Wal-Mart to Tag and Track Clothing

Discussion
Jul 26, 2010
George Anderson

By George Anderson

Everyone can quit guessing what next step
Wal-Mart will take in its plan to test radio frequency identification (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 (underwear and socks) to help it more effectively
manage its inventory.

"This ability to wave the wand and have a sense of
all the products that are on the floor or in the back room in seconds is something
that we feel can really transform our business," Raul Vazquez, the executive
in charge of Wal-Mart’s stores in the western U.S., told the Journal.

Myron
Burke, director of store innovation and the person leading the retailer’s EPC
program, told RFID Journal, "We are addressing the opportunity
to improve inventory accuracy and inventory availability. We have been working
collaboratively with suppliers on a strategic basis to make this part of our
systems."

Interestingly, a RetailWire poll earlier in the month
found 88 percent of respondents thought RFID would be somewhat or much more
common in retailing in the next three years. Wal-Mart plans to roll out item-level
RFID to other products in all of its 3,750 stores in the U.S. if the test on
jeans and underwear is successful.

"We are focused on items that require a more complex purchasing decision
by the customer," Mr. Burke told RFID Journal. "With denim,
the customer has to make a decision based on brand, style, size and cut, in
addition to price, of course. There are other areas of the store where we sell
items with similar attributes. Tires are one. Some electronics items, such
as TVs, are another."

According to Mr. Burke, apparel will be tagged when
it is manufactured and will be ready as it arrive at stores’ loading docks
and moves to the sales floor. He told RFID Journal that the technology
would not only let Wal-Mart know when an item needed to be replenished but
if it was missing from a shelf or on the wrong shelf.

While many in retailing see
a tremendous upside to the information available using RFID, privacy advocates
see the specter of Big Brother in the tags.

"There are two things you really don’t want to tag, clothing and identity
documents, and ironically that’s where we are seeing adoption," Katherine
Albrecht, founder of Consumers Against Supermarket Privacy Invasion and Numbering,
told the Journal. "The inventory guys may be in the dark about
this, but there are a lot of corporate marketers who are interested in tracking
people as they walk sales floors."

Discussion Questions: Will Wal-Mart’s actions lead to the widespread adoption
of item-level RFID at retail? Do privacy advocates have legitimate concerns and
how should stores using RFID address them?

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24 Comments on "Wal-Mart to Tag and Track Clothing"


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Dick Seesel
Guest
10 years 9 months ago

Walmart (and therefore other retailers) have been slower to adopt RFID technology than I would have expected four or five years ago. It is clearly a breakthrough to see the large-scale rollout that Walmart has announced, and merchants who have been waiting on the sidelines will move forward now that vendors are being pushed in this direction.

RFID is an important advance in supply chain management, all the way from the vendor (and its own factories) through distribution centers to store shelves. Privacy advocates’ concerns are likely unfounded (in my opinion) but these issues will have to be confronted by Walmart and others, if only to avoid negative publicity.

Paula Rosenblum
Guest
10 years 9 months ago
The question as asked is easy to answer…of course it will. And in fact, I believe there are a substantial number of apparel manufacturers already embedding RFID tags in their product. But there are other questions that are far more interesting: 1) Does Walmart’s mega-box format lend itself to item level RFID?Not really. Items could be anywhere in that big store…the chain will never get a completely accurate count until they can do the whole store, and that’s not going to happen (that pesky physics problem with liquids and metal). 2) Shouldn’t this have been a merchandising initiative? In most retail enterprises the answer would have been a resounding YES. After all, it’s the merchants who are most aware of the “out of stock” problem and would be the likely proponents of change. But wait…the top 2 merchants at Walmart have just resigned, most recently the head of the apparel merchandising group. So what does that say about the power dynamic within the company? I’ve got a lot more to say about this, and it’ll… Read more »
Bill Robinson
Guest
Bill Robinson
10 years 9 months ago

What is implied in this move by Wal-Mart is a distinction between good stock-outs and bad ones. A “bad” stock-out is when you are out of an item that is either in season, promoted, in a prominent display position, or not substitutable with a similar item. Wal-Mart wants to find out if the RFID test in jeans will increase their service level for these kind of items. And it will–resulting in even greater turn rates and more customer loyalty.

