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.
Published: July 19, 2012

At 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.”