Uniqlo's parent company of gambles on tiny RFID chips

The Uniqlo Fifth Avenue store in New York has gleaming bins at the front of the store with automated stations where shoppers can check out their purchases by simply placing them in gleaming bins. The customer does not have to scan individual items or look up prices on a screen to pay at this casual clothing retailer, unlike the self-checkout process at many stores. Customers simply drop their items in a bin and pay without having to scan individual items or look up prices on a screen.

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Using radio frequency identification (RFID) readers, which are embedded inside the checkout machines, the next-generation process automatically reads RFID chips that are embedded inside the price tags, triggering the sale. Takahiro Tambara, who is the chief information officer of Uniqlo's parent company, Fast Retailing Co., the leading clothing retailer in Asia, is the architect of this strategy. Several years ago, Mr. Tambara set out on a mission to transform the way customers shop at many of the company's brick-and-mortar stores, which are still critical to the company's business model, despite the fact that more and more commerce is moving online.

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Using self-checkout machines is part of a broader effort by Uniqlo to improve the supply chain of the company with technology such as RFID, according to Mr. Tambara. In 2017, all brands of Fast Retailing, including Theory and Helmut Lang, began embedding RFID chips into their price tags, as a way for the retailer to be able to track individual items from its factories to warehouses and inside its stores, including its online store. The company has said that this data is critical for Uniqlo in improving the accuracy of inventory in its stores, altering production based on customer demand, and getting a better understanding of its supply chain, according to the company.

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“RFID is not something we introduced because we want to automate the checkout process; what we wanted to do was to develop a platform that could be used across the entire supply chain,” Mr. Tambara explained.

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According to Praveen Adhi, a senior partner at McKinsey & Co., the latest and cheapest RFID chips, reader hardware, and software are enabling retailers such as Uniqlo to implement the technology more precisely and at a lower cost, he said. In his role as head of the consulting firm's retail operations practice in the Americas, he leads the firm's retail operations practice. As far as RFID tags are concerned, it has become more affordable than it was a few decades ago, with the cost of a single tag going from 60 cents to around 4 cents, and the range and accuracy of reader hardware have also improved, he said.

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Using RFID, Uniqlo claims that it has reduced "significantly" the number of items that are out of stock on their sales floor, as well as reducing lost opportunities and improving customer satisfaction, according to the company. In terms of business impact, the company declined to provide more specific information.

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In 2013, Fast Retailing began testing the technology, and in 2019 it started rolling out RFID-enabled self-checkout machines in a certain number of stores. Despite refusing to specify how much Fast Retailing has spent on the technology, Mr. Tambara said that since 2016, when the company launched a strategy to become a digitally enabled apparel retailer and developed its own e-commerce platform, it has more than doubled its investment in information technology.

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"While RFID has a wide range of uses, one of the most common is improving inventory management. However, RFID is also finding its way into self-checkout machines as apparel retailers increasingly look for ways to use the technology once their merchandise has been tagged. There is a high likelihood that many apparel brands will implement RFID by 2023 or 2024," according to Mr. Adhi. 

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Uniqlo's RFID-based check-out system, he said, has the advantage of being faster and more accurate than barcode-based self-checkout machines and is one of the unique advantages of RFID-based systems. There are still a large number of retailers that rely on printed bar codes, which can only carry limited information, and must be scanned manually.

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Currently, Fast Retailing is one of only a few apparel retailers that have rolled out RFID self-checkout services on a large scale, which underscores the obstacles that retailers have to overcome-sometimes for years-before a major rollout is possible, said Mr. Adhi. There are checkout machines available in all 47 Uniqlo stores in the U.S. and 16 in Canada, as well as in 14 of Uniqlo's stores in all 25 markets in which it has stores. Cashier checkout is also available at many stores.

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Fast Retailing has reported that since deploying the machines, customers have reduced their wait time at the checkout by 50% since the machines have been rolled out. RFID readers and antennas, both of which are integrated into the company's point-of-sale systems, are being used by the company to track items but will cease tracking after the items have been purchased, according to the company. 

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Despite the ease of use of self-checkout machines, many shoppers say they remain hesitant to use self-checkout registers because of the difficulty of scanning items and other problems associated with self-checkout machines. A survey by customer-experience-technology firm Raydiant in 2021 found that thirty-six percent of shoppers had significantly increased usage of self-checkout, while 67% had experienced some kind of malfunction at a self-checkout machine in the past year. 

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As a result of better technology, retailers like Uniqlo aim to alleviate such concerns from their customers.

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Although generative artificial intelligence (GAI) and the viral chatbot ChatGPT have captured the world's attention on a global scale, retail analysts still contend that there is a lot that can be done with simpler technologies like RFID, as well. Forrester Research Inc.'s vice president and retail analyst Sucharita Kodali said that RFID remains one of the most practical and advanced technologies for merchandise tracking, if not the most advanced. The cost of using computer vision, a form of artificial intelligence that is capable of analyzing images, is still too high for its widespread use for self-checkout and inventory management, as it is still too expensive for widespread adoption, she added.

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Uniqlo's competitors, such as Inditex, which is the parent company of the fast-fashion Zara chain in Spain, also started attaching RFID-chipped tags to the items of their clothing in 2014, along with testing the use of the technology for self-checkout in their stores. Decathlon, a French sports goods retailer, said in 2014 that it has added RFID to more of its self-checkout machines in an effort to improve customer convenience.