Retail Race
Amazon just cut the ribbon with Auburn University on an RFID lab.In a race with Macy’s, whose increasingly successful Omni-channel strategy they attribute to technology investments, Amazon needs to find new ways to compete.Yes, it’s true.Amazon is not tops in everything. And RFID is one of those technologies that Macy’s attributes to their growing success against Amazon.
Of course, today, these are vastly different business models, and in many ways, completely different problems. Although online is growing, Macy’s still attracts the traditional shoppers who want to SHOP — see, feel, sense and try on merchandise, such as my recent new pillow purchase where I tried every high tech demo pillow in the store before choosing one.On line, no matter how many chats and likes there are, you cannot get that great fit like r trying on 18 pairs of running shoes in the store to find just the right one.
So, in-store trumps online for experience. But, that means big investments in inventory. Amazon may have an advantage on inventory management, if they play it smart. As we talked about recently with Wayfair and the way they use software to determine what to stock and what to just catalogue and drop ship from the manufacturer,1 an internet retailer can represent a vast array of merchandise without actually having to invest (much) in the way of inventory.
But there are other elements to the game here, such as the fulfillment side of retail. Smarter routing and fulfillment software2 allows retailers (and manufacturers and wholesalers) to make advanced decisions about the location of inventory and the best way to ship. RFID can play a role here in improving accuracy of pick and pack. Although Amazon is still a maestro in this area, it has invested heavily in other technologies to assure they do it faster and cheaper than anyone else, with technologies like Kiva3 and maybe in the future with RFID.
RFID’s main target in the retail sector has been better inventory management, which has led to sales uplift and greater margin.4Thus, Target is also delving into RFID, after a long thought process, part of an outcome of bringing in a new CEO with new technology perspectives (and leadership).Target plans to roll out RFID next year.Calling these “smart labels” makes it appear as if Target may be headed towards self-checkout as well as inventory management, or so their blog post states.Self-checkout means an all-in tagging strategy, which is unlikely at this point since that could be a bit pricey and also a major dramatic change to an organization already going through a lot of change.Target has a target for their RFID rollouts — women’s, kids and baby apparel and home décor. These will roll out in selected stores in 2016. Target says they are working with several vendors to ‘fast track’ the program.So, we should see something in the stores soon.
In-store use cases today are pretty well understood high value on display, inventory management for shoes and apparel and experience shopping (dressing room applications and sporting goods, for example) — although we may be surprised by a new idea. Ecommerce businesses have some ideas but, as of yet, no major rollouts, so it will be interesting to see what Amazon actually does. Target says they plan to use RFID with the click and collect (online order — pick up in store) which is a growing portion of their business.
Next Stage in the Evolution
One of the areas beyond apparel that retailers kept telling us they wanted to tag was cosmetics. There are ways to solve technology issues in spite of the challenges of liquid, metal and the varying sizes of the products. One approach is to work with the packing design to leverage the metal foils or tops for antennas. The other is to develop ultra-thin, ultra small chips and antennas, which the industry has already been working on. There are several chip makers that have these products today, but we did not see an actual release of products for this segment — until last month.
Checkpoint released their new ‘Slim and Whisper’ RFID labels for the Health/Beauty/Cosmetics categories. In partnership with Impinj, who just sailed past their 10B chip sales, theSlim has a label of 88x7mm and integrates with the latest Impinj® Monza® R6 chip. This is small enough to put on a mascara package. Lipstick, mascara etc. have a shorter sku life cycle in the cosmetic industry, with frequently changing colors and technologies. They also have that key characteristic that makes RFID so helpful — high mix.5 Display choices of lipstick vary from the MAC counter at Nordstrom’s containing 154 colors to the Estee Lauder display of 21 colors, which are only 2 of the more than a dozen brands any major retailer will carry in their store. A big inventory stocking challenge, to say the least.
Envision a product we will call Pink Parade. You can get that color in a variety of applicators6 — lipstick, lip pencil, lip pencil/applicator — in one package, with matte or gloss finish, extra stay-on power and so on.And Pink Parade will only be a summer color, to be replaced by Adoring Autumn in a few months. You can also combine the color with matching nail polish and other up-selling products. So, if the pairing is not available — there goes the sale. And do we have to acknowledge that small things are very tempting targets to shoplifters?
