The current issue and full text archive of this journal is available at www.emeraldinsight.com/0263-5577.htm
IMDS 108,5
The adoption of RFID in fashion retailing: a business value-added framework
596
K.L. Moon
Received 3 October 2007 Revised 13 January 2008 Accepted 25 January 2008
Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Kowloon, Hong Kong, People’s Republic of China, and
E.W.T. Ngai Department of Management and Marketing, The Hong Kong Polytechnic University, Kowloon, Hong Kong, People’s Republic of China Abstract Purpose – The adoption of radio frequency identification (RFID) will create a revolutionary change in the management of a supply chain, particularly in the retail sector. The aim of this paper is to study the views of fashion retailers on RFID applications and, in turn, to analyze the added value to be gained by adopting this technology. Design/methodology/approach – A two-stage methodological approach was adopted. The first involved a multi-case study of five large, highly representative fashion retailers in Hong Kong, in which in-depth interviews were conducted with ten senior staff members. The second involved the design of a framework with four propositions for examining the values generated for fashion retailers upon the RFID implementation. Findings – The findings show that RFID could be implemented in the fashion retailing in the customer relationship management, shop floor management, marketing and promotion, and logistics and inventory management. Improved operational efficiency and effectiveness, and increased sales and profits, are the major perceived benefits, while implementation cost, compatibility with current systems, data accuracy, top management attitude, and staff acceptance are the key challenges. Practical implications – The results give fashion retailers a better understanding of the potential benefits and challenges of adopting RFID. The retailers will, therefore, be able to make more informed decisions in operational planning and resource allocation. Moreover, the results may inspire more fashion retailers to use this technology. Originality/value – By integrating the views of the potential users, the RFID-based business value-added framework supports a research agenda for further investigation of the use of RFID in commercial sectors and contributes to the understanding of technology transfer in a less technologically advanced fashion retailing industry. Keywords Fashion, Retailing, Radio frequencies, Identification, Technology led strategy Paper type Research paper
Industrial Management & Data Systems Vol. 108 No. 5, 2008 pp. 596-612 q Emerald Group Publishing Limited 0263-5577 DOI 10.1108/02635570810876732
Introduction Radio frequency identification (RFID) is a technology that is used to communicate with identified objects using radio waves, so that the objects can be recognized, tracked and The authors wish to acknowledge and express their appreciation for the support of research grants A-PG26 and G-YF20 from The Hong Kong Polytechnic University.
traced (Jones et al., 2005b). This technology may have a significant impact on every echelon along the supply chain, and certainly affects the retail sector (Li and Visich, 2006; Chen and Pfleuger, 2008; Melski et al., 2007). When RFID technology is adopted in a retail store, sales transactions can take place instantly through the RFID reader at the cashier’s counter, thus preventing long payment queues and enriching the shoppers’ shopping experiences. RFID technology can also improve the level of security within the store by detecting if items that are not being paid for are being removed from the shelves, or if a large volume of products is being removed from the store without authorization (Jones et al., 2005a). More importantly, the use of RFID technology can streamline stocktaking operations, strengthen customer relationships, facilitate promotional activities and allow retailers to allocate resources more effectively. The values of RFID technology is particularly apparent in fashion retailing, as the fashion business is characterized by a wide assortment of products, short life-cycles, high seasonality, high volatility, high-impulse purchasing and complicated distribution and logistics operations (Christopher et al., 2004). RFID technology can help fashion retailers solve a number of problems that are unique to their industry (IDTechEx, 2005b). First, as the product life of fashion products is very short – typically only about three months – it is vital to ensure that the product is delivered to the store as quickly as possible. As RFID provides the capability to track and trace items, it can improve the efficiency of many activities along the supply chain. Second, as fashion retailers need space to display products of different styles, sizes and colours, management of these items becomes complex. An RFID-based stock management system can identify the needed items for the customer quickly and correctly, and consequently “search regret” (Reynolds et al., 2006) can be minimized. Third, RFID gives each clothing item a special identifier, so that counterfeiting, theft and illegal product diversion to grey markets can be prevented or at least reduced. Fourth, the behaviour of fashion shoppers is mysterious and unpredictable. The issue of RFID-based customer cards enables retailers to record how fashion shoppers shop, interact with products and make purchase decisions. Subsequently, they can provide customised marketing programmes for their loyal customers at an individual level. RFID technology can manipulate a tremendous amount of stored data and create visibility for objects of interest at different strategic points along the entire marketing channel (Li and Visich, 2006). The adoption of such technology will create a revolutionary change in the retailing arena. However, this is an under-researched area. Much of the current research focuses on hardware development and physical application, and is restricted mainly to item tracing and tracking. The views of potential users on the adoption of RFID and the major factors involving in an effective implementation have rarely been considered. Therefore, the major aim of this paper is to conduct a multi-case study to solicit the views of fashion retailers on RFID applications. Subsequently, we present a framework to illustrate the values generated in fashion retailing businesses upon the implementation of RFID. We conclude the paper with four research propositions for further study. RFID technology and its applications in fashion retailing RFID is a wireless technology that uses transmitted radio signals to tag, recognize, track and trace the movement of an item automatically. These objects can be containers, trays, pallets, cases, product items ( Jones et al., 2005b), or even
Adoption of RFID in fashion retailing 597
IMDS 108,5
598
