Did 2017 Mark a Tipping Point for RFID Adoption by Retailers?

RFID’s Major Debut

When Wal-Mart announced in 2018 that it would require its top 100 suppliers to equip their products with radio frequency identification (RFID) labels in 2003, investors rushed to support RFID technology. The benefits of RFID have been clear from the start. RFID labels decrease operating costs for retailers and allow for more timely, accurate inventory tracking. Automated inventories reduce items out of stock and, in turn, boost sales volumes.

However, the anticipated RFID boom proved a bust by 2005, as a number of complications discouraged other retailers from adopting RFID labels and forced Wal-Mart to scale back its implementation. Some of the largest RFID investors sustained irreparable losses, and it seemed RFID would never get off the ground.

Nearly 15 years later, the RFID market is regaining momentum.

Label Market Movement

Macy’s – which has been utilizing RFID labels to track inventory since 2011 – claims that it is already halfway to accomplishing its goal of incorporating RFID technology for 100% of its merchandise.

Several other retailers – including Bloomingdale’s, JC Penney, Kohl’s, and Target – have also started using RFID tags. As retailers’ interest in RFID grows, major label suppliers are positioning themselves to capitalize on new opportunities: 

• Avery Dennison introduced its Intelligent Labels Solution range of RFID labels in September 2017.
• In May 2016, CCL Industries expanded its RFID capacity by acquiring Checkpoint Systems, which released two RFID label brands – Wind and Windlight – for cosmetics inventories.

The Future of RFID Labels: 3 Factors to Watch

Do label leaders’ recent efforts mark a tipping point for RFID adoption? The future of RFID will continue to depend on:

1. price
2. ongoing changes in retail sales patterns, especially e-commerce
3. ease of implementation

Wal-Mart’s efforts to launch RFID into the mainstream were largely hindered by the steep cost of RFID labels, between $0.50 and $1.00 each. Such high prices crippled suppliers of low cost products, where margins are particularly thin. Today, the cost of the most simple RFID labels – typically a small antenna or chip mounted on a plastic substrate – ranges from $0.07 to $0.15, a price that suppliers can absorb more easily.

Lower prices combined with a more urgent need for RFID brought on by the rapid growth of e-commerce spell a more optimistic future for RFID labels. Online sales complicate supply chains, making inventory tracking more crucial than ever.

And label companies are working to address some of the remaining challenges to implementation, including software capabilities. Over the last few years, label producers have initiated relationships with tech firms to facilitate adoption of data storage software:

• RR Donnelley has partnered with Smartrac, a producer of RFID products, to market RAIN RFID and increase the number of products connected to the Internet of Things.
• UPM Raflatac collaborated with Magic Add – a cloud technology and data management firm – to develop RafMore, a line of pressure sensitive labels connected to a cloud database.

However, traditional barcodes remain much more affordable and offer sufficient functionality. Growth for RFID labels will likely be limited to higher-end retailers like Macy’s that can rather than retailers that rely on sales of low cost products.

To Find Out More

Want to learn more about the labels market?  Check out The Freedonia Group's study Labels in the US, which breaks out the industry by application method, stock material, market, and printing technology.

About the Author:

Ellen Kriz is an Industry Analyst at the Freedonia Group where she covers US polymers & packaging markets.