When both supplier and retailer have a shared interest in reducing or eliminating “bad” stock-outs, the supplier will want to share the cost of RFID.

RFID can’t help much in merchandising lines where there are “good” stock-outs. Good stock-outs are when items are out of season, can be substituted, or are not key items. My guess is that Wal-Mart will be slow to roll out RFID in these lines.

Ron Margulis
Guest
10 years 9 months ago

It’s not just Walmart that is really pushing item-level RFID. There is a consortium of retailers, manufacturers, trade groups and academics that will be announcing a major leap forward in the technology and the related benefits that can be attained through the use of RFID this fall. Stay tuned.

Also, I’ve been quoted in a few articles on RFID and privacy along side Ms. Albrecht and am convinced that she either doesn’t understand the potential positive impact from RFID or doesn’t care and is just using the issue to further personal ambitions.

Max Goldberg
Guest
10 years 9 months ago

The pluses of RFID tags would seem to far outweigh the minuses. How many times have you shopped for an item only to find that the right size is not on-shelf? With the tags, consumers could learn if the correct size is in the store. It will help retailers cut shrink. And it will be invaluable in supply chain and inventory management.

Dan Desmarais
Guest
Dan Desmarais
10 years 9 months ago

RFID will soon be on just about everything you buy from larger retailers. The enormous benefits to the entire supply chain will soon make it common place, and this Walmart example is just another stone on the road to full adoption.

Privacy needs to be addressed and an education of the consumer should be adopted by retailers using RFID. Consumers need to know that the tags exist, how to deactivate them, how to remove them, and how the information is being used.

David Dorf
Guest
10 years 9 months ago

Nobody wants their neighborhood store to run out of their favorite items when they’re shopping, so we should support retailers’ efforts to more tightly manage the supply chain. Yeah, there are some potential privacy issues with RFID, but they can be addressed in straightforward ways. Until a retailer gets caught misusing RFID data, I (and I think most people) will give them the benefit of the doubt in exchange for keeping the stuff I want on the shelf.

Of course we’ve been disappointed by the “Walmart+RFID=widespread adoption” equation before, so I’m withholding any victory proclamations.

Susan Rider
Guest
Susan Rider
10 years 9 months ago

Wal-Mart’s adoption of RFID has been the catalyst for RFID thus far. Now I think retailers and other companies will adopt RFID when it makes sense and adds value to an application. Companies will not adopt blindly and without an ROI. If RFID can add benefit beyond traditional barcodes, there may be an application. If not, barcodes are still cheaper.

Privacy advocates’ concerns in the past have been on invasion of personal preferences, etc. Quite frankly, retailers have the ability to track consumers’ buying trends, visits, etc, now. There seems to always be an ‘against’ factor but, in this instance, it has little merit.

Bill Bittner
Guest
Bill Bittner
10 years 9 months ago

There is something much more important to be gleaned from the Walmart announcement. Specifically, there seems to be a “kinder and gentler” Walmart when it comes to RFID. Instead of dictating to suppliers that they must begin tagging merchandise shipping containers, Walmart is looking for win-win categories where suppliers can benefit from increased sales of tagged merchandise because of improved availability. After all, it is the manufacturer who suffers most if a customer substitutes another manufacturer’s product; the retailer still gets a sale.

Walmart is also subsidizing the cost of tags by teaming with suppliers to get volume discounts. The takeaway is that RFID is not yet the obvious panacea it was thought to be a few years ago.

Dan Berthiaume
Guest
Dan Berthiaume
10 years 9 months ago

In the long term, Wal-Mart’s initiative will lead to widespread item-level RFID tagging. Wal-Mart has driven retail adoption of RFID since square one. However, Wal-Mart has fairly unique leverage to use to force suppliers to provide item-level tags (and pick up much of the cost) that most other chains lack, so as is usually the case, a few other behemoths will start following Wal-Mart’s footsteps and item-level RFID will slowly trickle down.

