October 14, 2005
A business case for RFID in retail
The report RFID and Retail: Little Return for Case and Pallet Tagging published by AMR Research states that RFID implementation for retailers, particularly FMCG retailers, at present does not appear very attractive from an ROI perspective. This is because enterprise-wide RFID does not promise an increase in revenue good enough to make a healthy contribution to the bottom line.
According to the research, a retailer with sales of $ 5 billion per annum, a margin of 3.25%, and 200 stores would require an investment of $ 39 million and 3 years for complete RFID implementation. The researchers feel that the money can be used in many other ways that can have a more direct impact on the bottom line, for example, improving work-flow management, improved pricing and promotion technology, etc.
The report also states that an ROI model cannot yield information that is fully accurate as there are several aspects of RFID that cannot be quantified easily. These include targeting high-value goods for tagging, reduced shrinkage, etc. The report favors approaching RFID implementation not in context of near term ROI but with an eye on long term strategic advantage. The information that RFID provides can ultimately lead to the development of the demand-driven supply network, (DDSN).
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