Uniqlo’s Parent Company Bets Big on Tiny RFID Chips
Uniqlo Co., Ltd. (株式会社ユニクロ, Kabushiki-gaisha Yunikuro) (US: /ˈjuːnikloʊ/ YOO-nee-kloh;[1] Japanese pronunciation: [jɯnikɯɾo]) is a Japanese casual wear designer, manufacturer and retailer.[2] The company is a wholly owned subsidiary of Fast Retailing Co., Ltd.[3] - Origins in Japan - A Yamaguchi-based company, Ogori Shōji (which, until then, had been operating men's clothing shops called "Men's Shop OS") was founded in March 1949 in Ube, Yamaguchi. On 2 June 1984, it opened a unisex casual wear store in Fukuro-machi, Naka-ku, Hiroshima, under the name "Unique Clothing Warehouse".[5] Initially, the brand was going to be registered as a shortened contraction of "unique clothing".[6] However, in 1988, during administration work in Hong Kong for registering the brand, staff in charge of registration misread the "C" as "Q", and that is how the brand name was born.[7] Tadashi Yanai then changed the store name to "uniqlo" across Japan.[8] In September 1991, the name of the company was changed from "Ogori Shōji" to "Fast Retailing", and by April 1994, there were over 100 Uniqlo stores operating throughout Japan.[citation needed]
At Uniqlo’s Fifth Avenue store in New York, shoppers can checkout simply by placing their goods in gleaming bins of automated stations. Unlike the self-checkout process at many stores, customers of the casual apparel retailer don’t need to scan individual items or look up prices on a screen—they can simply drop their items in a bin and pay.
This next-generation process is powered by radio frequency identification readers inside the checkout machines, which automatically read hidden RFID chips embedded in price tags. It is the strategy of Takahiro Tambara, chief information officer of Japan-based Uniqlo’s parent company, Fast Retailing Co., Asia’s top clothing retailer. Mr. Tambara set out on a mission several years ago to transform the way customers shop in its bricks-and-mortar stores, which are still key to the company’s business model even as more commerce moves online.
Mr. Tambara said the self-checkout machines are part of a broader effort to improve Uniqlo’s supply chain with RFID. All Fast Retailing brands, including Theory and Helmut Lang, began embedding RFID chips into their price tags in 2017—allowing the retailer to track individual items from its factories to warehouses and inside stores. That data is critical for Uniqlo in improving the accuracy of inventory in stores, adjusting production based on demand, and getting more visibility into its supply chain, the company said.
“We did not introduce RFID because we want to automate the checkout process; we wanted to develop a platform so that it can be utilized across the supply chain,” Mr. Tambara said.
Newer and cheaper RFID chips, reader hardware, and software are enabling retailers such as Uniqlo to implement the technology at lower cost and with more precision, said Praveen Adhi, a senior partner at McKinsey & Co. who leads the consulting firm’s retail-operations practice in the Americas. The cost of RFID tags has fallen from as high as 60 cents a tag a few decades ago to about 4 cents a tag, and reader hardware has improved in range and accuracy, he said.
Uniqlo said that RFID has resulted in “significant reduction in out-of-stock” items on the sales floor, and that it has contributed to “reducing lost opportunities and improving customer satisfaction.” The company declined to provide more specific information regarding the business impact of the technology.
Fast Retailing began testing the technology in 2013, and in 2019 started rolling out RFID-enabled self-checkout machines in certain stores. Mr. Tambara declined to say how much it has spent on the technology, but said Fast Retailing has doubled its investment in information-technology since 2016, when it launched a strategy to become a digitally enabled apparel retailer and developed its own e-commerce platform.
While the most common use case for RFID is improving inventory management, the use of RFID at self-checkout machines is gaining traction as more apparel retailers explore ways to apply the technology once their merchandise has been tagged. For the majority of apparel brands, implementing RFID “will be on their 2023 or 2024 agenda,” Mr. Adhi said.
The unique benefit of an RFID-based checkout system like Uniqlo’s is that it is faster and more accurate than barcode-based self-checkout machines, he added. Many retailers still rely on printed bar codes, which require manual scanning and are more limited in the data they carry.
Fast Retailing is one of a few apparel retailers so far to have implemented RFID for self-checkout at a large scale, underscoring the obstacles retailers need to work through—sometimes for years—before a major rollout, Mr. Adhi said. Uniqlo’s checkout machines are available in all 47 U.S. and 16 Canadian stores, and 14 of the 25 markets where it has stores, the company said. Stores also offer cashier checkout.
Fast Retailing said that since it rolled out the machines, customers have reduced their wait time at checkout by 50%. The company is using RFID readers and antennas, both of which are integrated into its point-of-sale systems, and said items stop being tracked after they are purchased.
Many shoppers remain hesitant to use self-checkout registers, saying they are put off by hard-to-scan items and other issues at self-checkout machines. Thirty-six percent of shoppers surveyed by customer-experience-technology firm Raydiant in 2021 said they have significantly increased usage of self-checkout, while 67% said they have experienced some kind of failure at the machines. Retailers like Uniqlo aim to allay such customer concerns by providing better technology.
While generative artificial intelligence and the viral chatbot ChatGPT have captured the world’s attention, there is still a lot of work that can be done with simpler technologies such as RFID, retail analysts say. RFID remains the most practical, if not the most advanced, technology for merchandise tracking, said Sucharita Kodali, a vice president and analyst focused on retail at Forrester Research Inc. Computer vision, a form of artificial intelligence that can analyze images, is still too expensive for widespread use for self-checkout and inventory management, she said.
Uniqlo competitors such as Inditex, parent company of the Spanish fast-fashion Zara chain, began attaching RFID-chipped tags to its items in 2014, and has also been testing the use of the technology for self-checkout. French sporting-goods retailer Decathlon said it began adding RFID to more of its self-checkout machines in 2014.