by Ellen Kriz
January 11, 2018
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.
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:
Do label leaders’ recent efforts mark a tipping point for RFID adoption? The future of RFID will continue to depend on:
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:
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.
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.
Ellen Kriz is an Industry Analyst at the Freedonia Group where she covers US polymers & packaging markets.
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