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Retailer push into item level tagging
will benefit shoppers in the long run

02/07/11 | John R. Johnson | email

Retailers stand to benefit greatly from item level tagging. By affixing RFID tags to apparel goods, footwear and other products with complicated SKU mixes, retailers like Walmart and Macy's gain from increased sales and customer loyalty by having products on store shelves when customers need them.

However, at the end of the day retailers hope it is the customer that gains the ultimate benefit and will drive the adoption of item level RFID tagging in retail. As customers become busier and more connected through mobile devices, they will embrace retailers who have inventory where they want it, when they want it, and priced how they want it.

"This is now literally a customer-centric initiative," says Peter Longo, president of logistics and operations for Macy's. "It's not a jazzy technology initiative that consultants are working on. It's now a customer mandate. The [retailers] that get this and move on it quickly will be the organizations that consumers reward. Those that are laggards or disbelievers will be the organizations that the consumer will punish."

Not long after listening to Longo speak at the NRF show in New York, I heard a funny story about a friend who entered an Old Navy store looking for an uncommon size of jeans. "You might find them online, but not here in the store," the store associate adamantly replied. Well, guess what. Sitting on a store shelf was the exact size the patron was looking for. Had she not opted to shop the store anyway, some other retailer would have received credit for that sale.

That type of occurrence, and many more just like it, happen every day at retail outlets with poor visibility into their inventory. In fact, most store inventories are only 65 percent correct.

"The status of where we are in the consumer space today and the demands of the customer for efficiency and accuracy doesn't tolerate 30 percent inaccuracy with our inventory," says Longo.

Beyond inventory accuracy, retailers that deploy RFID will eventually gain from a reduction in labor. While Walmart isn't on record as saying so, the end goal of many retailers is automated checkout areas that utilize RFID. Item level tagging allows a stack of goods to be scanned with a single swipe of a reader, rather than scanning the bar code of each individual item. Although some may mourn the loss of the "personal touch" at the checkout area, what shopper really wants to stand in line for 10 minutes to purchase goods when a swipe of a mobile device or a customer loyalty card will do the trick instead?

"Last year we spent a lot of time looking at retailer benefits through the studies coming out of the University of Arkansas," says Sue Hutchinson, director of industry adoption at EPCglobal. "But every time we put pen to paper, we kept being pushed back by retailers and vendors saying lets look first and foremost at the value to consumers. This is no longer something that is retailer or industry-centric. The consumer is pushing for this. At the end of the day, a lot of growth is coming from consumer demand to have products that they want in the right stores at the right time."

Eventually, RFID will allow retailers to interact with shopper's mobile devices or loyalty cards, alerting them or promotions and special pricing. Shoppers, in turn, will be able to do comparative shopping inside the store.

RFID also greatly simplifies warranty and returns issues. It will benefit the retailer by eliminating much of the existing return fraud, and consumers will gain by having better service when they do return goods.

Walmart began the push toward item level tagging last summer, announcing that it would tag all men's jeans and basics at its 3,000-plus stores that carry apparel. The retailer is expected to increase the categories it tags sometime this year. Elsewhere, Macy's is taking the lessons it learned at its Manhattan Bloomingdales RFID initiative and expanding item level tagging to seven Macy's units. JC Penney is expected to deploy RFID in 30 stores this year, with 20 more on tap for 2012.

Of course, the consumer centric angle for RFID adoption doesn't stop at the retail cash register. Almost every RFID application has a consumer gain attached, and many are designed exclusively with the consumer in mind, such as RFID wrist bands for amusement parks, and RFID solutions designed to assure safety of students on school busses. The EpicMix ski pass is being embraced by skiers at Vail Resorts, who can take information about the runs they ski and post it on Facebook. Skiers can also track others in their group and discover their location on the mountain.

RFID also has huge consumer ramifications in the healthcare and medical sectors. RFID can assure that patients receive authentic drugs and can guarantee that medical devices are ready when needed during surgical procedures. In these cases, RFID isn't about easier transactions or customer loyalty, but about saving lives.

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