On the privacy issue, I know this is near-heresy but I do believe privacy advocates have valid concerns about RFID. I have interviewed Katherine Albrecht on the subject and while she is extreme in her views, this does not totally cancel out the validity of consumer concerns over item-level tagging. Retailers should be transparent in their consumer privacy practices regarding RFID.

Ed Dennis
Guest
Ed Dennis
10 years 9 months ago

Little is mentioned but it would be best for all if RFID is used to prevent theft. Walmart can’t seem to keep anything in stock using RFID in other areas, so using it to catch shoplifters would seem to be a better use of this technology. If RFID can be shown to significantly reduce shoplifting, its use would spread like wildfire. Imagine what retail could do with the money saved if shoplifting and employee theft were eliminated!

Alison Chaltas
Guest
Alison Chaltas
10 years 9 months ago
RFID has so much potential in really understanding retail conditions and their impact on shopper behavior and sales. As long as the retailers are ethical and transparent in the use of data, what shopper wouldn’t want the products she seeks in the place they are supposed to be when she wants them and at a fair price? Today, the missing piece of this equation is store level inventory planning based on real world conditions. We guess how much to send to each store based on what sold in the past, without a clue as to whether the product was on the shelf, in the back room or lost in the wrong spot. RFID will help us leap forward in manufacturers and retailers planning better. Certainly there are big questions that we need to address as an industry. Privacy concerns are one that rational and well-intended minds should be able to address. A bigger one will be the changing financial model at retail. Once RFID is fully implemented in a category and vendor line, scan-based trading… Read more »
Marge Laney
Guest
10 years 9 months ago

This is big news and a big move for the RFID adoption movement. Supply chain optimization and inventory control notwithstanding, RFID has the potential for facilitating the deliver of a much better in-store experience to the brick & mortar retail customer. From drastically decreasing the problem of out of stocks to the more nuanced visibility into what customers buy, the technology will deliver actionable real-time data that can improve in-store customer service and make it worthwhile for customers to make the trip.

As far the privacy issues are concerned, I really don’t see the problem. The tin foil hat crowd always finds a problem with any business intelligence that gives insight into customer buying habits, but I think the benefits far outweigh the concerns.

Liz Crawford
Guest
10 years 9 months ago

Which categories are involved in the program is important to the success of the venture. RFID has gotten off to a slow start, and I don’t believe it’s all due to concerns about privacy. Instead, initial investment costs and perceived value have been more at issue I believe.

Using categories with many SKUs and a complex purchase decision process is the way to get the biggest bang for the buck here. Other categories RFID might benefit: contact lenses, beauty products, and electronics.

Bill James
Guest
Bill James
10 years 9 months ago
Overall this report in the WSJ should lend a positive dynamic to the whole item level discussion. Apparel is a near perfect category for advancement in item level tagging, the gains to be made in category have yet to be fully defined. Consumers, especially when it comes to apparel, are picky; they want what they want and when their size, color or style is out of stock. Everyone loses, the retailer, and the maker of the apparel. The value of having the right product on shelf at the moment of consumer decision will be valuable for both the consumer, retailer and manufacturer. The sensitivity to the privacy issue can and will be addressed. Because the RFID tag will be part of the hang tag, it can be simply detached in store and disposed of. There is absolutely nothing in the tag relating it to a consumer, the tag contains SKU information germane to the product just like a UPC bar code. And no one is going to scan these in people’s garbage cans at home,… Read more »
Nathaniel Fry
Guest
Nathaniel Fry
10 years 9 months ago

RFID adoption will probably be based upon the characteristics of various merchandise categories. Some categories, like apparel (high value, high SKU intensity) will generate significant immediate business benefits from leveraging RFID solutions. These categories will enjoy widespread RFID rollouts. Other categories, where the business benefit is not as compelling or immediate, will not see much adoption in the near term.

