James Tenser

Wal-Mart to Tag and Track Clothing

July 26, 2010

FROM RETAILWIRE:
Everyone can quit guessing what next step Wal-Mart will take in its plan to test RFID technology. According to a Wall Street Journal report on Friday, the world's largest retailer plans to tag individual men's jeans and basics to help it more effectively manage its inventory. Will Wal-Mart's actions lead to the widespread adoption of item-level RFID at retail?      [more...]

RFID shows considerable potential to serve as a beneficial type of in-store sensing for merchants. If applied in "transparent" fashion, it may well contribute to a better shopping experience, especially with respect to item availability. However it would be a mistake to call RFID a solution--it's merely a solution element within a larger set of in-store implementation practices.

Several commentators here have correctly observed that RFID technology is best suited for high-ticket, high-involvement categories, and so it makes sense to electronically tag apparel, consumer electronics items, power tools, etc.

Its potential is much more limited for lower ticket consumables. This presents yet another best-practice challenge for large retailers with diverse merchandise offerings. Walmart faces a dilemma--it proposes to incorporate this new technology that is applicable to only a subset of its assortment. It gains all the complexity but only applies the benefit to part of the store.

The same monitoring solution cannot possibly be optimal for a sack of onions and a flat-screen TV. Their margins and turn rates differ wildly and the consequences of merchandising inaccuracy are very different in dollar impact and character.

For a retailer the size of Walmart, the benefits of RFID may still scale, even if applied only to 10% of the assortment. Smaller FMCG retailers (read: everyone else) should be wary about blindly following the Great Wal down this path.