human objects. Most RFID infrastructures are composed of three principal components (Shepard, 2005): (1) a transponder, which is fixed to an object and identifies it, known as the RFID tag; (2) a reader, the main purpose of which is to serve as a communication channel; and (3) data collection application comprising a software solution and an antenna. RFID technology was originally developed during World War II to distinguish aircraft on radar. In recent years, this technology has moved from obscurity into more commercial and mainstream applications. A number of industries have piloted this new RFID technology (Ngai et al., 2007b), including aviation (Wyld et al., 2005), food and animals (Hall and Hampl, 2004; Streit et al., 2003; Alu et al., 2006), building and construction (Jaseiskis and Ei-Misalami, 2003; Sommerville and Craig, 2005), libraries and museums (Coyle, 2005; Erwin and Kern, 2005; Hsi and Fait, 2005), retailing (Ka¨rkka¨inen, 2003; Prater et al., 2005; Chen and Pfleuger, 2008), logistics (Ngai et al., 2007a; Won et al., 2006), healthcare (Andersson et al., 2007; Wicks et al., 2006), printing, and textile and clothing (Hum, 2001). Indeed, the applications of RFID are diverse. In Europe and the USA, RFID and similar wireless technologies have been adopted by some major retailers. In many cases, this has been an innovative move that has proved to be both efficient and economical. Wal-Mart, the biggest retail chain store in the USA, carried out a pilot study in 2004 to test the use of RFID. Since then, many of the top supermarkets and retailers in the world have announced adoption plans, including Marks and Spencer and Tesco in the UK, Metro in Germany, Coles Myer in Australia, and Mitsukoshi in Japan (Roussos, 2006). As a consequence, their suppliers and service providers have been forced to keep up with them, and so have taken steps towards adoption. The rapid increase in the number of RFID users suggests a major research opportunity in the retail industry (Sethuraman and Parasuraman, 2005). Traditionally, firms in the fashion and clothing industry have been regarded as late adopters of innovative technologies, lagging far behind firms in other sectors, such as the automotive and electronics industries. However, in the last few decades, the fashion business environment has changed. There has been a rise in vertically integrated players, such as Benetton, Esprit and Gap, and more and more discount retailers have entered the industry (Roberti, 2006). In response to the intensive competition, some pioneering fashion firms have had the vision to enhance their competitive edge through the use of such advanced technology as RFID. A German company, for example, invented two types of new washable RFID tags in 2002 for tracking rental uniform items (RFID Journal, 2006a). The time that is taken to handle the renting process is then reduced. Marks and Spencer also started testing RFID on individual items of clothing in 2004, tagging all men’s suits, shirts and ties at one of its stores (Collins, 2006). This implementation of RFID meant that the in-store inventory could be tracked and recorded more effectively and responsively, ensuring that a fuller range of sizes or styles of garments was available to customers (Sangani, 2004). Prada Epicenter Store also attempted to provide different shopping experiences for its customers by combining expensive architecture and RFID technology (RFID Journal, 2006b). When a customer with an RFID card enters the shop, his/her
purchasing history and preferences can be detected, so that the salesperson can provide him/her tailor-made services and/or promotions. In addition, customers may see items of different colours and sizes in the same category, as well as the availability of the stock, from the RFID display screens. Other fashion retailers who have taken part in RFID trials include Gap, Benetton, Kaufhof and DHL Fashion, ranging from fashion leaders to department stores to logistics service providers (IDTechEx, 2005a). RFID is not only a cost-saving technology but also a service-enhancing technology (Sethuraman and Parasuraman, 2005). Hence, it can be expected that the adoption of RFID in the retail sector will increase rapidly. Yet, the adoption rate will depend on the benefits received and the challenges encountered. One of the main research focuses of this paper is to study fashion retailers’ views regarding the RFID implementation issues. The findings will be used to develop a framework to illustrate how RFID can generate business values for fashion retailers in various operational areas. Case analysis and results RFID is a new technology and the implementation of RFID in the commercial sector is in its early stages. Not many studies on the fashion retailing sector have been reported. The first aim of this study is to solicit general views from the fashion retailers on why and how they will forward their adoption decision. These views are crucial to the development of suitable and applicable solutions and, more importantly, to understanding technology transfer within a firm. To achieve such the aim, a multiple-case design among local fashion retailers was carried out. Case research is a qualitative research method that is widely recognized by researchers (Carson et al., 2001; Eisenhardt, 1989; Yin, 1994), and is particularly well suited to new research areas or research areas in which existing theory seems insufficient (Benbasat et al., 1987; Deshpande, 1983; Eisenhardt, 1989; Yin, 1994). The use of multiple cases rather than a single case was adopted because maximum variation sampling is appropriate for analytical purposes in marketing research (Stokes and Perry, 2005). Multiple-case designs are always desirable when the purpose of the research study is description, theory building, or theory testing. Indeed, multiple-case designs provide more general research results (Benbasat et al., 1987). On the other hand, the number of cases that is suggested by researchers varies. Some researchers suggest an open-ended number of cases (Patton, 1992; Romano, 1989), while others recommend a restricted range. The most appropriate range falls between four and eight (Eisenhardt, 1989; Perry, 1998; Stokes and Perry, 2005). The present study approached five large, highly representative fashion retailers for investigation. Views collected from the senior staff of these firms would therefore be judged to be rich enough in information and suitable for in-depth analysis. The study of each case started with field visits to the headquarters and retail stores of these sample firms. Then a search was made of relevant company data from the internet and published documents, such as their web sites and annual reports. The main part of the study involved in-depth interviews with their senior staff. At the beginning of each interview, the participant was given a brief outline of the research purpose, together with an explanation of the ethical issues, to ensure that he or she was willing to take part in the interview (Carson et al., 2001). Reliability was achieved by using a standardised interview protocol for each case (Lau and Moon, 2006), in which a series of questions in an open-ended format were pre-determined (Appendix).
