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.
Although many retailers—including Macy's, Lord & Taylor and even J.C. Penney—say they are achieving big benefits by deploying RFID within just a few departments, Rosenblum believes that there may be a more fundamental problem inhibiting the technology's deployment at department stores. If, based on RFID read data, a cycle count within one department reveals that items are missing from the store front, she explains, the challenge becomes how to interpret that information and how to reconcile it with the expected inventory count. She surmises that auditors—even internal auditors—would be reluctant to accept those results without a full count of goods throughout the entire store if RFID counts differed from expected inventory levels.
For example, 10 pairs of jeans may not appear on the RFID-based count because those items may be located in a non-RFID-enabled dressing room or department, and might turn up on another count two weeks later. When only a few of a store's departments are utilizing radio frequency identification, Rosenblum says, it can be challenging for auditors to figure out why RFID data does not match the expected count. "My feeling is until you can get to a point where you have full RFID coverage [of the entire store]," she states, "the RFID counts are interesting, but I can't imagine an auditor who would sign off on that."
Implementing RFID technology throughout an entire store, including dressing rooms and every department, could initially be a costly proposition, Rosenblum notes. For that reason, she predicts that RFID will currently be a greater benefit to smaller or specialty stores, rather than to large department stores. The stumbling block for RFID installations, she contends, is not so much tag cost as the cost of readers, which would need to be in use within every part of a large store, rather than a few handhelds used periodically by personnel within a few departments.
In its letter to its merchandize vendors, J.C. Penney included a list of the various shoe, bra and denim products that would still need to be tagged, noting that merchandise not included on the list would no longer require an RFID tag. The letter also indicated that the retailer plans to reduce the amount it pays to suppliers for any goods no longer tagged. Since the list of 41 product areas did not include jewelry, Penney's fashion jewelry vendors are most likely not supplying goods with RFID tags already attached. Instead, the retailer's employees are likely attaching RFID tags to jewelry items after receiving them at its distribution centers or stores.
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