StorefrontBacktalk Gets Its RFID Facts Wrong—Again

The retail-focused Web site incorrectly says Costco believes item-level RFID isn't viable.
Published: May 15, 2013

I’ve written in the past about StorefrontBacktalk‘s misrepresentations of RFID news (see Mischaracterizing JCPenney’s Approach). The site is at it again. A recent headline claims “Costco CFO on Item-Level RFID: ‘That Ain’t Happening.'”

The article, written by hack Evan Schuman, is about a comment that Costco CFO Richard Galanti made during the question-and-answer period of a call with investors. Jefferies & Company analyst Dan Binder said: “I remember, last year, you guys were very focused on some of the operational opportunities to improve your cost structure. You called out some of that today. Overtime reduction was one of them, which you mentioned earlier. I’m just curious, as you look at the organization today: Are there any big buckets where you can still pull costs out?”

Galanti responded: “I don’t think there have been any big buckets… I did mention the overtime—20 percent-plus reduction in overtime hours. That was several million dollars a year, maybe a basis point or two over a couple of years. But nothing like everybody thought that RFID would free up the front end and reduce our biggest labor-cost area. That ain’t happening. But we have done a better job [unintelligible] and tackling the little things…”

Shuman spun this comment this way in his article: “Item-Level RFID has its backers at Macy’s (NASDAQ:M) and a lot of supporters at JCPenney (NYSE:JCP) (if the retailer only had the cash). But a warehouse chain such as Costco (NASDAQ:COST)—with aisle inventory stacked dozens of feet in the air—should be a natural. Not so, Costco CFO Richard Galanti said Tuesday (March 12). In fact, not even close.”

The problem is, Shuman doesn’t understand RFID (and, apparently, journalism—professionals aim to get their facts straight before making sweeping comments). Costco’s CFO was talking about his company’s experiment—which has not been reported—with replacing cashiers with self-checkout, to save millions on labor costs. Costco’s tests found that RFID was only about 99 percent accurate when trying to read items within a shopping cart. That’s extremely good, but not enough to replace cashiers.

What does this have to do with item-level RFID and what Macy’s is doing? Absolutely nothing. Macy’s customers don’t wheel their goods out in a shopping cart, and Macy’s isn’t focused on reducing cashier labor costs. It is focused on improving inventory accuracy and an omnichannel strategy that is only possible with a high level of inventory accuracy.

Coscto’s CFO was not saying that RFID couldn’t deliver value at the item level, or that it can’t increase inventory accuracy, improve store execution, enable an omnichannel strategy and so on. All he was saying is that RFID cannot be used today to replace cashiers. So here is my advice: If you’re considering replacing checkout counters with RFID portals, wait a few more years. And if you’re looking for intelligent commentary about RFID, don’t visit StorefrontBacktalk.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on
this article, click on the link below. To read more of Mark’s opinions, visit the RFID Journal
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