types of shoplifting or theft events. One big risk we continue to address with many retailers today is the Organized Retail Theft (ORC) event. These are professional or syndicates that typical know what they want to shoplift based on their “shopping list”. They can sweep the shelves of expensive merchandise and many a times will also try to defeat the product protection solutions in use. Through our constant engagement with the retailers, we have introduced innovative ORC solutions over the years to stay one step ahead of these syndicates.

RIA: How do you address the costs involved with implementing RFID?

RIA: Retailers who have embarked on the RFID journey understand that there is the tangible cost of setting up the RFID infrastructure and the cost of RFID labels. Many also recognise that RFID is in some ways looked upon as an ERP or business transformation enabler. With a correctly executed RFID program, there are savings in terms of addressing Out-of-stocks (OOS), Inventory accuracy and Sales increase due to having the merchandise available for sales. However, another big tangible benefit is having a reduced working capital, which can be 20-30% reduction for an apparel retailer. So RFID implementation cost can pay for itself many times over.

In parallel, the cost of RFID labels has reduced from a decade ago by a factor of 8 to 10. The RFID label not only provides the data intelligence, in many applications, they also provide the anti-theft function at the Point-of-exits. So there is another savings here due to the 2-in-1 use of a single RFID label.

RIA: Where in the supply chain should retailers start to implement RFID tracking?

RIA: A retailer would typically sit down with our RFID consulting team to understand their business needs and processes. Once understood, a proof-of-concept pilot is normally implemented in a few stores over a small number of SKU items. The activities are store centric at this stage and may include the use of RFID handheld readers and Readers at the doorways.

For retailers with business case and needs to pilot RFID for omnichannel, a good starting place can be Flagship stores whereby they can understand and validate the shipping process and compliance.

RIA: How does RFID help enable retailers to improve the customer experience in store and as part of an omnichannel offering?

RIA: Some of the main challenges in omnichannel sales are stock accuracy and speedy/accurate order fulfilment. RFID offers Inventory management and Process automatic.

In practice, it means that the stores are carrying the correct quantity and type of inventory, handling minimum store transfers and having the shortest pick-and-pack time for customer order fulfilment. This translate to positive customer experience for the “Buy-online, pick-up-in-store” or “Buy-online, ship-from-store” situations. In a recent survey, more than 70% of customers want to know the stock is available before going to the store.

RIA: Have you examples of retailers using your solutions to maximise operational efficiency?

RIA: We have deployed thousands of RFID enabled devices today.

One major US Departmental store with hundreds of locations is deployed with our RFID solutions for Omni Channel Inventory Availability. This has allowed them to Increase shelf availability, which drives same store sales, while enhancing the customer satisfaction.

An example from Europe would be a major chain-wide Departmental Store that has deployed our RFD solutions to ensure shelf availability of high-demand items. This resulted in same store sales increase of “never-out-of-stock-items”.

Another example is a major Global Sporting Goods chain with hundreds of stores worldwide. They are deployed with our RFID Inventory management and loss prevention function, which is integrated into their POS systems. A key benefit is having the RFID and Security Loss Prevention function in one platform. This has allowed the retailer to optimised stocks as they aggressive expand into Asia.

RIA: How do you convince retailers that investing in a source protection solutions package will increase sales and margins?

BC: Source Tagging is a program whereby we work with the Retailers and CPG and/or Manufacturers to have the Checkpoint RF (EAS) or RFID label embedded into the product packaging. These products include H&B cosmetics, Healthcare, Apparel & Sporting Goods, Shoes, IT products, etc.

Source Tagging offers several distinct advantages, including allowing the merchandise to go straight from delivery to the store floor for immediate sales, strong label tagging compliance and in-store tagging labour cost saving.

So in a real store environment, the situation whereby the shelves are empty of a particular high volume or high margin item is addressed. This translates to sales opportunities for the regular and impulse shoppers. So when the Inventory system is showing 5 items on the floor, there are really 5 items on the floor for sales.

Source Tagging is also effective against Shoplifting and the ORC events we spoke about. Advances in RF technology allow the RF or RFID label to be disguised, embedded or Imprint with a Visible Deterrent message. These psychology elements create doubt and uncertainty for the potential shoplifters.

Other tangible savings include in-store staff not having to spend time to perform tagging, or for the part-time staff to omit tagging or incorrect tagging. Store staff can spend their time to serve the customers, which again maximises the sales opportunities.

RIA: What can RFID provide to enhance security throughout the supply chain?

RFID technology can provide the tracking and authentication of the product through the supply chain journey. As an example, the carton or even individual items can be tracked from the factory to the store.

Specific to the security enhancement, this means that the authentication of the carton or items can be read at each point of the journey. This can address concerns of product switch or theft along the journey. At the store level, any customer return or refund can also be checked and authenticate that it is firstly a genuine item, and secondly that it is not a stolen item.

RIA: What is the future of RFID and where do you see a new or future growth market?

RIA: RFID technology is already widely used for asset/document tracking, vehicle identification, animal tracking, highway toll, event tickets and rail tickets to name a few real world applications outside of retail. RFID is an enabling technology to achieve certain efficiencies or process compliance.

Specific to retailing, omnichannel demands and Supply chain efficiencies continue to feature highly for many retailers. Retailers are also fighting for every customer dollar with enhanced customer experience. At the same time, retailers are time looking at their compliance and work process to maximise margins and savings.

A recent survey of US retailers showed that over 50% of them are already using some form of RFID technology in the retail business. Furthermore, another 20%+ indicated they will start RFID activities within the next 12-24 months. Within Asia Pacific, we are already in various stages of RFID work with key retailers.

Many retailers are taking note of the adoption and traction of RFID. We see the interest in developed and developing countries. It should be noted that certain retail friendly enablers also have to be available for RFID to take off, for example infrastructure, IT services and organised retailing. This is happening now, like the case of China and India. We are in what appears to be a sweet spot for RFID technology today.

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