Whisper is a slightly different product. It is 12 mm x 12 mm and is tuned for high performance for small, densely packed merchandise, including cosmetics. “Whisper is ISO18000-6C compliant and can be encoded and printed to carry EPC data in several formats, printed bar code and human readable text“ says Checkpoint. Envision a stack of face creams or foundations; if a display case is filled with products, you can envision the densely packed scenarios. Being able to find the ultra-light or summer bronze is the key to sales.
Early Supply Chain Use Cases – Where did they go?
They’re back — but maybe not in the way envisioned
These products and a recent research project I did at Macy’s (often called shopping) lead back to the first use cases promoted by the RFD community so many years ago: loss prevention.
Loss Prevention
In the early days, major brands that experienced counterfeiting, like Gillette/P&G and luxury goods providers, touted RFID as a significant add to the EAS approach, which had limited value. Having said that, it turned out that loss prevention was not the initial use case that became the breakout strategy which tempted retailers forward. However, that is changing. Witness the latest tamper-proof tags I saw at Macy’s (see pics in side bar).
We spoke with Checkpoint about their new LP technology that is used for luxury goods: their S3i RTLS Wireless In-Store Network. This is a real-time location system, which is a wireless in-store network, taking RFID beyond alarming devices, to obtain critical data and analytic intelligence in real-time. “S3i’s smart devices work in conjunction with smart keys to register all events, such as commissioning, removal of devices and theft.”
Checkpoint is in pilot with some retailers today, they told us. “Some large retailers are seeing the benefits as they are piloting S3i to create zones around high-risk merchandise and high-risk areas such as backrooms, fitting rooms, rest rooms and exits. With the technology, they are able to detect and deter shoplifting, organized retail crime, and employee pilfering. S3i is customized to provide real-time notifications when merchandise enters or exits designated zones or when there is an attempted unauthorized removal of the device. It uses audible and/or visible alerts delivered to associates via smart phones, tablets, radio headsets, or public address systems. This enables retailers to track high-risk merchandise in real-time and respond more quickly to potential theft.”
So, although we are used to seeing cable and other devices on high-end products, there will be new devices and new systems in the background to leverage the data — not just alarming.Recently the Saks in Jupiter, Florida, had a theft that demonstrated the value of these.The thieves had the gall, right as the store opened, to just plough through scooping up a bunch of high-end handbags and running out the door before anyone could respond. An alarm system on these would have limited value, but some wireless system connected to store cameras could have picked up videos of the thieves, potentially giving investigators what they needed to catch the actual thieves.
I am sure experiences such as these make retailers rethink some of their risk management/loss prevention strategies.
Conclusion RFID and the Brand
Brand factor, a composite of many things going well, really helps sustain and support a company’s growth. Acknowledgements such as “We use xxx, thus our investment is safe,” or “We shop at yyy, thus we are in fashion,” or “They back up the quality of their product,” and so on, are critical to companies.Investment in technology is critical to support the brand — not just great merchandise.Consumers don’t often get to experience the great merchandise if the brand is not strong.
Retailers think about RFID to support many facets of the business.Whether it is display management to ensure that shoppers see all the product you have for sale; or easily locating stock, such as shoes; or creating a fast checkout customer kiosk for product info or price checking; or managing inventory accurately; to supporting merchandise, allocation and financial tasks, RFID is playing a great role in retail.
The fun side of RFID is just emerging to provide an enhanced shopping experience, whether it’s ‘seeing yourself’ in a product such as dressing room technology or other roles for RFID which are being piloted.
Yet, RFID will always have to meet the test of helping the retailer achieve critical metrics to enhance shareholder value, brand and ROI.We know it is not RFID alone that is responsible for firms like Macy’s steady climb into the top rankings across multiple metrics such as brand, sales and so on. But it is instructive to step back and see an overall strategy for technology, which informs the retailer on everything from store formats to merchandise choices, to most effective advertising, to Omni-channel, home delivery and other strategies. It can also be seen how technology investments for a store like Macy’s have paid off.An important lesson for many retailers to take note of.
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1 Omni-channel – Start Asking the Right Questions — Return to article text above
2 You can read what retailers are doing in routing in our Home Delivery research and in this issue with Descartes, as an example. — Return to article text above
3 Kiva Systems — Return to article text above
4 RFID ROI survey we did revealed these results. — Return to article text above
5 Read Why Jeans, to understand the relationship of RFID to high mix merchandise challenges. — Return to article text above
6 Please note the poor expertise of the writer here in this category. Ask me about shoes and I am all there — but makeup, not an expert. — Return to article text above
To view other articles from this issue of the brief, click here.