The future of item identification in Retail
Just as retail has evolved over the course of history, so too has the process of identifying items in retail. In fact, item identification serves as the cornerstone of retail operations.
Item identification plays a pivotal role in the retail business process. It’s not just about sales; it’s essential for all operations, including ordering, delivery, and stock management.
Yet, the looming question remains: What lies in store for the future of item identification? Will item IDs vanish, as seen in some cashierless stores, or will technology embedded within the items themselves advance?
To comprehend this, it’s imperative that we delve into the background and history of item identification.
Optical recognition by humans
The ability to identify items has been integral to retail since its inception. Initially, items were visually identified by humans.
The limitation of this “technology,” if we can even call it that, was, of course, the inability to automate processes.
There was an evident need for further development.
Visual identification was impractical in industrial settings, leading to the development of barcodes. Barcodes are essentially characters, typically numbers, used to identify items by creating a unique set of characters for each item.
Over time, industrial and retail requirements changed, and the standard EAN barcode no longer sufficed. New types of barcodes, like QR codes, were introduced, allowing manufacturers to include more data in barcodes and retailers to leverage richer item information in their processes.
While we had barcodes capable of storing ample data, the efficiency of barcode readers remained a challenge.
RFID and NFC
This led to the development of new technologies—RFID and NFC—which improved item identification and scanning efficiency. RFID scanners, for example, could read multiple items simultaneously. However, due to technology limitations and high costs, these technologies haven’t seen widespread adoption in retail.
Optical recognition again but now with AI
The next phase of retail evolution called for new item identification technology, particularly in cashierless stores and fruit and vegetable scales. These environments require optical recognition and AI to ‘see’ and recognize items for identification.
Today, retail continues to evolve, and it’s presenting fresh challenges.
There’s a surge in new kinds of items, especially in the digital realm. Selling products like music, digital art, and documents demands entirely new processes and methods of item identification.
You can’t simply slap a QR barcode or RFID tag on a new song from your favorite artist, and often, you can’t even physically see these items.
When we delve into retailing within the metaverse or through social commerce, things become even more intricate.
Furthermore, the boundaries that once clearly defined various types of retail are blurring.
Supermarkets are offering travel packages and insurance, fashion stores are providing tailoring services, and DIY stores are renting out boats.
All of this, combined with novel customer loyalty concepts and enhanced customer experiences, necessitates the development of new item identification technologies.
Retail processes are increasingly migrating to cloud-based execution, transforming retailers into cloud-native companies.
I firmly believe that this shift towards cloud-based retailing will inevitably drive changes in item identification. Item identification will become an integral part of the cloud environment.
However, for item identification to seamlessly transition into the cloud, a rock-solid, immutable link between the item and cloud operations is essential. To establish this unbreakable connection, a certain level of intelligence must be embedded within the item itself.
Consider the potential of intelligent IDs affixed to items that can communicate with one another and their surroundings.
Allow me to provide you with two examples:
Picture milk cartons that communicate with a temperature sensor that monitors the temperature inside your fridge and warns you if the temperature is not good enough.
Or, envision that you’re placing that same carton of milk into your shopping basket. As soon as it’s in the basket, it checks if there are any Cornflakes inside. If it detects there aren’t any, it reminds you to grab some Cornflakes as well.
This scenario illustrates the potential of smart, interconnected products.
These smart IDs would act as active participants in the retail process, not passive entities as they are today. Decentralization, in this context, refers to the item’s ability to perform certain functions independently, reducing reliance on retailers and cutting costs.
Think about it—smart IDs capable of seamless communication, regardless of the retail’s software implementation or infrastructure. That same milk carton could “check” your shopping basket even when you’ve moved on to the next store.
One existing technology that holds promise, albeit not yet widely adopted, is Blockchain with its immutable smart contracts.
These smart contracts are essentially snippets of software imbued with specific intelligence, capable of linking with digital, physical, and abstract items. For physical items, NFC technology can establish a permanent connection.
Several promising pilot projects are already demonstrating their potential, such as Lowe’s in the US, which is testing RFID technology in conjunction with smart contracts and blockchain to combat power tool theft, yielding highly positive results.
If this technology continues to advance, it holds the potential to revolutionize both retail and item identification.
The transformation of retail into a cloud-based, customer-focused industry, along with the emergence of new retail concepts and item types, will undoubtedly drive changes in item identification technologies.
The current technologies have reached their limits and are ill-suited for the evolving market environment.
The future is very near.