Adoption of RFID in fashion retailing 599
IMDS 108,5
600
These questions were set in a loosely structured way and inserted into “conversation” during the interviews. The interviewees were encouraged to express their own opinions freely. With the permission of the participants, the interviews were tape-recorded for later transcription. The data that were captured from the interviews were then analyzed using the content analysis technique (Carson et al., 2001), which is defined as “the objective, systematic, and quantitative description of the manifest content of a communication” (Malhotra, 2004). This analytic approach is based on the theory that repeating certain elements of discourse – that is words, expressions and similar meanings – reveals the research context (Thietart, 2001). In the coding process, the discourse or text is broken down into units of analysis and classified into categories that are defined according to the context of the research. These categories are: potential of implementing RFID in fashion retailing industry, feasible application areas of RFID, and perceived difficulties in adopting such technology. This coding method tries to interpret the presence or absence of a given category. Then, word frequency is counted and analysed. In addition, quotations from the interviews were used to support data interpretation (Perry, 1998). The following sections describe the results from the in-depth interviews. Background of the responding firms The five retail firms included in the study have a good reputation in Hong Kong as well as in the region. They were all wholly Hong Kong-owned and had been established for over ten years. As shown in Table I, four of them were owned by other parent companies. One of the five retail firms and two of the four holding companies were publicly listed. Their core businesses were retailing, franchising, wholesaling, trading, manufacturing and distribution. On average, their annual sales turnover in the past Retail firm Core business
Firm A Retailing
Major market
Hong Kong, China, Asia
Parent company
Group W (listed) Wholesaling, retailing, franchising Hong Kong, China, Asia
Core business Major markets Years of establishment Annual sales turnover (US$ in million) Employees Interviewees Table I. Summary of company profiles
Firm B (listed) Retailing, manufacturing Hong Kong, China, Taiwan, Asia Group X (listed) Trading, retailing, manufacturing USA, Europe
Firm C Retailing, franchising Hong Kong, China
Manufacturing, trading, retailing USA, Europe
NA Trading, manufacturing, retailing Japan, USA, NA Europe
20
29
20
35
11
160 3,800 GM of Co. A
260 12,200 Group director CEO of Co. B
90 2,600 Group CEO Group COO
200 4,600 Group director CEO of Co. D
10 20 Owner Sales manager
Group Y
MD of Co. C
Firm D Retailing, franchising Hong Kong, China, Asia, Europe Group Z
Firm E Wholesaling, retailing Hong Kong, China, Asia NA
three years ranged from US$10 to over 260 million. All the interviewees were from the senior managerial level, including owner, CEO, directors, general managers or key functional managers. They had been working in the industry for many years and had vast experience in fashion retailing. Therefore, their views on the implementation of RFID technology can be regarded as representative and reliable. Detailed corporate information of the five sample firms, as well as their parent companies, are shown in the Appendix. Potential of RFID in fashion retailing All of the interviewees had some knowledge about RFID and saw that this technology might have a potential to be implemented in the fashion retail industry in view of the nature of the products and the environment of the business. For example, a director of a branded fashion retailer pointed out that RFID was feasible in the fashion business because of the materials and characteristics of the products: [. . .] Data transmission through the RFID system may be disturbed by metal or liquid materials. However, the main substance of garments is textile fibres; RFID is feasible for these materials.
RFID is particularly suitable for large retailers that carry many brands and/or product lines, as RFID can help keep track of the locations of the products, monitor the level of inventory, develop better stock plans, identify brand and product authenticity, and reduce human errors. Another interviewee, a director of a high-end fashion retailer, greatly admired the intelligent functions of RFID: [. . .] As we sell several brands, RFID can help us identify every brand that we have in each store. In addition, we recruit many new salespersons each season; RFID can help us minimize human errors and personnel costs.
However, some interviewees had reservations about the usefulness of certain RFID functions. For example, one of the key functions of RFID is to provide quick scans of a large amount of merchandise and show the quantities, styles and prices all at once at the cashier’s counter. A respondent stated that this function was not applicable to her high-end fashion products. She also pointed out the needs of high-end fashion retailers differed from those of supermarkets: [. . .] Supermarkets need fast transactions because their customers usually buy a large quantity of merchandise, whereas fashion shoppers, particularly in the high-end market, buy at most a few pieces. Therefore, this function may not be useful for us.
Nevertheless, all of the interviewees expressed great interest in this technology and wanted to try it if the constraints, such as cost, durability, accuracy and feasibility of being integrated with current systems, could be overcome. One interviewee summed up the potential of RFID: [. . .] This new technology may help us to improve our operational efficiency and effectiveness. I think our sales performance could be enhanced by using it.
Application areas of RFID The interviewees suggested several potential areas in fashion retailing in which RFID could be applicable. The first and most obvious area is shop floor management. Responding quickly is essential in a fashion business, particularly for those stores that
Adoption of RFID in fashion retailing 601
IMDS 108,5
602
sell mass fashion. An interviewee from a mass fashion retailer stressed the importance of a quick response in shop floor management because of the market uncertainties and demand fluctuations: [. . .] We require a quick scanning system when customers buy a large quantity of products. More importantly, we need to automatically and promptly refill merchandise in the stores whenever an item has been sold.
Another retailer also considered how RFID could enhance their ability to serve customers better at shop floor level, particularly those who are tourists requiring immediate availability of selected merchandise: [. . .] Our customers are mainly tourists who come from around the world. When the product they want to purchase is out of stock, they can’t wait, or can wait for only a short period.
