Nine West Joins The Item-Level RFID Trial Club. But Will It Graduate?

Written by Eric Athas
August 14th, 2008

Have item-level RFID trials become the industry’s Roach Motel? A place where trials check in but they don’t check out?

On Monday (Aug. 11), the $3.8 billion Jones Apparel Group became the latest retailer to launch an RFID item-level trial, albeit a conservative one, testing it at "a couple" of the 221 stores it operates under the Nine West name, said Norm Veit, executive VP of Management Information Services at Jones.

But Jones, which also sells clothes under a wide range of other well-known brands, including Anne Klein, Evan-Picone, Gloria Vanderbilt, Joan & David and Jones New York, is far from alone in conducting such a trial.

Dozens have been staged in the last two years with major retailers globally—200-store Turkish chain LCWaikiki threw its tagged hat into the ring just last week—but only one (British retailer Marks & Spencer) has confirmed it’s making the deployment leap.

IDC analyst Peter Abell said a retailer has to justify the cost of moving to implementation and that’s proven to be a massive hurdle.

"Fundamentally, it boils down to ‘How can I justify it?’" Abell said. "It’s a fair amount of investment that’s going on that people are still concerned about, so they can’t make that leap of just going forward."

James Tenser, principal of VSN Strategies and an author of a report on in-store deployments, said one reason for a lack of implementations is that it’s simply not as easy as people expected it to be.

"What I think we’re learning is that it’s not the short, straight line to success that people had hoped for them," Tenser said. "It just means it’s not the easy win that we had hoped it would be."

The lure of item-level RFID is legendary, but to make it work requires deep penetration into quite a few systems. To be precise, it can certainly function without such extensive integration. But the system wouldn’t be able to deliver the promising magical ROI without it.

That’s the other key problem with an item-level trial. The nature of a technology trial is to test the package in close-to-battlefield conditions, to go beyond what can be learned with lab tests, demos and getting the answers to tons of questions from vendor representatives.

But most limited trials—by virtue of the fact they are indeed limited—don’t test the parts of the RFID item-level promises that are most likely to fail. To craft a meaningful test would require interactions with supply chain, CRM, POS (including self-checkout) and possibly even digital signage. That’s asking an awful lot for a limited trial.

Louis Bianchin, , an analyst at market research and strategy consulting firm VDC, also questions whether most retailers appreciate the mammoth trial-to-deployment hurdle with item-level RFID.

"A pilot is usually self-contained, it’s simple," Bianchin said. "If you want to roll it out, that’s another proposition."

Bianchin said there’s no question that RFID technology at the item level is proven. He said making it work successfully in a deployment stage doesn’t rely on the technology; rather, it’s the operation.

"You need to have the whole complete chain interlinked," Bianchin said. "If you manufacture something and you ship it to either your (distribution center) or a depot or warehouse and you start tagging, you have to pull [the items] out of the box, unfold them, tag them, put them back into the box. It’s not 25 cents per tag anymore, it could be 2 to 5 bucks."

Bianchin added that the frequency and make of a tag varies depending on where the product is manufactured. If a retailer’s product is manufactured and tagged in Asia, for example, they have to be able to read it when it arrives in the United States. Therefore, Bianchin said, item-level RFID tagging is a lot more than just putting a chip on a shirt.

What sets £9 billion (roughly US$17 billion) retailer Marks & Spencer apart is that the company’s merchandise is relatively high priced and that the chain is more closely involved in the manufacture of its products than is typical.

In November 2006, the retailer deployed the technology in 42 stores and has since grown to 120 stores, said Marks & Spencer spokesperson Olivia Ross.

"From a logistical perspective, it’s much easier to manage," Ross said. "Essentially, our clothing suppliers already put Marks & Spencer labels on the clothing goods. So they’re provided with the label with the tag and just have to do what they did before, only with new technology."

ABI Research analyst Jonathan Collins said the 600-store retailer is the "poster child" of item-level RFID deployment.

"M&S is a great example because it is a company with control throughout the manufacturing, shipping and retail operation, so it could see immediate value in all those areas from RFID tagging without requiring buy-in and investment from partners who in turn would have to find their own ROI," Collins said. "That, combined with a strong focus on the potential and the development of a technology that suited their requirements has led to an ongoing deployment that has been expanded several times since the initial pilots."

