RFID a ‘Very Big Part of Macy’s Future’

By Paul Prince

At a recent investor meeting, the retailer's top executives, including its chief omnichannel officer, reiterated how item-level tagging is a key driver for growth.

During an investor meeting held last week at its New York headquarters in midtown Manhattan, Macy's executives provided an update on the company's strategy regarding radio frequency identification and the role the technology is playing in driving sales and profitability.

"A lot of the growth is coming from omnichannel," explained Karen Hoguet, Macy's chief financial officer, "and we are going to keep investing in all of these technologies and all of these different ways of doing transactions."

Robert B. Harrison

Macy's launched its omnichannel initiative several years ago. The strategy involves integrating its stores, the Internet and mobile devices so that the retailer can deploy all of its inventory—no matter where the goods may be located—to serve customers' needs. A pivotal part of this omnichannel strategy is the company's capability of allowing associates at any store to sell a product that may be out of stock locally, by selecting merchandise from other locations, or from its online fulfillment centers, for shipment to the customer's door. Likewise, the online fulfillment centers can draw on store inventories nationwide to process orders originating on the Internet or via mobile devices.

At the end of 2011, the company had 23 Macy's stores set up to pick and ship orders from other brick-and-mortar locations, or from the Internet. At the start of 2013, Hoguet said, 292 stores were enabled to fulfill goods. By this fall, she expects there to be a total of approximately 500 stores available for filling orders. Macy's customers, she has said, don't really care from where the retailer pulls the goods, as long as it fills each order accurately and the delivery is timely.

Critical to making that omnichannel strategy work is employing RFID to ensure that merchandise is replenished in a timely fashion. To drive that effort forward, Macy's created the new position of chief omnichannel officer in January 2013, appointing Robert B. Harrison to fill that role, by overseeing the integration of store, online and mobile operations. Harrison, previously Macy's executive VP for omnichannel strategy, also assumed responsibility for the retailer's systems and technology, logistics and related operating functions.

"We look at RFID to be a very big part of our future, not just in how we run our business, but also from an omnichannel perspective as well," Harrison said at last week's meeting. "We have right now, with RFID, about 50 percent of our replenishment vendors signed up to deliver RFID-tagged goods in the coming timeframe. By August, we will have about 10 percent of our total replenishment up and running, and we will be doing cycle counts on [that] inventory on a monthly basis. We are extremely excited about the accuracy it's going to bring to our business, because having the exact quantity of product in the store that we think we have will be a huge sales driver."

In addition, Harrison provided an update regarding Macy's efforts to utilize RFID within its women's shoe departments—a plan that the retailer first announced nearly two ago (see Macy's Inc. to Begin Item-Level Tagging in 850 Stores).

"We're using RFID now in all stores, in shoe sampling. So if you were to go down to Herald Square, as an example here, or any other store, each of the shoes is going to have an RFID tag, and that has taken care of our missed samples on the floor," Harrison stated. "It used to be a huge problem, in that we would have really scary numbers —20 or 30 percent of our samples not represented on the table. Generally, the customer isn't going to buy it if she can't see it. With the RFID technology, we've driven that way down. And we've seen the sales change, because she can buy and see the full assortment that we have."