Pressure From European Retail Buyers Forces RFID Checkouts Suppliers to Discuss Infrastructures Deals

Interest in using contactless RFID-based self-checkout systems among European retailers expands from initial talks about hardware and software towards more complex discussions about infrastructural deals that many technology suppliers failed to foresee in their business plans.

As retailers consider using contactless RFID checkout systems, they increasingly expect technology suppliers to discuss tagging processes, integration and store modification requirements simultaneously with their products. These developments reshape pricing models and negotiation procedures related to the technology.

While initial conversations about RFID self-checkout systems focused on hardware and software improvements, today's procurement review process looks more like an infrastructure deal due to high dependence on overall store's RFID performance.

That creates uncertainty for financial planning. Checkout terminals work well independently but fail when it comes to consistent performance of surrounding infrastructure which may vary significantly among suppliers, warehouses and stores' environments. As a result, retail executives pay much more attention to the issue before approving multi-store roll-out.

These changes become especially noticeable in case of multinational companies operating several chains within Europe and having different supply arrangements even within same retail categories. If product tagging process varies from one manufacturing partner to another, it becomes difficult to ensure consistent operation of self-checkout systems that require reliable RFID detection infrastructure.

Additionally, retail buyers began to question replacement strategies. Barcode technology was quite stable for several years since basic processes remained unchanged throughout all that time. RFID technology involves new layers of hardware including readers, RFID tags and detection systems that require significant investment.

That brings to the table more questions related to budgeting needs, maintenance obligations, rate of lost RFID tags and compatibility of systems with developing store infrastructures. Some technology providers have already responded to emerging needs by rethinking their selling strategies.

While many companies started their sales efforts with emphasis on faster checkouts, today they highlight implementation and integration services they offer. Ability to integrate systems with existing infrastructures seems to play a much bigger role than interface optimization in today's negotiations.

This shift poses challenges to small-scale suppliers of platforms that primarily focus on developing self-checkout hardware. Major European retailers normally expect technology suppliers to support implementation process in different formats of stores as well as integration with various inventory management systems and manufacturing companies.

As a result, procurement cycles tend to become more complicated. Retailers seem to be less willing to launch pilot programs before understanding how the new technology works on all stages including replenishing, returns processing and inventory reconciliation.

Discussion also highlights differences between central offices of retail organizations and store managers. Technology groups tend to prefer standardization of hardware across the region while store managers prioritize practical aspects such as mistakes with tagging process and crowded store's floors.

That affects speed of implementation. Sometimes deployments are launched at flagship stores while regional expansion slows down awaiting results of internal evaluation. It puts additional pressure on providers expected to support different checkout processes at the same time.

Lastly, today's contractual negotiations also differ from what was seen earlier during rollout of the first generation of self-checkout systems. Performance guarantee related to transaction speed is now considered insufficient. Today, retailers expect higher accountability regarding accuracy and stability of self-checkout infrastructure.