P&G’s Decision To Pull Back From Wal-Mart RFID Trial Quite Understandable
Written by Evan SchumanSay what you will about RFID, but it is the picture-perfect companion for hyperbole. Any development is either instant death for RFID or the magic trend that will make item-level RFID universal by late Friday morning.
It’s therefore not surprising that so much has been made of the decision by Procter & Gamble (P&G) to abandon its tagged promotional displays at Wal-Mart. On the one hand, this can be seen as a setback for such tagging projects. P&G touted the effectiveness of its display tagging project often.
Given P&G’s reputation for ROI worship, many assumed the company pulled the plug because RFID was failing the test.
What is closer to the truth is that the test failed, not the technology. And to the extent that Wal-Mart was as much a player in this trial as P&G, it could also be said that the test didn’t fail, the tester did.
In December 2007, John Fontanella, one of the industry’s better RFID analysts who sadly passed away last year, made a prediction that precisely called what would derail the tagged display trial: lack of human trust to use the RFID-generated data.
Fontanella’s argument had been that field managers, for example, would trust their own instincts and experience over any CRM-generated recommendations. If the data isn’t being used, there’s no physical way it can help the bottom line. But whose fault is that? The technology deployment? The managers who didn’t insist that the recommendations at least be tried? The IT director who didn’t make a strong enough case for its use?
IT directors tend to be much better at selling up—to their CIOs, CFOs, CEOs and board members—than convincingly selling down to their staffs and field personnel throughout the chain. Although it’s the upselling that gets the trial funded and approved, neglecting the downselling will just as surely guarantee its failure.
A Two-Way Street
In the P&G case, the problem seems to have been that Wal-Mart wasn’t collaborating as much as P&G wanted. For example, one part of the value of tagging displays is that it could be instantly determined which stores had forgotten to put the display out. The tagging allows a call to be made to the behind-schedule store. But if the display request gets ignored and stays in a crate on the loading dock, is it really fair to blame the RFID tag?
Let’s get practical. Any partnership between the $84 billion consumer goods giant and the $401 billion retail empire is going to be tricky, from an ego standpoint. P&G is used to partnering with companies that are smaller than it is. Aligning itself with a player that is almost five times larger has got to feel weird. P&G is used to having its partners regard mild suggestions as edicts from on high.
Wal-Mart is used to working at its own pace. Is that much of the lack of responsiveness referenced? Is some of this reaction perhaps a little bit parental? “Wally, if you can’t take proper care of your RFID-tagged displays, maybe I shouldn’t buy you any more until you’ve shown me you’re more responsible.”
The serious concern is that some in the industry will interpret this setback as an indictment of the technology. Thus far, there is no evidence that RFID itself was in any way at fault.
-Marc
February 19th, 2009 at 9:00 am
Well, this is the age old problem that never seems to be addressed. Culture is tougher to change than technology. People almost always try to continue doing what they were doing – going so far as to continue work arounds when new systems handle processes completely.
When we talk of people, process and technology, the latter two are relatively easy to define and deploy in comparison to the former. One of the ways we get the people to change is to make some of them irrelevant in the new process. Automation is the reason why the US has such high productivity – the people that do have jobs are assisted greatly by technology. And it is those that are willing to change that get to work with the technology. This isn’t always the case, but is often so.
In trials like this, it is hard to make that change. It is a trial. And if the people using it see that they may be sacrificed if the trial becomes standard process, they are disincented to make it work. Still, even if they are inclined to help it along, trust – as pointed out in the article – in the data and the people who put the system in is another thing altogether. The reason to deploy the technology is that it will lead to a different pattern of business – one that the folks that run off of “gut feelings” just can’t see. And they fear for their jobs if things go wrong. Thus, more of the same by following those “gut feelings” is better than risking a problem.
Change is hard. It is why it will be another 10+ years before we see the penetration of RFID that was posited to arrive in 2005. It is why, after nearly 40 years, so few B2B documents are automated. It is why most in the retail supply chain that have automated purchase orders have failed to automate purchase order changes – which occur an average of over 4 times for every purchase order and thus base most of the retail supply chain on manual efforts, not automation as we like to think.
The PO was easily automated for companies, but the same “gut feeling” desire on the part of buyers and account reps keeps the changes a manual process just in case I might have a major last minute change, even though most changes occur before the “last minute”. If we haven’t solved this cultural problem in 40 years, it is unlikely we’ll solve the cultural issues with RFID any time soon.
February 19th, 2009 at 9:19 am
So! You are saying that P&G did not have enough clout to force a store manager to live up to Wal-Mart’s contractual agreements?
I don’t buy it. It sounds too much like a lame excuse.
February 19th, 2009 at 10:45 am
It’s way more than trust that was lacking here. It’s an absence of In-Store Implementation practice. At-retail compliance remains potentially the largest business improvement opportunity facing the retail consumer products industry.
This reported decision by P&G exemplifies the frustration held by many manufacturers with In-Store Implementation of promotions. There is no routine, repeatable, measured and collaborative practice to execute planned promotions in stores. Data on compliance, if available at all, arrives weeks or months after the fact.
Even the mighty Walmart, it seems, has so far been unable to master this challenge on behalf of its trading partners. It means that billions of dollars in trade and promotional funds are spent ineffectively, while we debate which brand of ID code to attach to the display headers.
It’s the practice that matters most here, not the choice of technology. For the past two years, the In-Store Implementation Network has advocated establishment of a fully collaborative “plan-do-measure” retail compliance discipline that would ensure real-time visibility and accountability. We cannot improve what we do not measure. Retailers – and that includes even Walmart – must step forward on this issue if we are to see real progress on retail effectiveness and shopper experience.
February 20th, 2009 at 1:16 pm
I don’t really know anyone who said the technology failed.
In fact, P&G went out of its way to say its test Validated the benefits.
It’s crazy to me that people are saying it was a “lack of collaboration.” It’s like saying if my truck comes to your dock and you won’t accept the merchandise, we weren’t collaborating.
It was barely between the lines – P&G is quite simply and bluntly saying, the concept doesn’t work if Wal-Mart won’t act on the data. They are sending Wal-Mart a strong message.
I do not believe, as an aside per above comment, that the retailers are contractually committed to getting displays to the floor at some specific times – almost sure they aren’t actually. But even if they were, no one has ever tried to enforce such a contract until now, so why would this be different.
Everyone is making this much more complicated than it needs to be.
February 23rd, 2009 at 7:40 pm
I believe it because I lived it. I launched a marketing test at Wal-Mart when I worked for one of their Top 10 suppliers. I called each store and was assured every $100,000 installation was in place. So I put on some Dockers and hopped a plane to hit 10 stores across the country. Only two of the stores had installed the program and I found $800,000 sitting on the back docks. The store managers feel entirely autonomous and always defer to their personal experience. The size of the vendor does NOT come into consideration.
Stores are contractually committed to putting a display on the floor, on a designated date, and they are rewarded handsomely for it. It very difficult for retailers to turn away the market development funds associated with displays. Some have tried to rid their stores of the distractions, but they always come crawling back to the fountain of margins.