Jan 26, 2016Macy's has taken live a new program that employs radio frequency identification to allow omnichannel fulfillment of consumer purchases, right down to its last available unit of in-store merchandise. The program, which Macy's has named Pick to the Last Unit (P2LU), enables the retailer to list goods for sale online even when there is only one such item available at the store. In the past, inventory counts were simply not precise enough to ensure that a unit of a particular product was actually in stock and available for sale. However, Macy's says it has proven that by using RFID technology to perform inventory counts, it can be certain of what it has available and can, therefore, put it up for sale. The RFID system is provided by Tyco Retail Solutions, using that technology company's TrueVUE RFID Inventory Visibility software platform to capture inventory data.
When products are sold down to just one or two items of a specific size or color, they are traditionally put on a sales rack at a reduced price; in the case of online sales, they typically aren't listed at all. That's because even if one size of a particular stock-keeping unit (SKU) is down to its last item at a store within a shopper's vicinity, there is too high a risk that the garment isn't actually in stock and available for sale. Between 15 and 20 percent of inventory falls in the "last unit" category, Macy's reported to Tyco. Therefore, a large percentage of goods, especially in the popular fashion category, cannot be sold online. That made a program such as P2LU a good idea, says Kim Warne, Tyco's global marketing director.
Macy's, which declined to respond to requests for comment, has been using RFID technology for inventory management and replenishment for several years (see Macy's Inc. to Begin Item Level Tagging in 850 Stores and Macy's Expands RFID and Beacon Deployments). Its chain-wide deployment for both Macy's and Bloomingdales stores has been underway for approximately three years, Warne says, and each store is equipped with Zebra Technologies MC3190-Z handheld readers, which the sales staff use to conduct sales-floor inventory checks. Initially, the company tagged replenishable basics, such as underwear, men's slacks and, more recently, women's shoes. Many suppliers are attaching RFID tags to the merchandise they ship to Macy's, so goods arrive at stores already tagged.
Macy's has reported that it experienced a 2 to 3 percent inventory degradation (inaccuracy) each month, which could equate to 24 percent by the end of the year. This would make omnichannel sales challenging, especially if only one or two units of a particular product were reported to be located at a store.
During the past year, the company has been looking into the category of fashion apparel, which can pose more challenges than other merchandise. Typically, fashion consists of seasonal items that are stocked in smaller quantities, are sold more quickly and might not be replenished when inventory gets low. Most fashion apparel is now tagged.
The fashion category is also sold through omnichannel means, enabling a consumer to visit Macy's website and purchase goods physically located in a store within the region in which he or she is ordering it. Because Macy's is now using RFID to track those goods, the company resolved to modify its omnichannel program to include products that have been reduced to a single item at any specific store. The retailer spent the past year testing its ability to use the RFID-based data to accurately fulfill online fashion purchases from the last units for sale within women's dresses. It found, based on a year of testing, that online sales increased compared with the year prior. This also meant that the stores selling dresses had fewer marked-down products in the single-item category.
When an order comes in for the last unit of a product within a store, Warne explains, employees can use a handheld reader to search for that item so that it can be shipped to the online customer.
Macy's continues to use the TrueVue software platform in the same way it did previously, says Randy Dunn, Tyco Retail Solutions' director of global sales and professional services. With each RFID-based inventory count, the TrueVue software still updates the inventory system on Macy's server regarding which items are present in each store, and that data can be used to manage omnichannel sales. The only difference, he says, is that Macy's now utilizes that information to open up its omnichannel sales to single-unit inventory items.
At the point-of-sale stations at most of its stores, Macy's has installed Zebra DS9808 handheld devices, which combine a bar-code scanner and an RFID reader. Those devices are typically being used to generate new RFID tags for products returned by customers, Dunn says. (The MC3190-Z can be also utilized for this purpose.) An employee first scans the item's bar-coded UPC, and the bar code printed on the tag (the ID number printed in bar-code form on the tag matches the ID encoded on the tag's RFID chip, allowing the tag to be isolated for the write process). The handheld device then overwrites the tag's memory with a serialized item number that ties back to the item's UPC.
Macy's is also extending its P2LU program to non-fashion departments, in which the amount of inventory is typically higher at stores, but may also be reduced to a single unit or two for a specific category. What Macy's is doing, Dunn says, can be seen as "a shift in thinking" for the retailing industry. "They have much higher confidence in the smaller numbers [of products]," he explains, allowing for new ways of making sales. Dunn cites other scenarios in which only a single unit might be available for sale at any store at any given time. For instance, if a single Louis Vuitton purse, valued at $5,000, were available for purchase at one of Macy's stores, it would traditionally not be listed as being available online. With its P2LU program, however, Macy's will now be able to open up that item to more sales options.
Dunn identifies two things that a retailer needs in order for it to have confidence in its inventory data: what he calls the single view, in which all stores and buyers can view the same information regarding what is available for sale, and data integrity, in which that single view is accurate. "RFID is improving that accuracy," he says. "This is a huge deal for retailers."
