Many consumers appreciate the convenience of both click-and-collect and delivery services for their grocery shopping. Discover how RFID technology can help in this article.
Due to the surge in online ordering in 2020, many grocers were forced to implement makeshift solutions to accommodate this demand. These solutions often burdened retailers with additional labor expenses for in-store picking, among other costs. Retailers continue to face pressure on their labor costs in the wake of the pandemic amid widespread staff shortages that are driving up wages.
RFID technology has long been gaining traction in grocery, but it has lagged behind the more widespread deployments that have benefited other industries. This article explores some of the key opportunities RFID technology delivers for grocery business stability, including:
- Inventory accuracy
- Shrink reduction
- Enhancing the in-store experience
Growth in Grocery E-commerce Creates Demand for Inventory Accuracy
Grocery e-commerce sales skyrocketed in 2020 and have remained elevated in 2021 as many consumers appear to appreciate the convenience of both click-and-collect and delivery services.
Managing the increased demand for online grocery ordering is just one of many opportunities that grocery retailers have to leverage RFID technology throughout their operations, from inventory management to shrink reduction and improved sustainability. The surge in online ordering in 2020 may have been a tipping point for the increased adoption of RFID in the grocery sector. RFID technology has long been gaining traction in grocery, but it has lagged behind the more widespread deployments that have benefited other industries.
Online grocery ordering, whether for pickup or delivery, had been slowly increasing as a percent of sales for years, but soared in 2020 as consumers sought to minimize their potential exposure during the COVID-19 pandemic.
Grocery e-commerce sales continued to gain traction during the year. Research from Brick Meets Click showed that grocery e-commerce sales totaled $8.4 billion in April 2021, up from $7.2 billion in April of last year when much of the country was in lockdown.
Food retailers scrambled to keep up with demand, and also felt an unprecedented level of strain on their supply chains, leading to product shortages beginning in the early stages of the COVID-19 pandemic, and continuing well into 2021.
In many cases grocers were forced to implement makeshift solutions to accommodate the increase in online ordering. These solutions often burdened retailers with additional labor expenses for in-store picking, among other costs. Retailers continue to face pressure on their labor costs in the wake of the pandemic amid widespread staff shortages that are driving up wages.
Recent research from logistics consulting firm MWPVL has found that the labor costs of in-store picking with curbside pickup amount to about $10.78 for an order of 22 items totaling $100. The firm estimated that delivery costs add an additional $10-$25 per order, based on shopper density, number of deliveries per order and other factors.
“Now that grocers have gone through the crisis, they will be looking at new technologies to help them with the online fulfillment process,” says Tim Kane, Retail Industry Principal at Zebra Technologies.
These include solutions such as automated micro-fulfillment centers and dark stores that rely heavily on technology to make order picking more efficient. When e-commerce was sitting in the low single digits as a percent of sales, grocery retailers often outsourced the fulfillment to third parties, but retailers seeking to maintain relationships with their customers are now looking at other options, says Mark Delaney, Retail and Hospitality Industry Principal at Zebra Technologies.
By adding a digital identity to every product, RFID has the potential to unlock the siloed, often disconnected food supply chain and play multiple roles in making these fulfillment solutions and others more cost-effective.
The promise of RFID is that it can serve as a gateway to a suite of solutions that will be of increased importance in a post-COVID landscape. Reducing out-of-stocks, optimizing labor efficiency, and minimizing food waste/ optimizing for sustainability as result of improved expiration management are just a few examples of the ways that RFID will drive returns on investment within the grocery segment. As the technology gains upstream supply chain adoption, the value will only continue to grow.
The recent A New Era for RFID in Retail report from Accenture found that interest in the technology has been increasing in recent months across retail segments, including grocery, where 56% of survey respondents are now focusing more on RFID. Nearly nine in 10 grocery retailers — 87% — reported that RFID enabled them to deliver better omnichannel experiences for their customers during the pandemic.
Following are some of the key opportunities for the grocery industry to leverage RFID technology.
Grocery retailers plan to use RFID for:
- 45% Reducing out-of-stocks
- 36% Improving customer engagement with smart technology
- 33% Collaboration with blockchain
- 24% Inventory tracking and visibility
“Inventory accuracy is always at the core of what companies in any retail sector are trying to achieve,” says Kris Barton, Director of Market Development — RFID, Retail & Food, at Avery Dennison. “It’s about knowing what you have, and where you have it. Whether it’s a pair of shoes, a pair of denim jeans, a fast-fashion item, or a fresh product on your shelf, you’ve got to make sure you have inventory accuracy.”
