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Macy’s Pledging Item-Level RFID Chain-Wide By 2013

September 28th, 2011

Still, it wouldn’t be the effortless instant search described in limitless item-level RFID PowerPoint presentations. “You’d have to have the gun, know the UPC and you’d need to generally know which rack” the garment is likely in, Connell said.

The launch will officially start next year and “will be in size-intensive replenishment categories such as men’s furnishings, intimate apparel, men’s slacks, denim and women’s shoes in each store nationwide. Macy’s and Bloomingdale’s private brands are included in the initiative,” said a Macy’s statement. “This will enable multiple counts throughout the year compared with the current practice of taking a physical inventory once a year.”

Greg Buzek, president of the IHL retail research group, said he thought it was a good move, if not a bit overdue. “I guess my first reaction is that it is about time,” he said. “RFID at the item level has tremendous benefits, particularly for retailers that focus on soft-goods products, because issues of interference that plague many hard goods and food items do not exist. Using the technology to streamline the supply chain, to locate products within the store that are on the wrong shelves, in dressing rooms, while providing a better inventory account has a direct impact on sales.”

IHL has reported 25 percent item sales boosts “for tagged items in certain categories simply because there is a better chance the inventory is on the rack where the customer is looking for it. Because these are passive tags, however, the actual benefits will come down to store execution of fixing any issues at the store level,” Buzek said. “Combined with a strong task-management platform, this installation can provide a powerful return for Macy’s and a competitive advantage in in-stock position over its competitors.”

On the other hand, given that the goal—after two years—is to impact only 30 percent of products, that limits how far this can go. “For example, it can’t be a replacement for EAS,” Buzek said. “It’s really just a large-scale beta test.”

Given that much of the financial heavy-lifting here will be shouldered by manufacturers, Macy’s had to persuade quite a few of its product makers to buy in.

Connell said the core of his argument was pointing out that item-level RFID was very much in the interests of manufacturers, because the more accurate inventories mean that more purchases will be made—and made faster—to replenish products. “When you sit there and describe why this is a good thing to do, that it’s as good for the vendor as it is for Macy’s,” resistance melts, he said. “As our sales go up, our purchases go up.”

Of course, the real ROI argument is that Macy’s won’t be alone. If lots of other major chains join in—which seems likely—then the manufacturer’s investment becomes a no-brainer.

Therefore, much of this arrangement truly needs other chains to play, too. That’s certainly not out of the question, given recent item-level efforts from Wal-Mart, and J.C. Penney and LL Bean along with some creative RFID moves from Aldi.

It’s a delicate balancing act, as it will take many of the top-tier chains to make this fully profitable for suppliers. If everyone plays, this works. If just a few play, well, it really depends on who those few are. If they are sufficiently large and—this is even more critical than size—sufficiently diversified product-wise, it might work with 10 or 12 major players.

Someone has to go first in a big way. Macy’s move is the brave and the smart approach. The question remains: Will it be the right approach? And when the answer to that question relies solely on the actions of your most direct competitors, that can make for some very sleepless item-level nights.


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