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J.C. Penney Defers Its RFID Dreams

Six months after its CEO announced plans to use RFID tags for 100 percent of its goods by February 2013, the retailer now says that it will restrict tagging to only a few merchandise categories, in order to reduce costs.
By Claire Swedberg
Jan 30, 2013J.C. Penney has reduced its commitment to radio frequency identification tagging this month, to a fraction of its original rollout plans. The retailer issued a letter to its suppliers on Jan. 21, indicating that only shoes, bras and some denim products would require item-level RFID tags. However, the firm indicated to RFID Journal that the tagged items would also include fashion jewelry.

Six months ago, at the Fortune Brainstorm Tech conference—held in July 2012, in Aspen, Colo.—Ron Johnson, the company's CEO, had announced that all merchandise sold by J.C. Penney would be tagged by February 2013, and that every store would be equipped with the hardware and software necessary to read the tags and use the culled data to improve supply chain and inventory visibility (see J.C. Penney CEO Predicts RFID Will Help Create a Transformational Shopping Experience). What's more, the retailer would begin using RFID to enable customer self-checkout, Johnson announced, explaining that operating the company's cash registers would be a big expense. "About 10 percent of all the money we spend—half a billion dollars a year—goes to transactions," he had stated. By using RFID, in conjunction with other technologies, to enable self-checkout, the firm would save money that it could then redirect to providing a new level of customer service.

In order to reap all of the money-saving benefits of such a huge RFID deployment, however, the retailer would first need to spend a great deal of money on the technology's purchase and installation. Ultimately, the price tag for such an ambitious program proved to be too high for the national retailer at this time.

"The company recently postponed the implementation of RFID as part of a cost-saving initiative," says Joey Thomas, J.C. Penney's media relations manager, "but will continue to roll out tagging in bras, footwear, fashion jewelry, and men's and women's denim. We see the value and benefits of RFID, and will continue exploring the opportunity to further deploy the technology at a later date."

Several factors may have led to the RFID postponement, among them the company's own financial problems throughout the past two years. "J.C. Penney's shortfall in sales can't be understated," says Paula Rosenblum, an RSR Research analyst with more than 20 years' experience as a retail technology executive and CIO. "The impact of its shortfall on other decision-making is real."

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