The second potential area of application of RFID is customer relationship management. Knowledge about customers is important for all fashion retailers. As individual shoppers may react differently at different stages of the purchasing process, an in-depth understanding of their shopping behaviour could help the sales personnel provide personalized services for their customers. Many interviewers appreciated the tracking function of RFID on the shoppers. One interviewee said that: [. . .] If a customer entered our stores and picked up a pair of trousers, say, for over ten seconds, or picked up several pairs of trousers of a similar style, this would give us a signal of what he or she is looking for and thus we can tailor our advice for him or her.
In all circumstances, fashion retailers should hold the knowledge of products, operations and, in particular, customers within their firms, rather than within a single staff member. An effective system should be adopted to avoid the danger of losing the knowledge of their loyal customers, especially when a staff member leaves the company. One interviewee from a high-end retailer noted: [. . .] On the one hand, we have to trust our sales staff to serve our VIP customers. On the other hand, we cannot fully rely on them as the staff turnover rate is high. When any of our staff members leave, it is difficult for us to keep the information of our loyal VIPs in our system. Some loyal customers may even be lost if we cannot keep and use such knowledge.
The interviewees further explained why retaining loyal customers and developing good customer relationships were so important for their businesses. Personalized interactions with loyal customers are always required for those selling high-end products. An RFID system can provide immediate information of a specific customer, so that a fashion retailer could serve their customers easier and better. Another respondent said that: [. . .] As we are selling high-end products, we need to treat the customers as friends and provide them with professional suggestions. If we can trace the purchase history of our loyal customers, then their taste, purchase quantity, preferred styles and colours, and even age group can be identified immediately.
The third potential area suggested by the interviewees is marketing and promotion. A complete fashion outfit is often composed of several items, such as tops, bottoms and accessories. Many fashion consumers prefer to purchase a well-matched, coordinated outfit in one go. If the mix and match details, such as material, colour and pattern are in
the system, RFID solutions can generate mix and match suggestions for them. This is a good opportunity to encourage cross-selling and up-selling. The director of a mass fashion retailer stated that, by using RFID, they could be able to create additional values for their customers:
Adoption of RFID in fashion retailing
[. . .] We could input all the item information, including mix and match styles, into the RFID system. Then, we could hire a fashion adviser in our stores to track fashion trends and give advice to our customers. With the help of the RFID system, these services could be realized.
603
The CEO of another retailer also said: [. . .] Such system would be particularly useful, if the staff do not have much fashion sense or are newly recruited. In fact, we now print guidelines with predetermined suggestions for our staff to memorize. If we can make use of RFID, we can increase our sales efficiency.
The fourth area of application is logistics and inventory management. The improved efficiency of stock control is important for fashion retailers because of the short shelf life of products and the complex assortment requirements. The owner of an import-fashion enterprise stated that the intelligent function of RFID in handling stock data would be very helpful for their operations: [. . .] We have a wide product range, in view of quantity, style, sizing and colour. This is a challenge for us to manage the large amount of information in a timely manner. If we could make use of the RFID technology to retrieve stock information directly and accurately, our staff would not lose time checking the storeroom.
Such applications can be extended to include the management of a franchising business. Our interviewees agreed that the information that is stored in the RFID tag could help them detect the stock level of their franchisees effectively and discover whether their franchisees were carrying any counterfeit stock. A CEO of one sample firm stated that this RFID function could help them to save operation costs in managing and controlling their franchisees: [. . .] We could better control the stock level of our franchisees and detect any counterfeit items that are being stored in their shops. This would save us a lot of time that is spent at present on visiting and checking our franchisees.
On the whole, all our interviewees agreed that RFID technology has a potential in various areas of fashion retailing that could help them to improve their operational efficiency and increase sales volume. Perceived difficulties in adopting RFID technology In spite of the various benefits of an RFID system, the interviewees saw some difficulties that might affect their adoption decisions. The first concern was the cost. All of the interviewees worried about the increased expenditure on the RFID tags, hardware facilities, and the system operations and maintenance, because these would directly add cost to their merchandise at the item level. The director of an import-fashion enterprise stated: [. . .] We have to first consider seriously the costs of the full system, including both the hardware and the software. Then, we have to factor in the operational costs of using this system, as we need extra human effort to input data into the system and attach the RFID tags onto each piece of merchandise.
IMDS 108,5
604
The other concern of the interviewees about using RFID is the technology itself, especially the compatibility of the technology with their current corporate system, data quality and the life cycle of the technology. These are more important when their business involved different countries. A general manager of a branded retailer pointed out that these were key factors of implementation. He said: [. . .] The other main challenges I can think of are whether this new RFID system can be integrated into our current system and whether we can expect 100% accuracy of the data. We are also afraid that there would be other technologies replacing RFID in the near future. Therefore, we would not pioneer the use of such a system unless it had been proven to be truly successful.
The last concern raised by the adoption of RFID technology was related to the attitude of senior management and the calibre of sales personnel. The attitude of top management directly affects investment decisions, while the quality of sales personnel leads to the demand for a user-friendly system. One interviewee highlighted this issue: [. . .] The attitude of top management can be a challenge for us as it is very important to get support from top management. Equally important is the attitude of our staff as they have to learn how to use a newly introduced system.
Another interviewee also stressed the importance of staff quality and worried about the acceptance of their salespersons of a new technology: [. . .] The education level of salespersons in the fashion retail industry is relatively low and they are rather reluctant to try new technologies or new methods. So, we would expect the language of the software to be user friendly so that our salespersons could pick it up quickly.