Raghu Das, CEO of IDTechEX, agreed that the successful deployment at Marks & Spencer was mostly because of its closed system. He said that when retailers with an open system try and implement item-level tagging, they’re going to have to apply tags as the products are going into stores instead of during the manufacturing process, which can be costly.

"If you don’t have enough infrastructure and you’re dealing with a lot of different people making clothing, you have an issue about getting a good payback," Das said.

He also said big retailers like Wal-Mart and Germany’s Metro Group sell a lot of less-expensive products, which makes it much more difficult to cost-justify tagging.

With Jones Apparel’s item-level trial, the company will be tagging high-end apparel at only "a couple" of its Nine West stores, where every item at the floor level will be tagged, said Jones’ Veit.

The products will be tagged at distribution centers and then shipped to stores, where associates will use Motorola fixed and handheld scanning devices. Three other vendors—Vue Technology, Avery Dennison and inCode Wireless—have also signed on for the trial. Avery Dennison will provide the RFID tags and printers, Vue Technology the software and inCode Wireless will handle installation and integration services.

Turkish retailer LCWaikiki announced on Aug. 6 its own item-level RFID trial. Using products from Alien Technology and STS Technology, LCWaikiki has been running this pilot in its Istanbul-based flagship store and one Alien official claimed sharply improved efficiency.

"As a result of its RFID deployment, LCWaikiki has seen a 60 percent time reduction in stocktaking and a 70 percent time savings in the transfer of stock from the storeroom to the sales area," said an Alien statement.

RFID/EAS combo hard tags and Alien UHF/EPC-compliant Gen 2 Squiggle-Short inlays were placed on all 24,000 apparel items in the store, allowing the retailer "to track all processes from stock receipts, stockroom/sales replenishment, inventory management, product detection, customer returns, stocktaking and store-to-store transfers," the statement said.

Much of the challenge with RFID item-level trials is that they do pose such a huge change potential. Also, the chances of system problems with such an extensive and integrated change are not trivial. Challenges may be expected, and they are something that needs to be filed under "the cost of doing business." But it’s still nerve-wracking when the CEO is furious and looking for someone to blame.

At Jones and Nine West, though, they are taking this trial one step at a time.

"This is more of an exploration for us. Conceptually it makes a lot of sense, to get faster reads of information and the idea of being able to look up inventory faster," said Jones’ Veit. "There’s efficiency and inventory accuracy." But will it work beyond a trial? Said Veit: "It’s too soon to tell."


One Comment | Read Nine West Joins The Item-Level RFID Trial Club. But Will It Graduate?

  1. Chris Kapsambelis Says:

    After reading all the comments by experts on the failure of RFID to advance beyond the pilot stage, I come away with the distinct feeling that it’s a smoke screen used to cover up the obvious fact that Passive RFID, in the supply chain, has failed to perform.

    You state that “The lure of item-level RFID is legendary, but to make it work requires deep penetration into quite a few systems.” What is the lure of RFID in the supply chain?

    The primary data element in retail for many years is the SKU (Stock Keeping Unit). When first introduced, systems were developed that required keyboard entry of the SKU and associated data.

    The introduction of Barcode, and the UPC Number was easily integrated because of the one for one relationship between UPC and SKU. The advantage of barcode came from the replacement of the laborious and error prone keyboard entry with a hand-held barcode scanner.

    The lure of item-level RFID is the promise of group reading, which eliminates the need to scan barcode items one at a time. Since the SKU can easily be derived from the EPC encoded in the RFID tag, integration should be no more difficult than the introduction of the earlier barcode and UPC.

    So why do RFID pilots never checkout of the “Roach Motel”? Aside from the high cost of the tag, group reading has been found to be unreliable and error prone. Without the savings and speed of group reading, the cost of the tag cannot be justified and any improvement beyond hand scanning is minimal.

    Redesigning existing systems to compensate for the low read rate is a costly and useless exercise. I believe this is what is meant by the phrase “to make it work requires deep penetration into quite a few systems.” If a reader could derive the SKU for every item presented, integration would be a trivial task.


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