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J.C. Penney Bungles Transition to RFID for Anti-Theft

Removing the electronic article surveillance (EAS) hard tags the company used before installing RFID readers at store exits led to a surge in shoplifting.
Posted By Mark Roberti, 11.25.2013

When J.C. Penney hired Ron Johnson, who headed up Apple's retail division, to be its CEO, the 100-year-old retailer was struggling. Sales were down. The brand was diminished and the board hoped Johnson would transform the company with the innovative ideas he deployed at Apple.

One idea Johnson had was to attach radio frequency identification tags to all of its products. Penney's launched an aggressive rollout of RFID technology, starting with all jeans, shoes and bras (see J.C. Penney CEO Predicts RFID Will Help Create a Transformational Shopping Experience). This, he believed, would improve inventory accuracy and on-shelf availability, thereby creating a better shopping experience. (The company later backed off from its plans—see J.C. Penney Defers Its RFID Dreams and J.C. Penney Pauses RFID Efforts.)

Another idea Johnson had was to get rid of the hard plastic electronic article surveillance (EAS) tags that were on many products. He wanted to go to mobile checkout devices, similar to Apple, and there was no way for staff on the floor to remove the tags, so Johnson dispensed with them.

There was just one problem—well, three, actually. The first is that J.C. Penney did not install RFID gate readers at its exits, so there was nothing to sound an alarm if someone were to walk out with an armful of items without paying for them.

The second problem is that EAS tags, while not the most comely addition to products, provide a deterrent. Those who might try to swipe a piece of lingerie (one of the most stolen items) or a man's tie might not do so if they feared an alarm at the door would call attention to them. When Penney's removed this deterrent, people began helping themselves to some attractive items without paying for them.

The third problem was that the retailer adopted a more lenient return policy, whereby people could return items without showing a receipt. So without hard tags or RFID tags on most goods, dishonest people could grab a bunch of products off a shelf, then take them over to a register and request a refund.

Several news reports suggested there was interference between the EAS system and RFID. This is not what I was told, and it seems highly unlikely. The two most common types of EAS systems are acoustic-magnetic and radio frequency. Acoustic-magnetic systems use gates at exits that emit tonal bursts at about 58 kHz, causing magnetic material in the tags to resonate. When an EAS tag is not deactivated, receivers at the gates pick up the signal from the tag and sound an alarm. Since such solutions use magnetic energy and operate at about 58 KHz, it's unlikely they would have any impact on RFID tags operating at 915 MHz. RF-based EAS systems work much like an RFID system, except they operate in the range of 1.75 MHz to 9.5 MHz—a long way from 915 MHz on the radio spectrum, and thus unlikely to interfere either.

That's not to say that every now and then, something doesn't happen that could cause an issue. But I've seen the two systems work side by side at the University of Arkansas' RFID Research Center, where extensive testing was performed, as well as during a recent visit to Checkpoint Systems' lab in Barcelona, Spain. Some retailers are obviously using both RFID and EAS in their store operations, and there have been no reports of interference problems from those companies.

Last week, J.C. Penney Co. reported that an increase in theft led to a percentage point decline in profit margin. Not good—but I guess if people are stealing Penney's products, at least it's a sign they want the items. Right?

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.

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