Ed Rosenbaum
Guest
10 years 9 months ago

A simple and short response to the question: Yes! What Walmart does, others will follow. The big-box marketers try to get a step ahead of Walmart in technology-based marketing. It simply is not happening.

Doug Stephens
Guest
Doug Stephens
10 years 9 months ago

Obviously the truly provocative question here is around the privacy issue.

I for one am of the belief that privacy, as we know it, will very shortly become a nostalgic relic of the past. Frankly, I think our grandchildren will wonder what we did that was so terrible that we didn’t want anyone to know about it. So, the idea of Wal Mart tagging my jeans doesn’t really trouble me too much.

I prefer to consider the upside; that being the ability of marketers to identify and market to MY individual needs and preferences and spare me the mountains of mass-marketing crap they currently broadcast. I’d gladly give up a little privacy for that.

James Tenser
Guest
10 years 9 months ago
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… Read more »
Rich Nanda
Guest
Rich Nanda
10 years 9 months ago

Great perspectives above with all the major points covered.

My take:

Similar to Doug, I think privacy concerns will increasingly fade away. With the rise of social media and the digitization of life in general, people (and especially the young) just won’t care that their jeans have been RFID tagged. People are sharing FAR more personal information online EVERYDAY.

And echoing Nathaniel’s comment, adoption will be rapid where the business case is strong – i.e., on products that are high dollar, high complexity, and at retailers/channels that can invest and execute to drive ROI. As usual, what will be most interesting is to see how cost and benefit are distributed among retailers and their manufacturer suppliers.

Bernice Hurst
Guest
10 years 9 months ago

The privacy issue has largely been rendered irrelevant by the general acceptance of social networking and the fact that people willingly expose every aspect of their lives to scrutiny by anyone who is interested. I still think stores selling products with RFID tags should make the public aware of it so that they can choose whether or not to collaborate in further exposure of their activities and preferences but, for the most part, I don’t think anyone will actually care.

A recent article about the development of tags for all food products that will eliminate checkout counters might make this problematic – or send more people out of supermarkets in search of smaller, independent grocers. What goes around, comes around as they say.

Herb Sorensen
Guest
10 years 9 months ago
RFID is one component in total retail knowledge, including who the shopper is, everything they do in the store on a second by second basis, where all the products are (and in-store advertising is) and interactions with same with the shoppers, and of course the linkage of shopper “loyalty” cards and purchases at checkout. When we began tracking shoppers with RFID 10 years ago, we always knew that someday stores would have tracking mechanisms that didn’t require very costly research investments, and that would come from passive RFID, with low cost tags that could be ultimately deployed in the trillions. Tracking shoppers and tracking products are closely related. Just as electronic scanners in the ’70s were focused on UPC “tagged” products, so the move now to electronic tags is focused on the products. However, deploying an RFID reader on the cart (with a wireless connection to the store) allows the retailer to know exactly which tagged products the shopper is in front of. MediaCart presaged this, before products were tagged, by tagging shelves and displays.… Read more »
Jerry Gelsomino
Guest
10 years 9 months ago

I think the biggest advantage of RFID is to the customers’ benefit. When they can be guaranteed that the product they are buying is safe, authentic, within the dates of freshness or quality they are paying for, then they will see its real worth. I see RFID not as a operating tool for efficiency, but a marketing tool to build customer loyalty.

Bill Hanifin
Guest
10 years 9 months ago

The adoption of RFID by Walmart to to manage inventory and improve in-store efficiency will be followed by competitors.

Imagine the messy pile of jeans on a table or in dressing rooms that need to be tediously reviewed for restocking in their proper place on shelves. Think now of how quickly that process can be completed through the use of RFID. This, in addition to Walmart’s ability to maintain proper stock counts of popular items, is justification that offsets privacy concerns at this time.

Our privacy has already been at risk for some time and I cannot pinpoint the invasive offense that is created by trying on a pair jeans tagged with an RFID device.

Am I upset that Walmart might know what size I am trying on? Don’t think so.

Will it help them to reduce shrinkage and theft? Yes.

If I were a company (Sensormatic?) making proprietary security devices, would I be concerned? Yes!

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