In summary, the views of the interviewees make it clear that there are several difficulties that are associated with the implementation of an RFID system. Prior to the adoption decision, these must be taken into consideration. A business value-added framework The interviews with the ten senior staff of the five large, highly representative fashion retailing firms in Hong Kong revealed a number of potential areas for the application of RFID in the industry. The benefits and challenges described by the respondents were the pull and push forces that affect a fashion retailer’s adoption decision. Specifically, the use of RFID in the areas of shop floor management, customer relationship management, marketing and promotion, and logistics and inventory management may have a strong and direct influence on the performance of individual firms in terms of operational efficiency, sales volume and overall profits. To better understand whether and how fashion retailers will adopt RFID technology, further research on RFID-generated values is needed. As there is a lack of reported empirical research in the industry, we propose, taking Porter’s (1985) classical value chain as a reference, a business value-added framework to illustrate the ways in which RFID applications can generate values for a fashion retailer (Figure 1). In this framework, RFID-based management solutions create values for a fashion retailer in terms of responsiveness, relatedness and refinement. Indeed, with the built-in intelligence, an RFID solution can capture data instantly, filter data selectively and manage data intelligently. In this way, a fashion retailer is able to respond more quickly to the market, deliver the most relevant information to related parties, and
Shop floor management Sales
Marketing and promotion management
Profits
Customer relationship management
Efficiency
Fashion retailing activities
Adoption of RFID in fashion retailing
Logistics and inventory management
605 Business value
RFID application
Responsiveness
Relatedness
Refinement
RFID retail management solutions
refine the operational process in the areas of shop floor management, customer relationship management, marketing and promotion, and logistics and inventory management. Improved performance in these major retailing activities will, in turn, enhance the overall efficiency of a fashion retailing firm, generate more sales volume, and increase profits eventually. All these will contribute to the competitiveness of individual firms and, subsequently, may change the business ecology of the entire fashion retailing industry. To verify this RFID-based business value-added framework, we offer four tentative propositions for future research. In which, the generated business values of responsiveness, relatedness and refinement are the independent variables while a firm’s performance in shop floor management, customer relationships development, marketing and promotion, and logistics and inventory management are the dependent variables. P1.
The business values that are generated by using RFID technology can help fashion retailers increase the efficiency of shop floor management.
From our study of the five sample firms, shop floor management is the core activity of a fashion retailer. In addition to providing a fast check-out service at the point-of-sale counter, an RFID solution could be used to enhance other shop floor activities through a number of value-added features: for example, a wireless point-of-sale service delivered via handheld devices that are applied to process sales transactions in remote locations; efficient price updating systems that integrate RFID with LCD price tags to provide accurate and fast updating of price information; item-matching systems that produce suggestions for matching fashion items with a display device (kiosk) that is situated in various locations, such as on the shelf, at the check-out counter or inside changing rooms; and efficient item-searching systems that integrates handheld readers to search for items or recognize the identity of products on the shop floor. All of these features would help fashion retailers to manage their shop floor activities more efficiently. P2.
The business values that are generated by using RFID technology can help fashion retailers build up better relationships with their customers.
One of the key characteristics of the five sample firms is their wide variety of customers. Different marketing and sales tactics should be used to serve different
Figure 1. RFID-based business value-added framework for fashion retailing
IMDS 108,5
606
customer groups. Through the issue of smart RFID VIP cards to loyal customers, a fashion retailer can trace and keep record of their shopping behaviour and buying history whenever they visit the store. Such information can provide a great help to a fashion retailer in determining the right methods to serve their customers, such as discounts, special gift offers or product recommendation and, thus, build up a close but discriminating relationship programme for each customer. P3.
The business values that are generated by using RFID technology can help fashion retailers improve the effectiveness of marketing and promotion.
As reported by the ten respondents, the information retrieving function of the RFID system could also be useful for in-store promotions. Salespersons could make recommendations to customers about coordinating different items, such as tops with bottoms, jackets with vests, or skirts with sweaters. This would create more opportunities for cross-selling and up-selling and would add value to customers’ shopping experiences. Moreover, RFID could also be used to increase the effectiveness of promotions and advertising, such as through offering electronic coupons or providing extra promotional messages through RFID devices that are attached to outdoor or indoor promotion boards. P4.
The business values that are generated by using RFID technology can help fashion retailers advance the operations in logistics and inventory management.
