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RFID Leader P&G Steps Back from Promotions Tracking

Procter & Gamble has discontinued its landmark RFID promotions-tracking program with Wal-Mart. The firms used RFID to determine if promotional displays were set up as scheduled, and to facilitate corrective action if not. Collaboration issues apparently scuttled the program, which was widely recognized for its innovation and value.
Tags: Retail
Feb 18, 2009This article was originally published by RFID Update.

February 18, 2009—Procter & Gamble (P&G) has ended its highly touted practice of using RFID to track promotional displays at Wal-Mart stores. Displays were tagged to automatically record when they were moved between the back room and the retail floor. Merchandise managers were alerted if the system didn't detect promotional displays being positioned according to schedule. Both firms have publicly credited the system with improving sales by helping ensure promoted items were placed where shoppers could buy them.

"We have completed the validation step of this project with Wal-Mart," P&G spokesperson Paul Fox told RFID Update. "We continue to work with Wal-Mart on a number of EPC technology initiatives."

RFID tracking did prove effective for improving promotions tracking, but Fox stressed that business process changes and deep collaboration between retailer and manufacturer are required to maximize the value RFID provides. Wal-Mart and P&G won't be making the needed changes at this time and will continue to explore other ways to jointly benefit from RFID.

"I don't get a sense that this indicates any underlying problems with RFID technology or the application," RFID industry analyst Reik Read of investment firm R.W. Baird & Co. told RFID Update. "From what I'm hearing, the problems are specific to this program, and are centered on execution issues with Wal-Mart."

Promotions management is considered a challenging area of retail operations and compliance rates are notoriously low. Advertising, merchandising and sometimes promotional packaging or giveaways must all be coordinated. Often, promotional displays languish in retail storage rooms because of a breakdown in execution.

P&G reported that one of its early pilots of the application at Wal-Mart resulted in a 28 percent sales improvement. Former P&G executive Dick Cantwell (who has since joined Cisco Systems as its retail and consumer packaged goods practice director) and Wal-Mart executives frequently cited the program benefits during industry conference sessions, keynote presentations and interviews. Even many skeptics of RFID supply chain initiatives saw the value of using real-time information to adjust in-store merchandising. Considering that Cantwell was a founder and recognizable leader of the forerunner to EPCglobal, that P&G is the world's largest consumer products manufacturer, and that Wal-Mart is the world's largest retailer, the promotions-tracking application was one of the highest-profile successes of RFID in retail.

"There is a strong belief that there is strong RFID value for promotions tracking," said Read. "But P&G's actions are going to lend credence to those who say there isn't value to using RFID in the supply chain."

P&G's pullback on promotions tracking comes on the heels of an unrelated decision by Wal-Mart's Sam's Club to adjust its RFID tagging initiatives to put more focus on in-store, item-level tracking (see Sam's Club Letter Outlines Changes to RFID Requirements).

Many retailers, consumer products makers and industry observers could more readily see benefits to using RFID for improving promotions than for other supply chain applications. Walgreens, the largest US pharmacy chain, also uses RFID promotions tracking (see Walgreens Deal Spells Promotions-Tracking Boon). GOLIATH Solutions, which provided the system to Walgreens, received one of the largest funding investments in the industry last year (see RFID Promotions Tracking Provider Gets $27M Funding), which is an indicator of confidence in the segment.
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