RFID in retail: How it works, applications, and benefits

RFID in retail is rapidly transforming the landscape of the industry. By tracking products in real-time with radio waves, RFID gives retailers a better view of their stock, streamlines operations and boosts the supply chain. As the demand for accurate stock levels and seamless shopping experiences grows, RFID has gone from ‘nice-to-have’ to an essential tool for modern retailers.

In this post, we’ll cover what RFID is, how it works, the benefits it offers, and examples of how it’s transforming retail operations.

Use the links above to skip ahead to the questions you're most interested in.

What is RFID in retail?

How does RFID work in a retail context?

RFID technology uses three main components: tags, readers, and antennas. RFID tags are small chips embedded with data, while RFID readers emit radio waves to detect and capture information from these tags.

When RFID-tagged items pass through a reader, the reader captures real-time data on stock levels, sales, and product locations. Unlike barcodes, which must be scanned individually, an RFID reader can scan hundreds or even thousands of tags at once.

There are two main types of RFID readers:

• Fixed RFID readers: These are stationary devices that are installed in specific locations, such as entryways or checkout zones.
• Mobile RFID readers: These are portable, handheld devices that can be moved throughout the store, offering flexibility for inventory management and item tracking from anywhere.

For retailers, integrating an RFID system with your inventory can greatly enhance operational efficiency. RFID helps improve stock accuracy and visibility, enabling a seamless shopping experience for today’s omnichannel consumers, whether shopping in-store or online.

Uses of RFID technology in retail

RFID technology is becoming essential for retailers worldwide. According to the latest global research from our partner, Zebra Technologies, 61% of retailers plan to adopt RFID by 2026. Here are the top retail use cases for RFID technology.

Better inventory tracking

With RFID tags, retailers can track every item in real-time, giving staff immediate insight into when an item is low or out of stock. This visibility makes it easier to restock shelves quickly, and keeps customers happy by having popular items always available.

Customer behaviour insights

By tracking how items move around a store, RFID helps retailers learn which areas are busiest. Understanding high-traffic areas, pinch points, and product paths enables shops to adjust layouts and create a better shopping experience.

Easy order fulfilment

By tracking items across different locations, RFID improves order management. Whether fulfilling online orders or preparing items for in-store pickup, RFID ensures retailers know exactly where each item is, helping speed up services like ‘buy online, pick up in-store’.

Contactless checkout

RFID technology enables a frictionless checkout process where customers can simply walk through an RFID-enabled area with their items, which are automatically scanned and tallied. This allows for instant, contactless payment, eliminating the need for traditional checkout lines and dramatically speeding up the purchase process.

Temperature monitoring

For shops carrying perishable goods, RFID tags with temperature sensors can track and log product temperatures. This helps ensure items are stored safely, reducing waste from spoiled items and enhancing food safety.

Improved accuracy

RFID technology significantly enhances inventory accuracy in retail by enabling more frequent and precise stock counts while reducing human error. With the ability to scan multiple items simultaneously without requiring line-of-sight, RFID dramatically decreases the time needed for inventory counts.

This improvement leads to better stock visibility, reduced shrinkage, and fewer out-of-stock situations, ultimately resulting in increased sales and enhanced customer satisfaction.

RFID vs. barcodes

While both RFID and barcodes track items, the key difference lies in the need for a direct ‘line of sight’. Barcodes require the operator to scan directly in front of the item, whereas RFID allows data collection from a distance, even for multiple items at once.

Barcodes are common in retail for price tags and basic tracking, storing information like price, origin, and batch number. In contrast, RFID tags store more detailed data, have a larger read range, and don’t need to be in direct view of the reader, making them more efficient for high-volume operations.

RFID vs. NFC

Near-field communication (NFC) is a subset of RFID technology, with the key difference being that NFC allows for two-way communication. Both the device and tag can send and receive data, whereas RFID typically involves one-way communication from the reader to the tag.

NFC is used for short-range communication, requiring both ends to be within inches of each other. In retail, NFC is often used for card emulation, such as with contactless payment methods like Apple Pay.

Why has RFID become so popular in retail?

RFID technology has become very popular with retailers because it helps solve common problems with stock tracking. In the past, retailers had to rely on manual counting and barcode scanning, which could lead to mistakes, slow restocking, and lost sales.

With RFID tags on products, staff can quickly scan large quantities of inventory without needing direct line-of-sight. This efficiency is reflected in industry feedback, with 55% of retail workers reporting that technologies like RFID stock management systems make their daily tasks easier.

On the shop floor, RFID readers help track products as they move, so retailers can quickly see which items need restocking. While there are costs to setting up RFID systems, the benefits—like faster and more accurate stock management—make it a smart investment for retailers. We’ll dive deeper into the benefits of RFID in retail shops in the next section.

Benefits of RFID in retail

RFID is changing retail by making everything from inventory management to customer experience more efficient. Here’s how:

Better inventory management

RFID makes it easier than ever to track products in real-time, so shelves are always stocked with the right products.

The system can automatically update inventory counts as items move through the supply chain, are placed on shelves, or are purchased. This real-time visibility helps prevent overstocking of slow-moving items and understocking of popular products.

Improved customer experience

This technology also enhances the shopping experience by reducing stockouts and overstocks, making it easier for customers to find what they want, when they want it.

In addition to better product availability, RFID enables innovative features in shops, such as smart fitting rooms. For example, RFID-enabled mirrors can provide personalised recommendations based on the items a customer brings into the fitting room, displaying size availability, colour options, and complementary products. This personalised shopping experience not only helps customers make informed decisions but also allows retailers to optimise their inventory based on customer preferences and shopping habits.

More efficient

Another great benefit of RFID in retail is that it reduces the need for manual inventory checks, freeing up staff time for more value-added activities.

As we said above, traditional barcode scanning requires line-of-sight and individual item scanning, which can be time-consuming and prone to human error. In contrast, RFID can simultaneously read multiple tags without direct line-of-sight, dramatically speeding up the process.

Less risk of theft 

RFID’s tracking system makes it much harder for items to go missing. Each item tagged with RFID can be uniquely identified and tracked, making it easier to detect unauthorised removal from the store.

RFID-enabled security gates at store exits can instantly alert staff to potential theft attempts. Moreover, the technology can help identify patterns of theft, such as which items are most frequently stolen or at what times theft is most likely to occur.

Better supply chain visibility 

With RFID, retailers get a clearer view of their supply chain, tracking products every step of the way. This transparency helps identify bottlenecks and optimise logistics in real-time.

Shipments are verified quickly and accurately, reducing errors and disputes with suppliers. RFID makes it easier to manage product recalls, as affected products can be found and removed immediately. And, it can also help combat counterfeits, so authenticity is maintained throughout the supply chain.

Easy self-checkout & price check 

Another major benefit of RFID in the retail environment is the way it can streamline the self-checkout process, making it faster and more accurate. Instead of scanning each item individually, RFID-enabled checkouts can read all items at once, dramatically cutting down on time spent at the register.

Take Uniqlo, for example—customers simply place their clothing in a bin, and RFID scans everything automatically, no barcodes needed. For price checks, RFID-enabled kiosks or mobile devices instantly pull up accurate pricing, ensuring consistency across the store while making price changes and promotions easier to manage.

Ready to see how RFID technology could work for your retail business? Book a visit to our Innovation & Customer Experience Centre today.