In view of the findings of the case study, the fourth area in which RFID technology can add value for fashion retailers is logistics and inventory management. An asset track-and-trace system captures information that is stored in the tag, updates the product database and tracks the movement of items. Such an RFID system can enable large savings in time and labour costs in inventory management, and enable a rapid response when unexpected problems occur. In addition, the system can help improve the use of space in warehouses, distribution centres and retail stores. As there is no need to assign and store the products according to their type, they can be located in the most efficient manner based on their shape, size or relatedness (Jones et al., 2005a). Fashion retailers could also use strategically located RFID readers to monitor shipments throughout the entire logistics process so that arrival time can be accurately estimated, inventory control optimized and distribution errors minimized. Concluding remarks The introduction of RFID technology could give fashion retailers access to information in a way that has never previously been possible. However, the current application of RFID technology in the industry is still very limited. An in-depth understanding of the benefits and challenges of an applicable RFID solution is essential to a firm’s adoption decision. In this paper, we have studied the views of five large and highly representative fashion retailers regarding RFID adoption. Based on the findings, we developed a business value-added framework with four propositions for further study. Managerial implications We believe that knowledge of the values generated from an RFID system can help planners to design tailor-made software packages, support potential system users to
make wise investment decisions, and more importantly, inspire more fashion retailers to use this technology. The values generated through such revolutionary technology will be essential for fashion retailers to better serve their clients, to enhance their operational efficiency and, in turn, to create competitive advantages. In spite of that, there are still a number of challenges in such areas as technology, standards, infrastructure, cost and privacy (Davison and Smith, 2005). These challenges have managerial implications for further implementation in the commercial sector. In fact, RFID is not a fully mature technology. There are still some technological problems that affect the performance and accuracy of an RFID system (Wu et al., 2006; Smith, 2007). For example, when the tagged item is liquid or metal, the RF waves are refracted or reflected, and when a large number of tags are read simultaneously, interference may occur. In addition, the orientation of the tag antenna may affect the radio wave reception. The issue of RFID standards, especially in a global business environment, is a crucial concern. The lack of standard interoperability between different RFID-based systems will discourage users from making large investments in RFID technology (Gerst et al., 2005). In particular, as the radio spectrum allocation for RFID varies from country to country, it will be hard for tagged goods to travel along the global supply pipeline. The next challenge is the design of system infrastructure. In a fashion supply chain, the data that are captured from an RFID-based system should be transmitted to every authorized user of the information: the manufacturer, the distribution centre, the air cargo, the retailer and/or the department stores (Wu et al., 2006). Thus, the design of the system has to take into account the specific working environment and the personnel involved, so as to ensure the solution adopted will be efficient, robust and secure and, more importantly, supported by top management and accepted by frontline users. Another obvious constraint on the widespread commercial adoption of RFID is the cost of the installation of RFID system (Jones et al., 2005a; Wu et al., 2006). Although the price of passive UHF tags has greatly decreased in the past few years, it has not yet reached a level that is acceptable to most fashion retailers. In addition, the cost of RFID readers and the establishment of the infrastructure is quite a large investment, and this is a further obstacle to the implementation of RFID. The last challenge concerns the issue of privacy. Though many of the interviewees in our case-study had overlooked this issue, the special functions of RFID in tracking consumers’ shopping behaviour have already provoked a range of privacy concerns among civil liberties groups (Jones et al., 2005a; Chen and Pfleuger, 2008; Shih et al., 2005). Therefore, businesses will have to embark on public education to reassure consumers that the adoption of RFID technology will not infringe their civil liberties or be used to spy covertly on them. In addition, appropriate systems or monitoring processes should be implemented to ensure the data captured from the shoppers is only used for agreed purposes and will be destroyed afterwards. Theoretical implications The adoption of RFID is one facet of technology transfer (Lee and Runge, 2001). In general, adoption of advanced technology like RFID may incur a revolutionary change in a firm. In our multi-case study, the views of the five highly representative fashion retailers show that there are a number of pull and push factors affecting their final
Adoption of RFID in fashion retailing 607
IMDS 108,5
608
adoption decision. Nonetheless, the business values generated in a business are always the determinant factor. Our proposed RFID-based business value-added framework and the four propositions help managers identify RFID opportunities for generating values to improve their key operational activities. In a knowledge society, a firm needs to exploit the use of advanced technology extensively so as to develop its competitive advantage and succeed in today’s market. Indeed, having an in-depth understanding of the impact of the RFID-based values on a business is fundamental to the prediction of a firm’s adoption decisions and, in turn, to provide a better understanding of technology transfer and enhancement in a less technologically advanced fashion retailing industry. Our study also has an obvious implication for educators. RFID is a new and emerging technology. Because of its values, the adoption of RFID in the commercial sector will no doubt increase rapidly in the near future. However, a recent survey by the Computing Technology Industry Association revealed that 80 per cent of the responding companies said that there were insufficient numbers of skilled RFID professionals. Two-thirds of them said training and educating their employees on RFID technology is one of the biggest challenges they face in order to succeed in the RFID market (Morrison, 2005). Our multi-case study also supports this point of view. The interviewees’ concern about staff acceptance is one of the major obstacles in adopting RFID. We believe training programmes, such as RFID certification programs, regular/short courses, etc. can help frontline employees in using such technology. Educational institutions have to seize this opportunity to offer appropriate programmes to support the industry in the adoption of RFID. In conclusion, the business value-added framework and the four propositions developed in this paper set a succinct research agenda on how business values generated by RFID may affect a fashion retailer’s business performance, but more research should be directed to the examination of the challenges in pursuing such an advanced technology. For example, research should include consumers’ reactions, especially whether they feel it threatens their personal privacy (Sethuraman and Parasuraman, 2005) and trading partners’ responses, particularly those related to sharing of information and channel integration. These research issues will be fruitful for understanding the adoption of RFID by fashion retailers and for further investigation of technology transfer and enhancement in the commercial sectors. References Alu, A., Sapia, C., Toscano, A. and Vegni, L. (2006), “Radio frequency animal identification: electromagnetic analysis and experimental evaluation of the transponder-gate system 2006”, International Journal of Radio Frequency Identification Technology and Applications, Vol. 1 No. 1, pp. 90-106. Andersson, P., Rosenqvist, C. and Ashrafi, O. (2007), “Mobile innovations in healthcare: customer involvement and the co-creation of value”, International Journal of Mobile Communications, Vol. 5 No. 4, pp. 371-88. Benbasat, I., Goldstein, D.K. and Mead, M. (1987), “The case research strategy in studies of information systems”, MIS Quarterly, Vol. 11 No. 3, pp. 369-87. Carson, D., Gilmore, A., Perry, C. and Gronhaug, K. (2001), Qualitative Marketing Research, Sage, London.
