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Is This the Future of Retailing?

This month, Gillette begins testing smart shelves in Wal-Mart and Tesco stores. If the pilots prove that RFID can dramatically reduce out-of-stocks and thwart shoplifters, the technology could change stores forever.
Jan 18, 2003—Jan. 27, 2003 - The Gillette Company spent 10 years and $750 million developing its Mach3 shaving system. The product was a huge success, bringing in $1 billion in revenue in the first 18 months after it was launched in 1998. The Mach3 was so successful, in fact, that Gillette had problems keeping the product on the store shelves. It would sell out and not be replaced for hours or even days by busy store clerks.
OATSystem's Putta

Another problem was that the replacement blades were fairly expensive -- upwards of $25 for a pack of 20. So some people would simply swipe them. Many retailers responded by putting the blades behind the sales counter. But that meant some customers would leave the store without purchasing them because they didn’t see them on the shelf.

This month, Gillette began testing a solution it has been working on for more than three years. It is piloting a smart shelf at Tesco's Newmarket Road store in Cambridge, England. Wal-Mart is expected to launch its own pilot with Gillette at a store in Brocton, Mass, within a few weeks. The aim is to prove that the technology can provide a return on investment by guaranteeing products are always on the shelf and by reducing theft.

"Our sole, absolute goal -- the Holy Grail, if you will -- is to be able to get the product on the shelf and keep it on the shelf, so it's there when the customer wants to buy it," says Gillette's Paul Fox. "Everything else we do doesn't mean anything unless that product can be bought by the consumer."

The retailers involved have the same interests. "In-stock is a key focus for us, but so is loss prevention," says Wal-Mart spokesman Bill Wertz. "This technology offers us some potential to improve in both areas."

The shelves have built-in radio frequency identification readers that transmit radio waves to RFID tags on individual packs of Gillette razors. The tags reflect back a signal, which the reader turns into a unique ID. If one or more products are removed from the shelf, the reader senses that it is not getting a signal back and that information is passed to the computer, which updates the data on shelf inventory accordingly.

The shelves are considered "smart" because they can keep track of the number of items they hold and report when an item is about to sell out. "That's a huge bonus," says Fox. "It's a bonus for the retailer because they won't lose a sale because the shelf is empty. It's a bonus for manufacturers like Gillette because the product is available for purchase, and it's a bonus for the consumer because it's there when they want to buy it."
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