The Buzz in Consumer Electronics
By enabling companies to react quickly to sudden changes in demand for new products, RFID adoption in the consumer electronics supply chain could benefit manufacturers as well as retailers.
By Elizabeth Wasserman
Apr. 1, 2005—Ever-changing customer tastes and rapidly advancing technologies make anticipating demand in the consumer electronics industry difficult. Take Sony’s NW-HD1 Network Walkman, which was introduced with great fanfare last year. Sony had to quickly drop its price on the Network Walkman by $50 to $349, because consumers objected to converting music into Sony’s proprietary ATRAC3 format instead of the ubiquitous MP3 files. The Network Walkman suffered further markdowns—to as low as $259—after Sony announced it was introducing a new version that would play music in both formats.
When consumer electronics manufacturers make and ship too much of a product that becomes outdated, retailers are stuck with stock that nobody wants. These items take up precious storage space in the back room. Retailers have to start slashing prices or return the obsolete merchandise to the manufacturers. Either way, profit margins for retailers and manufacturers take a hit.
RFID deployment in the consumer electronics industry could help retailers identify hot-selling items more quickly and make sure they have the items on store shelves when prices are high. It could also reduce the amount of space in the storeroom taken up by goods that might become obsolete if they fail to sell quickly. And RFID could help manufacturers better meet demand by tying production to real-time sales data. In fact, many analysts believe that this is one of the few sectors where both manufacturers and retailers may benefit from RFID.
For now, retailers are in the driver’s seat. Some have already shifted the burden of storing merchandise to manufacturers, and now they are asking them to shoulder the costs of RFID tagging as well. “Retailers are increasingly focusing on having manufacturers manage parts of the supply chain,” says Chris Remy, senior manager of Accenture’s supply chain service. “They would rather have consumer electronics companies hold on to the products and be able to respond when the product is selling or, in the case of product obsolescence, take the product back.”
Apr. 1, 2005—Ever-changing customer tastes and rapidly advancing technologies make anticipating demand in the consumer electronics industry difficult. Take Sony’s NW-HD1 Network Walkman, which was introduced with great fanfare last year. Sony had to quickly drop its price on the Network Walkman by $50 to $349, because consumers objected to converting music into Sony’s proprietary ATRAC3 format instead of the ubiquitous MP3 files. The Network Walkman suffered further markdowns—to as low as $259—after Sony announced it was introducing a new version that would play music in both formats.
When consumer electronics manufacturers make and ship too much of a product that becomes outdated, retailers are stuck with stock that nobody wants. These items take up precious storage space in the back room. Retailers have to start slashing prices or return the obsolete merchandise to the manufacturers. Either way, profit margins for retailers and manufacturers take a hit.
RFID deployment in the consumer electronics industry could help retailers identify hot-selling items more quickly and make sure they have the items on store shelves when prices are high. It could also reduce the amount of space in the storeroom taken up by goods that might become obsolete if they fail to sell quickly. And RFID could help manufacturers better meet demand by tying production to real-time sales data. In fact, many analysts believe that this is one of the few sectors where both manufacturers and retailers may benefit from RFID.
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For now, retailers are in the driver’s seat. Some have already shifted the burden of storing merchandise to manufacturers, and now they are asking them to shoulder the costs of RFID tagging as well. “Retailers are increasingly focusing on having manufacturers manage parts of the supply chain,” says Chris Remy, senior manager of Accenture’s supply chain service. “They would rather have consumer electronics companies hold on to the products and be able to respond when the product is selling or, in the case of product obsolescence, take the product back.”
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