Rather than manually conducting inventory checks on a regular but infrequent basis, as most grocery retailers do, RFID enables them to count their inventory holdings quickly, more frequently, and inclusive of items that may be outside of retailers’ line of sight. Most importantly, RFID enables retailers to maintain an accurate assessment of their inventory holdings, which not only provides direct benefits in the form of data-driven inventory management, but also forms the backbone of myriad other use cases.
“There’s the old adage, ‘Garbage in, garbage out.’ But, if you get good data in, you can do a lot of good things with it,” says Barton.
Another area retailers are experimenting with is pallet and case level RFID tagging in back rooms with fixed readers to enable store staff to quickly count and identify items that may be out of stock and require replenishment. Enabling better replenishment from the back of the store to quickly find the items and bring them to the front of the store enables retailers to “save the sale” and increase customer satisfaction—something that is incredibly important given the pandemic strained loyalties between consumers and their preferred retailers.
“RFID solutions can create more advanced models for fulfillment and replenishment. This means replenishing products sooner, and reducing customer dissatisfaction and sales lost from out-of-stocks.” – Source: The Future of Frictionless Food
When retailers have better inventory data, they can manage their inventory more effectively, which reduces out-of-stocks and creates more sales opportunities, added Pedro Garza, Market Development Manager, Food, at Avery Dennison.
In addition, simply having cases of product tagged with RFID before they enter the warehouse or store also opens up numerous possibilities, he says.
“It’s important for retailers to think about RFID holistically, and sync that to the problems that they are trying to solve,” he says. “If they want to focus on food waste and shrink reduction, maybe that’s where they can start.”
In e-commerce, accurate inventory visibility allows retailers to ensure they are presenting accurate information to customers who are shopping online, among other benefits. RFID could be used to facilitate order picking by using it to locate products, for example, and can make order picking more efficient by alerting pickers to in-stock conditions.
As more and more retailers seek to make prepared foods a bigger part of their offerings, Item-level RFID tagging on prepared meals could also be used to accurately indicate the availability of these items online for e-commerce orders. Any pre-wrapped, grab-and-go meals, including meal kits, could be easily listed on a website, app or thirdparty delivery service using RFID integrated labels.
Being able to rotate products properly so that the oldest items, or items with least remaining shelf life, are always being stored or put out for display before newer items is one of the ways RFID tagging helps optimize “first expiry, first out” practices and reduce shrink due to better rotation practices.
This is especially applicable in the perishables departments, including deli, produce, proteins, prepared meals and meal kits, where shelf lives are short and proper rotation is critical.
“The retailers that do fresh or prepared foods really well are going to be the ones that will stand to benefit three to five years down the road, because once you get a good reputation in that space, it holds,” says Mark Delaney, Retail and Hospitality Industry Principal, Zebra Technologies. “RFID is a big piece of that, whether it’s receiving the product at the back door and ensuring that the freshest is cycled through, or just simply within the case or on the shelf.”
Within retailers’ in-store prepared meals operations, RFID tagging can help ensure proper rotation of ingredients and can provide benefits all the way through the process to help rotate the finished sandwiches, salads and other perishables products in display cases.
Additional use cases for minimizing shrink include using a hand-held RFID scanner to search for items that are set to expire within a day or two, so that the retailer can take action on them, whether that means merchandising them differently or perhaps pricing them down to sell quickly.
Hand-held RFID readers that include what’s known as a “Geiger counter” feature can be used to locate items based on specific criteria incorporated into product RFID tags, including expiration dates or lot codes. This functionality has the potential to streamline the search for physical inventory and reduce labor costs.
Or, a stationary RFID reader could be positioned over a case that holds prepared foods that could continuously monitor product expiration data to optimize rotation and minimize waste/shrink, create alerts to replenish to reduce out of stocks, while also helping minimize labor costs.
“In the past, waste was considered part of the cost of doing business,” says Garza. “It’s encouraging to see this starting to become an outdated paradigm, and to see the industry instead shift toward zero-waste design.”
According to ReFED, consumer-facing businesses account for nearly 1/3 of all food waste globally.
“Leveraging RFID to improve inventory visibility, enhance expiration management, and improve product rotation is not only good for the bottom line but also good for our planet by diverting the waste that would otherwise go to landfill,” Garza says.
“The ones that can message that they are doing everything that they can, including leveraging the latest technology, to make sure that they are not generating a lot of waste, will elevate their position within the customer’s mind, and give them a branding advantage,” he says.
Food Waste at Retail
Retailers generate 10.5 million tons of surplus food annually, and nearly 35% ends up in landfill, or is incinerated as waste
The top categories of food waste are:
- Produce: 35%
- Dairy and eggs: 29.3%
- Dry goods: 14.8%
The ability of RFID tags to connect to large amounts of information, such as Lot numbers, production line information, hour codes and more, creates opportunities for traceability that can serve multiple purposes in a grocery retailer’s supply chain.
One of the key use cases involving traceability is for product recalls. With Avery Dennison RFID-tagged cases, retailers can quickly identify recalled items throughout their networks and verify that they have been removed from the supply chain.
“We see recall as another opportunity where RFID can definitely help in not only reducing the overall waste, but also the responsiveness of the recall process, reduced from hours to seconds,” says Barton.
From 2017 to 2020, there were 1,010 recall press releases issued by the U.S. Food and Drug Administration, mostly related to undeclared allergens. Each recall requires large investments in time and effort on the part of retailers to hunt down these items and remove them from shelves, back rooms and warehouses—all of which can be facilitated with RFID tagging.
As the entire supply chain becomes increasingly digitized, RFID data also provides the advantage of offering the ability to integrate with blockchain technology or cloud-based traceability platforms.
Data gathered using RFID technology can also be used in various ways for vendor management. Shipments can be verified as accurate upon arrival, for example, and the shelf life of products can be tracked and measured to ensure it conforms with vendors’ claims, Garza explained.
This also applies to inventory tracking of totes, which are often used to deliver high-value merchandise that can benefit from being tagged both at the tote or at the item level.
“When a tote comes into the store, someone has to count what’s in the tote , and invariably someone’s going to count it wrong,” says Kane. “The fact that that RFID lets you know what’s in the tote helps you manage your inventory.”
Enhancing the In-Store Experience
Perhaps one of the most intriguing areas where RFID technology could play an important role lies in enhancing the customer experience by creating solutions for touchless checkout. The promise of these systems lies not only in the improved customer experience, but also in the potential for labor savings and increased basket size on the part of the retailer.
Vision-based sensors used in combination with other types of sensors, such as the Just Walk Out systems deployed at a handful of Amazon retail stores, are only in the early stages of adoption, but RFID technology promises to play an important role in the future of these emerging solutions. RFID can provide a value-added sensor element in these systems, especially when considering that the broader assortment of perishable products that are typical of any grocery will be part of the touchless checkout shopping experience.
In addition, RFID alone provides a more cost effective solution for retailers that is easier to deploy than either scan-and-go or visionbased models.
With the widespread adoption of omnichannel grocery shopping, RFID is a technology whose time has come. Not only does it help provide more efficient e-commerce solutions though enhanced inventory visibility, it also has the potential to improve the e-commerce customer experience.
While it has been more commonly used further upstream in the grocery supply chain at the warehouse level, RFID’s benefits are also beginning to have an impact on store operations as well, with opportunities in shrink reduction through better expiration-date management, in traceability for product recalls, and in providing contactless payment and frictionless checkout.
With better inventory management comes not only improved revenues and profitability, but also improved sustainability through waste reduction and more efficient deployment of resources.
“There’s nothing more important than keeping people safe in the supply chain with food,” says Barton. “But also people are becoming very aware that the carbon emissions are used to produce the food that’s wasted. These are things we look at. We enable brands and retailers to satisfy consumer demand with some of those key things in mind.”
Avery Dennison is a vertical supplier that does all of its own manufacturing, including converting RFID tags into labels, which enables it to control quality at every step.
“We have this relentless pursuit of innovative products that are driven by these core values of sustainability and innovation,” says Barton. Avery Dennison also brings some fit-for-purpose products that are specifically suited to the grocery sector, including innovations such as microwave-safe RFID tags as well as on-liquid/on-metal tags, adds Garza.
Zebra Technologies, meanwhile, brings its expertise in scanning and hand-held reader solutions to the table, along with the intellectual knowledge of the space, says Kane.
“We can really see where we have the opportunity to bring retailers a return on investment, and we can help them achieve that,” he says.
Avery Dennison and Zebra Technologies collaborate to provide the combination of data capture, hardware and software that are part of the ecosystem needed in the rapidly evolving omnichannel grocery environment. They provide not only back-end solutions that help retailers better manage their supply chains, but also solutions that help them better serve their e-commerce customers and manage their store inventories with more efficiency and less waste.