Chen, J.V. and Pfleuger, P. Jr (2008), “RFID in retail: a framework for examining consumers’ ethical perceptions”, International Journal of Mobile Communications, Vol. 6 No. 1, pp. 53-66. Christopher, M., Lowson, R. and Peck, H. (2004), “Creating agile supply chains in the fashion industry”, International Journal of Retail & Distribution Management, Vol. 32 No. 8, pp. 367-76. Collins, J. (2006), “Marks and Spencer to extend trial to 53 stores”, RFID Journal, available at: www.rfidjournal.com/article/articleprint/1412/-1/1 (accessed 20 July 2006). Coyle, K. (2005), “Management of RFID in libraries”, The Journal of Academic Librarianship, Vol. 31 No. 5, pp. 486-9. Davison, J. and Smith, S.E. (2005), Retail RFID Stirs Process Change and Improves Product Availability, Gartner, Stamford, CT. Deshpande, R. (1983), “Paradigms lost: on theory and method in research in marketing”, Journal of Marketing, Vol. 47 No. 4, pp. 101-10. Eisenhardt, K.M. (1989), “Building theories from case study research”, Academy of Management Journal, Vol. 14 No. 4, pp. 532-50. Erwin, E. and Kern, C. (2005), “Radio frequency identification in libraries”, Australasian Public Libraries and Information Service, Vol. 18 No. 1, pp. 20-8. Gerst, M., Bunduchi, R. and Graham, I. (2005), “Current issues in RFID standardisation”, available at: www.managementschool.ed.ac.uk/research/netent/papers/interop%202005. PDF (accessed 20 July 2006). Hall, R. and Hampl, J.S. (2004), “Radio frequency identification: applications for dietetics professionals”, Journal of the American Dietetic Association, Vol. 104 No. 10, pp. 1521-2. Hsi, S. and Fait, H. (2005), “RFID enhances visitors’ museum experience at the exploratorium”, Communications of the ACM, Vol. 48 No. 9, pp. 60-5. Hum, A.P.J. (2001), “Fabric area network – a new wireless communications infrastructure to enable ubiquitous networking and sensing on intelligent clothing”, Computer Networks, Vol. 35 No. 4, pp. 391-9. IDTechEx (2005a), “Benetton apparel, Italy”, RFID Knowledgebase, available at: http://rfid. idtechex.com/knowledgebase/ (accessed 19 July 2006). IDTechEx (2005b), “RFID progress at Wal-Mart”, available at: www.idtechex.com/products/en/ articles/00000161.asp (accessed 20 July 2006). Jaseiskis, E.J. and Ei-Misalami, T. (2003), “Implementing radio frequency identification in the construction process”, Journal of Construction Engineering and Management, Vol. 129 No. 6, pp. 680-8. Jones, P., Clarke-Hill, C., Hillier, D. and Comfort, D. (2005a), “The benefits, challenges and impacts of radio frequency identification technology (RFID) for retailers in the UK”, Marketing Intelligence & Planning, Vol. 23 No. 4, pp. 395-402. Jones, P., Clarke-Hill, C., Comfort, D., Hillier, D. and Shears, P. (2005b), “Radio frequency identification and food retailing in the UK”, British Food Journal, Vol. 107 No. 6, pp. 356-60. Ka¨rkka¨inen, M. (2003), “Increasing efficiency in the supply chain for short shelf life goods using RFID tagging”, International Journal of Retail & Distribution Management, Vol. 31 No. 10, pp. 529-36. Lau, M.M. and Moon, K.L. (2006), “Adoption of strategic networks: evidence from the Hong Kong clothing industry”, Journal of Business & Industrial Marketing, 1 June.
Adoption of RFID in fashion retailing 609
IMDS 108,5
610
Lee, J. and Runge, J. (2001), “Adoption of information technology in small business: testing drivers of adoption for entrepreneurs”, The Journal of Computer Information Systems, Vol. 42 No. 1, pp. 44-57. Li, S. and Visich, J.K. (2006), “Radio frequency identification: supply chain impact and implementation challenges”, International Journal of Integrated Supply Management, Vol. 2 No. 4, pp. 407-24. Malhotra, N.K. (2004), Marketing Research: An Applied Orientation, 4th ed., Pearson Education International, Upper Saddler River, NJ. Melski, A., Thoroe, L. and Schumann, M. (2007), “Managing RFID data in supply chains”, International Journal of Internet Protocol Technology, Vol. 2 Nos 3/4, pp. 176-89. Morrison, J. (2005), “Help wanted”, RFID Journal, March/April, pp. 13-20. Ngai, E.W.T., Cheng, T.C.E., Au, S. and Lai, K.H. (2007a), “Mobile commerce integrated with RFID technology in a container depot”, Decision Support Systems, Vol. 43 No. 1, pp. 62-76. Ngai, E.W.T., Moon, K.K.L., Riggins, F.J. and Yi, C.Y. (2007b), “RFID research: an academic literature review (1995-2005) and future research directions”, International Journal of Production Economics, 9 June. Patton, M. (1992), Qualitative Evaluation and Research Methods, Sage, New York, NY. Perry, C. (1998), “Processes of a case study methodology for postgraduate research in marketing”, European Journal of Marketing, Vol. 32 Nos 9/10, pp. 785-802. Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York, NY. Prater, E., Frazier, G.V. and Reyes, P.M. (2005), “Future impacts of RFID on e-supply chains in grocery retailing”, Supply Chain Management: An International Journal, Vol. 10 No. 2, pp. 134-42. Reynolds, K.E., Folse, J.A.G. and Jones, M.A. (2006), “Search regret: antecedents and consequences”, Journal of Retailing, Vol. 82 No. 4, pp. 339-48. RFID Journal (2006a), “New direct-to-textile washable tag”, RFID Journal, available at: www. rfidjournal.com/article/articleprint/111/-1/1 (accessed 19 July 2006). RFID Journal (2006b), “Learning from Prada”, RFID Journal, available at: www.rfidjournal.com/ article/articleprint/196/-1/1 (accessed 20 July 2006). Roberti, M. (2006), “RFID is fit to track clothes”, Chain Store Age, Vol. 82 No. 5, p. 158. Romano, C.A. (1989), “Research strategies for small business: a case study approach”, International Small Business Journal, Vol. 7 No. 4, pp. 35-43. Roussos, G. (2006), “Enabling RFID in retail”, Computer, IEEE, Vol. 39 No. 3, pp. 25-30. Sangani, K. (2004), “RFID sees all”, IEE Review, Vol. 50 No. 4, pp. 22-4. Sethuraman, R. and Parasuraman, A. (2005), “Succeeding in the Big Middle through technology”, Journal of Retailing, Vol. 81 No. 2, pp. 107-11. Shepard, S. (2005), RFID: Radio Frequency Identification, McGraw-Hill, New York, NY. Shih, D-H., Lin, C-Y. and Lin, B. (2005), “RFID tags: privacy and security aspects”, International Journal of Mobile Communications, Vol. 3 No. 3, pp. 214-30. Smith, A.D. (2007), “Mobile technology and communications: exploring aspects of customer relationship management”, International Journal of Mobile Communications, Vol. 5 No. 6, pp. 618-45. Sommerville, J. and Craig, N. (2005), “Intelligent buildings with radio frequency identification devices”, Structural Survey, Vol. 23 No. 4, pp. 282-90.
