Macy’s Moves to Item-Level Tracking Using RFID
"The right product in the right place at the right time." This ever-elusive goal at retail is what is behind the decision to roll out item-level tagging RFID (radio frequency identification) technology to every Macy’s and Bloomingdale’s by the third quarter of 2012, according to Tom Cole, chief administrative officer of Macy’s, Inc.
"RFID will allow us to more frequently count item-level inventory with precision so our inventory is readily accessible to our customers," said Mr. Cole in a press release. "This is technology that has proven effective in our testing, and we believe now is the right time to roll out RFID aggressively."
Macy’s and Bloomie’s plan to use item-level tags to track "replenishment goods … items automatically resupplied as they are sold to customers." This group of products represents roughly 30 percent of the two chain’s sales in stores and online. The chains expect to achieve inventory accuracy at 97 percent or better with the use of the technology.
Mr. Cole said it was actively working with technology vendors and product suppliers on the initiative.
"Our vendors are joining with us to adopt this technology, knowing the more precise inventory counts through RFID will reduce stock-outs and drive incremental sales opportunities," he said. "This is one of those genuine win-win-win situations in which customers, vendors and our company all benefit."
Bill Connell, Macy’s Inc.’s senior VP of logistics and operations, told RFID Journal that the company has been testing RFID technology on garments going back to late 2008.
"The technology is ready, the hardware is working well, the pilots have taken place," he told the publication.
Discussion Questions
Discussion Questions: What do you think of the decision by Macy’s and Bloomingdale’s to roll out item-level tagging of “replenishment goods” by the end of 2012? Will item-level tagging become a standard practice within apparel retailing and, if so, how long will it take before the rest of the industry is up-to-speed?
This is a long-overdue move, and I’m still surprised that Walmart didn’t get there first. Many of Macy’s vendors overlap with other department store accounts (often under other labels), so they ought to be ready when the next national retailer steps up to the plate. To make “My Macy’s” a true success — not just a slogan — it takes this sort of commitment to technology and good execution.
RFID has long held the promise of providing the retailer more accurate information but the cost of doing so has been a stumbling block. It seems Macy’s has developed a system to capture and utilize that data that they believe will generate enough savings to justify the expense.
Once this is deployed and proven successful for Macy’s, those same suppliers’ investment can be leveraged across other retailers. This can quickly move from a “needed to win” to a “needed to play” technology.
The industry has been having the same discussion on RFID since 2003, and the impact of mandates by major players like Walmart has been minimal at best. If Macy’s can make this work, other apparel retailers will undoubtedly follow suit, but as a lifelong Boston sports fan, I know success often involves a lot of false starts.
I’m a big fan of RFID. On paper, the technology provides an efficient and practical way of managing inventory. But in reality, why do I still see so many out-of-stocks at merchants that employ this system (You know who you are, starts with a W and rhymes with ballmart)? Another question that I have is, what took so long? Apparel and department stores have suffered from mismanaged inventory for a long long long time and RFID seems to be the solution for them (you know who you are, starts with S and rhymes with beers). From a loss prevention perspective, most clothing already comes with the ink tag (and if you aren’t you probably have LP issues) and incorporating RFID is a no brainer as the hardware is already there. RFID system: good. Implementation: questionable.
Macy’s does a lot of things right when it comes to marketing and technology. I just wish they would improve the people part of the in-store equation, and RFID might prove the case. RFID is makes sense on many levels for apparel retailers especially in the fitting room.
Now that Macy’s can verify with RFID, that conversion, ADS, and UPT occur in their fitting rooms, maybe they’ll develop strategies that drive traffic to the fitting room and provide service to the fitting room customer. This strategy would establish RFID investment as a revenue generator rather than an expense, which I believe is key to its overall prospect of adoption.
There are two other companies poised to make a similar announcement within the next few months, and others should follow. It’s going to be hard for competitors to stay afloat at 70% inventory visibility, when Macy’s could have 98%.
RFID was always about better physical inventories in the store — and one day — the elimination of RGIS-driven PIs. Real money savings there. Walmart missed the mark. This is directionally correct.
On one level, RFID has been talked about for so long, this announcement feels like, “What took so long?”
On the other hand, the retail struggle to maintain inventory accuracy has never been for a lack of technology. We’ve had the technology since bar-coding came along years ago. What’s been lacking is the commitment, discipline and execution to make the technology work. The only conclusion is that managements have looked at the problem over the years and decided it was less expensive to live with it than to fix it, whether that was true or not.
So, I expect RFID to roll out across the industry in the coming months and years. Follow the leader. But I’ll wait and see whether it has any impact on in-stock performance. Technology is often marketed as a “solution’, but it’s not a solution, it’s a tool. The solution comes when the tools are put to work by management teams committed to achieving a desired result.
Once again, logistics advances drive retail. But I’d like to point out that this focus on ITEMS can only come to good. Regardless of the store, shoppers only buy items, and not departments or categories. A very few items make or break the entire store, and watching those few, coddling them, if you will, is the key to substantial sales growth.
No. How is this any different than using POS to do the same thing? The real question here is using this as a guise for RFID. There are still many personal privacy issues which need to be addressed, and Macy’s is walking a very thin line in “tracking” items in their store. Some of the true questions include when does the RFID stop tracking? Is this at the door of the store? After? RFID is not ready for prime time until we address the personal privacy issues first, not last…
There are a ton of retailers launching new technologies in their stores to improve both internal operations and the customer experience. As one example, grocery chain, WinCo Foods, launched a smartphone app to allow shoppers to peruse brands and promotions while they’re in the store, and even locate products down to the section of the aisle using voice-recognition technology.
As far as the apparel retailer vertical, Macy’s is one of the first big retailers to jump on board. If the RFID technology does improve operations, other retailers will surely follow suit. But this is a larger example of a trend towards adopting technology as an integral part of the brand/company.