Interview with George Hoffman

With major retailers both in the US and Europe pushing item-tagging to the vendors, there will be a considerable market for locally supplied RFID-enabled tickets and labels in those apparel manufacturing countries.

The industry will see more retailer RFID (radio frequency identification) initiatives. The initial justification will be primarily targeted at improving inventory visibility within the store, and reaping the benefits of increased sales and fewer markdowns associated with inaccurate inventories. Retailers with more mature RFID programmes will explore additional use cases related to the customer shopping experience as well as a tool to facilitate omni-channel logistics. Retailers who have adopted RFID item-tagging, and who likely began by tagging garments, will be looking to reduce costs associated with tagging and further improve their ROI. The primary opportunity for retailers to reduce their tagging costs is to push that process back to their suppliers where tagging costs are much lower. Source tagging of RFID tags could reduce costs by as much as $.15 per garment. Another trend seen in RFID item-tagging is the move to integrated tags where the RFID chip is embedded directly into the existing price tag. This has two benefits. The first is cost reduction of up to $0.20 per item achieved by combining two tags into one, as well as eliminating the cost of applying an additional tag or label. This savings is in addition to the ones that retailers can achieve by going to source-tagging. The second benefit which product managers and merchandisers will appreciate is the elimination of that unattractive RFID sticker or secondary tag which cries out "mark down." With integrated tickets, brands' logos and important consumer information are no longer hidden by these additional tags or stickers.

There is a glut of information on the web about future RFID spending. According to IDTechEx, "In 2014, the total RFID market is worth $8.89 billion, up from $7.77 billion in 2013 and $6.96 billion in 2012. This includes tags, readers and software/services for RFID cards, labels, fobs and all other form factors. IDTechEx forecast that to rise to $27.31 billion in 2024."

As the move to source-tagging increases, many vendors supplying apparel to both US and European retailers will be required to purchase RFID tags locally. This will create challenges as RFID tag production is still in its infancy, and there are few reliable suppliers who can handle this emerging demand. This will also be true in other countries that are major exporters of apparel such as Bangladesh and Vietnam. Another problem created by the shift to source-tagging will be vendors-tagging compliance. Currently, the vast majority of RFID-tagging is taking place in the US and Europe, and by either large national brands, such as Levi's or Hanes, or by the retailers themselves. But in either case, the people tagging today have vastly more RFID-tagging knowledge and experience. When vendors in remote manufacturing locations are given responsibility for this task, there will be substantial confusion and given the cost of tagging, there will likely be a tendency to cut corners by using less costly and unapproved RFID tags. This will in turn force retailers to quickly implement RFID-tagging compliance guidelines as they push tagging back to the supplier.

The US and Europe are the major markets for RFID but this will change as source-tagging takes hold and purchasing of RFID tags moves to the apparel exporting countries.

Demand for RFID, while sporadic, is growing steadily. Some of the fluctuation was due to Wal-Mart and JC Penny strongly endorsing RFID only to pull back after not realising required ROIs. However, there are many more US and European retailers conducing pilots then there were 2-3 years ago, which bodes well for suppliers of RFID products.