A couple of years ago, J.C. Penney began one of the largest rollouts of radio frequency identification technology in retail. Penney announced that it would RFID-tag all jeans, bras and shoes at its 1,100 stores. Then, in June 2012, at the Fortune Brainstorm Tech conference in Aspen, Colo., Penney CEO Ron Johnson announced that the retailer planned to begin placing RFID tags on 100 percent of its merchandise.
Johnson disclosed that the company expected to employ the technology to help it transform the way shoppers purchase goods at all its stores. During an interview at the conference conducted by Jennifer Reingold, senior editor at Fortune magazine, Johnson said Penney planned to accomplish something 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.”
However, in a letter to suppliers dated Jan. 21, 2013, J.C. Penney said it “is modifying the rollout schedule of RFID tagging for merchandise categories. Until further notice, only the below merchandise sub divisions will need item level RFID tagging/labeling.” The letter lists 41 separate product areas, but they all fall under the three categories Penney was already RFID-tracking: jeans, bras and shoes.
News that Penney is backing off its plans to greatly accelerate its use of RFID inevitably will be spun as another example that RFID didn’t deliver on its promise. But that, in fact, is not the real story.
The letter does not state a reason for “modifying the rollout schedule,” and the retailer declined to speak to RFID Journal. But sources say the change had nothing to do with the benefits RFID was delivering. Penney was seeing improved inventory accuracy and better store execution through its use of RFID.
Johnson, who led Apple’s successful entry into retail, has been trying to remake J.C. Penney since he took over as CEO in November 2011. As part of the makeover, he introduced concepts designed to make shopping in a store more engaging and efficient. He had hoped that RFID-tagging all items would allow the retailer to eliminate fixed points of sale and let people check out on the store floor (as they do in Apple stores). Store layouts are also changing. Some merchandise is being eliminated, and new items are being introduced.
He also announced plans, in February 2012, to cut prices and eliminate sales events. That had a drastic—and negative—impact on revenue. Total sales dropped by 23.1 percent to $9.1 billion during the first nine months of the retailer’s current fiscal year, and Penney lost $433 million.
On Jan. 29, 2013, Penny announced plans to reinstate sales to lure back shoppers, Johnson told The Associated Press. The retailer also said it plans to add signage showing comparison prices from competitors.
“Deploying an RFID system with all this change going on proved to be too much,” says one person involved with the RFID project. “They need to complete these changes before expanding their use of RFID. It makes a lot of sense.”