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J.C. Penney CEO Predicts RFID Will Help Create a Transformational Shopping Experience

Ron Johnson says he expects that the retailer will start affixing radio frequency identification tags to 100 percent of its merchandise this year, and begin using the technology in 2013 to enable self-checkout.
By Paul Prince
Jul 19, 2012At the Fortune Brainstorm Tech conference, held this week in Aspen, Colo., J.C. Penney's CEO, Ron Johnson, announced that the retailer plans to begin placing RFID tags on 100 percent of its merchandise this year. In 2013, he disclosed, the company expects to employ the technology to help it transform the way in which shoppers purchase goods at its 1,100 stores.

At the conference, during an interview conducted with Jennifer Reingold, senior editor at Fortune magazine, Johnson explained the role he expects RFID technology will play in Penney's future. "RFID clearly is a technology that's been waiting for prime time, based on the cost of the ticket," he stated. "I believe the ticket cost—the increase in the ticket cost versus UPC label—is now at a point where the benefits way outweigh the cost of doing it."

According to Johnson, Penney plans to accomplish something that no other retailer has ever "done completely" before: "We are going 100 percent RFID with ticketing this fall. So February 1st next year, the entire Penney's platform will be on RFID tickets."

The CEO noted that most retailers currently utilize RFID primarily for the purpose of inventory management.

"You go to most retail stores, all you see is people doing work to execute the retail strategy. It's stocking shelves and transacting business," Johnson told Reingold. "That's going to all change, because of how we use Wi-Fi, RFID, mobile checkout. You'll be able to check out anywhere, anytime, from anyone, including yourself, because we're going to roll out self-checkout to our stores next year—and it's really cool and it's really easy, because it's RFID-based. You don't have to scan an item. You just throw it down, and there's the price."

Currently, Johnson explained, operating all of the company's cash registers is a big expense: "About 10 percent of all the money we spend—half a billion dollars a year—goes to transactions," he said. By using RFID, in conjunction with other technologies, to enable self-checkout, the firm would save money that it would then plow into providing a new level of customer service.

For 11 years, Johnson worked at Apple, where he served as the company's senior VP of retail operations. He then left the pioneering consumer-electronics company to join J.C. Penney in November 2011. The adoption of RFID, Johnson said, is part of his mission to create a "new interface for retail," one that will make the physical store "indispensable" in a digital world.

"You know, when I joined Apple in 2000, I came from a physical retailer, Target, and people thought I was crazy to go to Apple, because at that time, Apple was, you know, losing market share," he told the audience. "Very few retail stores, I think, have truly navigated this digital future, and how the digital and physical worlds come together, and that's why I came to Penney's—you know, to create, really, a new interface for retail."
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John Armstrong 2012-07-19 04:24:59 PM
Watch for News of Senitron Ron is correct - the technology is ready, for the RF saavy RFID installer. And the price point is about to get REALLY GOOD for the in-store hardware. Expect Good News soon from Senitron.
Leon Manuel 2012-08-09 07:51:23 AM
Vendor Impact This article doesn't really describe the impact this will have to vendors supplying JCP. Qoute: "I believe the ticket cost—the increase in the ticket cost versus UPC label—is now at a point where the benefits way outweigh the cost of doing it." Outweigh the cost for whom? JCP is mandating this for all its suppliers. A regular UPC hang tag for a garment (the size JCP uses now) costs around 0.5 cents per tag . A Similar RFID enabled tag costs around 9 cents per tag (multiple this by 10,000 units and its an increase in hang tag cost of at least $850. Not to mention a potential increase in chargebacks to vendors for tags that might get damaged during transit or are otherwise unreadable when they reach JCP. While vendors might be able to re-coup some of this from JCP by charging extra for Value Added Services, most big name retailers get Value Added Services for free as part of there agreement with a supplier. Aside for the tag cost, the cost of setting up this program for a supplier who don't currently doesn't have any RFID equipment can be a signifcant amount. This includes Printers, initial tag stock, RFID readers to verify the tags after printing, technical support for setting everything up. On the upside however such vendors would then have this equipment to be used with other retailers in the future and can even begin experimenting internal uses for RFID. I still believe however that RFID is the way to go and that JCP appears to be leading the charge now. Even more so than Walmart, who's adoption of RFID appears to have stalled after the intial effor all those years ago.
Ron Black 2012-08-15 07:45:16 AM
President/CEO RFID-Pros, a division of Compu-Power, Inc. in RFID has seemed to be somewhat of a science experiment to many organizations that could have benefited from its use but elected instead to stand on the sidelines and do nothing. JCP is embracing the technology, and while there will be bumps in the road, there will be learning and improvements resulting from their bold approach. Now, I suspect, others may see the light and benefit from the work of these pioneers and the champions that have moved ahead of them.

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