Stokes, R. and Perry, C. (2005), “Chapter 10. Case research about enterprises”, in Hine, D. and Carson, D. (Eds), Innovative Methodologies in Enterprise Research, Edward Elgar, Northampton, MA. Streit, S., Bock, F., Pirk, C.W.W. and Tautz, J. (2003), “Automatic life-long monitoring of individual insect behaviour now possible”, Zoology, Vol. 106 No. 3, pp. 169-71. Thietart, R.A. (2001), Doing Management Research: A Comprehensive Guide, Sage, London. Wicks, A.M., Visich, J.K. and Li, S. (2006), “Radio frequency identification applications in healthcare”, International Journal of Healthcare Technology and Management, Vol. 7 No. 6, pp. 522-40. Won, J.U., Choi, Y. and Park, J.H. (2006), “Pallet management system based on RFID in the postal logistics”, International Journal of Services Operations and Informatics, Vol. 1 No. 4, pp. 321-31. Wu, N.C., Nystrom, M.A., Lin, T.R. and Yu, H.C. (2006), “Challenges to global RFID adoption”, Technovation, Vol. 26 No. 12, pp. 1317-23. Wyld, D.C., Jones, M.A. and Totten, J.W. (2005), “Where is my suitcase? RFID and airline customer service”, Marketing Intelligence & Planning, Vol. 23 No. 4, pp. 382-94. Yin, R.K. (1994), Applications of Case Study Research, Sage, Thousand Oaks, CA. Appendix Interview questions . Have you heard of RFID? . If yes, can you tell us whether this technology is feasible in the fashion retailing business? . If yes, can you think of any potential areas that can apply the technology of RFID? . Can you tell us the benefits that can be generated through implementing RFID in your business? . Can you anticipate any factors affecting the implementation of RFID technology in the fashion retail business? . If an RFID system is available in the market, will you adopt it? Or under what conditions will you adopt it? Company profiles Company A is a direct subsidiary of a fashion retail group, which is a listed public company in Hong Kong and was established 20 years ago. The group licenses several high-end brands of apparel and accessories from Europe and the USA. Its core business is running distribution of the licensed products through retailing, franchising and wholesaling. The group employs around 3,800 staff and its sales turnover is close to US$160 million. The sales network covers major cities of South East Asia; in mainland China alone, there are over 300 stores carrying exclusive licensed brands. Company B is a listed company and is majority owned by another public listed fashion group. The parent group is the largest developer and producer of silk textiles and garments in China. The group employs more than 12,000 staff and has an annual turnover not less than US$250 million. Company B owns a popular fashion brand of ladies smart casual wear and licenses the right to manufacture and distribute several other brands. It has a fully owned garment factory and runs about 300 stores over Taiwan and another 100 over Mainland China under their brand name. Company C is an enterprise which includes knitting and yarn spinning factories. It produces high-valued woollen knitwear for US and European markets. It has more than 2,600 employees
Adoption of RFID in fashion retailing 611
IMDS 108,5
612
with annual sales turnover around US$90 million. Company C is now entering into the fashion retailing business and licensed the right of manufacturing and marketing of a famous Paris brand in Hong Kong as well as in China. It has more than ten self-owned stores and carries another ten franchisee stores under the same brand over Mainland China. Company D is a direct retail subsidiary of another fashion group. This group has been established for 35 years, running businesses from supermarkets to garment manufacturing, trading and retailing. It has subsidiary offices in Japan, Singapore, Taiwan and Italy, and employs more than 4,600 staff. Company D focuses on fashion retailing and markets a wide range of fashion and lifestyle brands. Operating through franchise and management consultancy agreements, this company has 109 boutiques located in Hong Kong, China, Taiwan, and Singapore, with an annual sales turnover around US$15 million. Company E is a fashion wholesaling and retailing company in Hong Kong. It has 11 years of history and focuses on high-end imported Japanese and European fashion. It carries a variety of popular products/brands of trendy ladies wear and accessories. Its primary customers are independent fashion retailers in Hong Kong, Greater China, and South East Asia countries such as Singapore, Malaysia, and Australia. The company has two wholesaling outlets and several joint-ventured retail stores. It has 12 direct employees and annual turnover around US$10 million. Corresponding author K.L. Moon can be contacted at: tcmoonk@inet.polyu.edu.hk
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints