Focus on Retail Solutions

The issue of customer and product identification within retail spans from some of the oldest problems, like theft, to more futuristic solutions such as truly tailored loyalty schemes. As the retail sector continues to undergo rapid, drastic changes, identification solutions are set to have a major impact on how we shop and how retailers get their goods to us.

Some of these applications, especially those involving RFID and biometrics, are changing the way businesses think about identification itself.

The potential of RFID

Despite first appearing in tracking and tracing and access applications in the 1980s, the potential of RFID in retail has only been recognized relatively recently. A 2005 Gartner report stated that retail “has gained the most attention in terms of RFID use and trials”.

With RFID tags it is possible to identify and track objects without time delays, without human intervention and thus without variable costs. These benefits have led research house IDTechEx to propose that the 2006 global market for RFID, including tags, systems and services, is worth $2.77 billion. It forecasts that, driven by demand and new laws, the market will reach $24.50 billion in 2015.

Much of this growth will be driven by the tagging of high volume items that are crucial to retail - notably consumer goods, drugs and postal packages - at the request of retailers, military forces and postal authorities and for legal reasons. In these cases, the primary benefits sought will be broader and include cost, increased sales, improved safety, reduced crime and improved customer service.

The tracking and tracing of goods also has major implications for the supply chain and is enabling far more accurate security. Of all stolen goods, 60 percent are lost to shoplifters and 40 percent to corrupt employees. As many retailers look to expand their product portfolio, RFID can help to prevent expensive goods such as MP3 players or designer fragrance from theft. Even if RFID can only successfully combat half of the loss experienced through corrupt employees, it will result in a 20 percent reduction of lost goods – in the case of a retailer such as Boots this can represent a large amount of revenue, especially during seasonal peaks such as Christmas. In the case of a pharmaceutical manufacturer or distributor, this control measure is vital as it can track potentially hazardous substances. IDTechEx propose that the market for these ‘Real Time Location Systems” will itself be worth $6 billion by 2016.

Real-time location of stock

Aside from security concerns, RFID improves traceability and, ultimately, is a method of locating stock in real-time and directing it to where there is highest demand for it. Linking RFID systems with stock control, CRM and even forecasting software provides a powerful tool for retailers to ensure they can profitably meet demand and react quickly to changes in customer requirements. Gartner points out that RFID will have greatest impact “where data collection is relatively chaotic such as...on retail store floors.”

A LogicaCMG study into RFID throughout Europe conducted in 2004 – covering 50 companies in six regions – identified the potential for RFID adoption. The research highlighted that more than half the companies in the UK, Ireland, France, Germany, Belgium and the Netherlands rated RFID as a high priority for IT spending. Since then a number of major retailers, such as Tesco (UK) and Metro (Germany) have already started the large-scale rollout of RFID solutions. Whilst these projects will be finalized by 2007, the research indicates that companies will not begin to tag consumer products until 2008 when prices of tags will have naturally lowered.

The advent of these ‘one cent’ tags will lead to RFID being present throughout the retail supply chain. The previously complex and labor-intensive management, recording and administration of the logistics behind retail operations will be drastically simplified with major gains arising from automation. It is, however, worth noting that this is not likely to develop until 2009. Gartner has proposed that by 2009 the cheapest RFID tags will cost around 15-20 cents.

The growth of biometrics

Biometric technology has been another growth area within the retail sector in recent years. BCC Research has tracked an annual average growth rate of 29.1% between the years 2002 and 2007. New biometrics such as palm veins or gait recognition continually refresh the debate around biometric solutions.

The prominence of biometrics as a method of verifying payments, for example using a fingerprint to pay for goods, has meant it has been catapulted into the retail realm but has had difficulty in moving beyond the point of sale. This has largely been due to the difficulty in identifying the retail logistics processes that can be simplified or accelerated by the presence of biometrics. However the growth in non-point of sale applications of biometric technology suggests this has been overcome.

For example, biometric systems such as facial recognition can provide concrete evidence of an employee’s whereabouts in large logistics depots. They can also put an end to so-called “buddy-punching” where one employee’s absence is concealed by another employee falsely checking them in. This has already made a major impact in the construction industry.

Likewise fingerprint entry to secured areas provides much stronger evidence that a given employee was responsible for the loss of any goods for example from that area as well as enabling managers to locate personnel in the event of any accidents such as a fire.

Expanding such security solutions to the store (or indeed within a complete shopping mall or even shopping village such as that in Bicester, England) facial recognition can enable store operators to match faces against watch-lists of shoplifting suspects. Trials of this technology within a shopping mall in Rotterdam as well as with the football club PSV Eindhoven have proven very successful where the crowd was scanned for faces to be compared against watch lists of known shoplifters and hooligans.

A similar system could be applied to make retail premises not only more financially secure, but also a front line in catching criminals. Retailers are faced with increasing rents and the threat of online rivals, so any measures to improve the security and provide shoppers with peace of mind are set to be a source of competitive advantage. This is especially applicable to larger retail villages where the onus may also fall on the landowner to deliver a basic infrastructure to enable retailers to link security systems and provide a blanket approach to security.

Personalized services and loyalty schemes

However, biometrics is not just confined to personnel and security issues. As a unique method of identifying a single person amidst a possible database of millions (consider for example the number of customers Tesco services in a year) biometrics also offers a natural base around which retailers can build specific and personalized services such as integrating financial services with big ticket purchases. Biometrics is particularly suited to this as it offers an additional level of security in dealing with personal information, compared to the simple presentation of a loyalty card or identity document.

Loyalty schemes could see the card replaced with a simple facial scan or fingerprint. This could then be integrated with personalized information to tailor offerings that deliver real value to the customer – this has already been pictured in the movie Minority Report, but turning science fiction into reality is very feasible in this instance.

As large retailers offer more and more services and products, focusing them around an individual shopper’s identity offers a sensible platform for effective personalization, making the most of marketing investment.

This is more than just removing the need for a card and barcode and replacing it with a fingerprint: though obviously this would potentially mean much greater take up of such schemes due to the ease of use afforded to the customer. Participants would no longer need to worry about keeping their cards with them to accrue points, and thus would be happier with an increase balance of points and therefore more rewards.

In addition offering a biometric basis for loyalty schemes offers a wealth of administrative benefits: cards would not need to be replaced, schemes could be seamlessly expanded throughout partner organizations and on an international scale, and even offer the ability to ‘spend’ vouchers or rewards accrued without any form of identification or payment.

A bright future

Logica’s experience within retail has shown that identity itself is now undergoing change within retail environments – giving products their own identity and then using that identity has big implications for the bottom line. These implications are mostly positive.

This means change on a truly global scale – pilot programs are giving way to full blown implementations throughout Europe and the US. Organizations need to invest in their use of technologies such as RFID, applying the lessons learnt from previous investment programs to guide expectations and achieve solid ROI.

Biometrics promises to make its presence felt throughout retail from supply chain to store to the end customer. The impact of biometrics upon areas such as payments means that the technology will be on the agenda of retailers for years to come.