Last week we looked at applications of RFID in the value retail market. Now let’s examine the RFID pilots of department stores and luxury retailers.

Macy’s Ltd

Macy’s Ltd, which owns Macy’s and Bloomingdale’s 800-plus department stores, began looking at RFID in 2008. The following year it enabled the entire Bloomingdale’s store in Soho with RFID tags and readers. Excluding cosmetics, all product categories were set up for deployment to identify the impact of RFID on the store and its operations.

Within a short period of time it became clear – as it has to so many retailers – that RFID was the solution to maintaining physical inventory accuracy. Like many bricks-and-mortar retailers, Macy’s was reliant on the annual stocktake to check inventory. It would start the season with clean data, but typically records would deteriorate 2% to 3% every month following a count.

To an outsider the solution would be to, quite simply, do more stocktakes. However, physical counts are a disruptive, labour-intensive project and relatively mind-numbing work for our colleagues on the shopfloor. By using RFID, Macy’s was able to speed up the process of counting stock and maintain inventory accuracy at around 95% throughout the entire year.

Keen to progress with RFID, Macy’s started tagging its replenishment business, which accounts for about 30% of its inventory. This included items that were re-orderable but – further to this – had a size/colour component to them. Category wise it began with denim, underwear and men’s bottoms. From there, the retailer progressed to tagging men’s suits, dress slacks and shirts, belts, bedding, women’s shoes, fine jewellery and fragrance.

Tagging replenishment items led to fewer out of stocks for Macy’s and had a number of further benefits, such as greater customer satisfaction, an increase in sales and profit and an improved balance sheet through greater control of inventory.

Beyond the immediate financial benefits, Macy’s found the improved data quality had a positive impact across all systems, from merchandise and assortment planning to reporting and analytics and even order management. Further to this it supported the retailer’s omnichannel strategy, as making any product available from any location through any channel is reliant on knowing what stock you’ve got and where it is on a granular level on detail.

As the broader business continued to engage with the project, suggestions came from various departments as to how they could further use RFID. This is how – interestingly – Macy’s also chose to tag display shoes. For those of us who haven’t experienced working in a retail shoe department, you may be unaware of the difficulty in maintaining display samples on the shopfloor. With the number of styles stocked in your average department store and the number of consumers picking up, trying on and moving samples around, it’s not uncommon for 15% to 20% of styles to be unrepresented on the sales floor.

It goes without saying that having the merchandise on the shopfloor is probably step one in the dummies’ guide to retailing. However, manually auditing display shoes is a cumbersome and time consuming task. By enabling them with RFID tags, staff at Macy’s could easily identify what was in stock and on display and where the gaps were.

So Walmart is tagging cases, F&F is tagging all products and Macy’s is only tagging replenishment plus display shoes – which is the best option? There is no one right answer – it depends on the structure of your business and your reasons for implementing RFID. But I will give away two guiding principles to help shape your RFID project:

 1) Regardless of business type, you should approach your pilot by identifying the product categories in your inventory that are most RFID-friendly. Considering RFID’s sensitivity to metal, tagging the pots and pans department probably isn’t the fastest path to RFID success. Apparel is a sure win, followed by textile based homewares such as sheets and towels.

2) Pick the low-hanging fruit. What product categories in your inventory stand to gain the most from RFID implementation? This generally includes categories with stock issues or complex sizing. It also helps to select categories that have healthy margins or price points to cover the initial costs of the innovation.

Interestingly, our own UK department stores have – after conducting their own investigations – taken similar approaches to Macy’s. Both Marks & Spencer and John Lewis initiated their pilots with complex size areas such as men’s formalwear and underwear, but they added an extra level by tagging knitwear, which by contrast has just a few sizes. Knitwear functioned as a control category for both retailers. Further to this it helped John Lewis and M&S explore the benefits on categories that feature fewer sizes and SKUs.

Burberry

RFID is a great application to manage inventory. And, by increasing size availability on the shopfloor, it positively affects the overall customer experience. However, RFID can also be implemented as a form of customer service in itself.  Burberry’s ventures into RFID are a good example of this.

Always the innovator, Burberry first introduced RFID into its flagship stores in 2012. Following the success of its digital strategy, Burberry wanted to bring its online brand environment to life in the physical world. Balancing online and physical stores is something many are battling with as bricks-and-mortar retailers attempt to reinvent themselves following a loss in sales to the flourishing online market.

Kitting out its stores with LED screens, Burberry attached RFID tags to all clothing to enable a digital connection to its products. When a customer approaches the screen with an item, any content specific to that product will appear on screen. As a luxury brand this adds an extra dimension to the experience – customers can see the product on the catwalk, how it was made, other colour options and what to style it with.

With its recent expansion into cosmetics, Burberry has also introduced virtual try on for make-up stores. At the digital nail and lip bar, customers can place a product on the RFID-enabled shelf, select their skin tone and virtually try on a shade. You’re probably thinking ‘surely customers can just try the tester make-up while they’re in Burberry’, and although virtual try on in store is a bit gimmicky, it is something new that is changing the experience of sampling products for the customer. It makes it easier for them to compare various colours and encourages customer engagement as it’s a new tool for them to interact with.

Overall, Burberry’s use of RFID is great for branding, and conversations with Burberry’s Regent Street store staff verify its success in driving customer engagement on the shopfloor.

However, using RFID in this way is more of a brand-building tool, rather than something that will drive efficiency across the business. RFID-enabled store experience has had great success in the luxury market – Rebecca Minkoff is another one to look at. But, then again, brand image is everything in the luxury market. It’s not as vital to retailers towards the middle and lower end of the scale though, so they should consider RFID’s other uses before experimenting with in-store experience as this is where they can achieve the most direct benefits.

That was the last chapter in our RFID blog. I hope you found them informative. If you want to stay in touch or would like further information, feel free to contact us at apparel@gs1uk.org.

  • Andy Robson is supply chain solutions manager at GS1 UK – a community of more than 28,000 members working in retail, food service, healthcare and more. As one of 111 independent, not-for-profit GS1 organisations across 150 countries worldwide, GS1 helps everyone involved in making, moving and trading goods to automate and standardise their supply chain processes using the common language of business. Find out more here.