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The Future of NFC in Retail

Last year brought a renewed focus to near-field communication — commonly known as NFC — when Apple announced that all iPhones starting with XR/XS will natively read NFC tech, no third party app required. With the vast majority of Android phones already natively reading NFC, it’s time to take a fresh look at the future of NFC in retail technology.

Thus far best known as a payment method, NFC, which is expected to be enabled on 2.2 billion phones by 2020, is poised to realize its full potential as brands begin to explore the many valuable use cases available.

A Quick Background: What is NFC

From a consumer perspective, NFC couldn’t be more simple: tap an NFC tag by moving an NFC-equipped phone to within an inch or so of it. For payments, the NFC object is likely a payment terminal placed near a cash register so consumers can easily complete their purchase with a phone. This works the same way for other use cases, the differences being where the object is placed and what action occurs when a digital experience is activated with an NFC-equipped phone. Because of its versatility — it’s usually in the form of a flexible sticker — an NFC tag can be placed on or in nearly any product: clothing, sports equipment, consumer goods, packaging and more.

From a technical point of view, NFCs greatness also comes in large part from this simplicity. A subset of Radio Frequency Identification (RFID), NFC is a technology standard that transmits information wireless over small distances and doesn’t require internal power to function.

Two components — an antenna and a small system on a chip, or (SoC) — make up the physical NFC tag and work together to form a functional device: the antenna picks up the signal from an NFC-equipped phone and activates the SoC. The SoC includes a small CPU that can store information, typically ranging from 48 bytes to one megabyte. Because of the small amount of memory available, NFC tags typically are encoded to a URL or other text record and work with an experience management system to power the digital experience the consumer interacts with.

Going Beyond Payment: Using NFC in Retail Technology

As NFC payment leads the way in terms of building awareness for NFC technology, consumers are increasingly receptive to new uses of the tech. Brands looking for new ways to leverage this awareness are discovering that NFC can create a new kind of marketing channel, one that reaches consumers directly through products themselves.

Because NFC tags are small and flexible enough to be embedded in or on almost anything, brands add them to their products during and after the manufacturing process. This inherently turns those products into new NFC objects consumers ‘tap’ with their phones. A tap activates a digital experience built by the brand that provides dynamic and contextual information relative to the specific product, creating a new kind of marketing channel.

Brands then receive real-time information about how consumers use their products, as well as the opportunity to provide helpful, contextual and exclusive content in exchange for product feedback and registration. Best of all, brands establish this connection regardless of whether the product was sold directly to the consumer or through a retailer.

Consider an Example: A Luxury Brand Leverages NFC

A luxury brand embeds an NFC tag into a new line of handbags. Those tags, incorporated into the fabric of the bag under the brand’s logo, are coded to activate the digital experience that includes a wealth of information about not only the full handbag line, but also the specific handbag — color, size and more. Additionally, the experience recognizes whether the phone scanning the bag is a sales associate at a retailer or a consumer. Lastly, it discerns whether the bag has been sold yet or not.

After manufacture, those handbags are sent to retailers across the world. Because the experiences the NFC tags activate are contextual, sales clerks receive information about the specific product when they scan the tag, aiding in the sales process. A consumer, on the other hand, scans the unsold bag and receives verification that the product is not counterfeit, providing a higher level of comfort with the purchase. After that purchase, the experience activated when the product is scanned recognizes the sale and prompts the consumer to provide registration information in exchange for exclusive content on how to best care for their specific bag.

The luxury handbag company now has a direct connection with the end consumer for a product that, without an NFC tag, would’ve been out of the brand’s value chain as soon as it shipped to the retailer.

Though it’s a specific use case, this example illustrates the power of NFC to create a connection between brands and consumers where one previously wouldn’t have existed. This adds value to the product itself, and as a result can raise the lifetime value of consumers through future sales.

Why it’s Time to Re-evaluate NFC in Retail

The advantages to brands are clear, but it’s also crucial to take a look at why we’re currently at a watershed moment when it comes to consumer comfort with NFC technology and its capabilities. Apple adding native NFC capability to all iPhones plays a large part in making NFC intuitive and easy to use for almost everyone with a smartphone.

90% of people currently use their smartphones in stores, and almost 40% are expected to consistently use a mobile phone to make purchases at a physical point of sale by 2021. Because of all this and more, the Global Near Field Communication Market is set to reach approximately $49.5 billion by 2025.

The perks of NFC don’t stop at retail technology. NFC use cases expand daily, and include transit access, tap-to-pair, wireless charging, password replacement and much more. As awareness grows, so does the importance of taking a fresh look at NFC in fashion and retail technology, and how much value can be added directly to products.

The Future of Retail Technology: NFC

Currently, brands are only scratching the surface of NFC possibilities. With increasing awareness of the technology, and a growing base of phones able to natively read it, these possibilities grow every day. Because of the widespread use of NFC payments, consumers are now comfortable with and receptive to using NFC in general.

Innovative brands already leverage NFC for all manner of use cases that help them better connect and communicate with consumers. It’s time for this new marketing channel to become mainstream.

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