RFID is the way to survive

Department stores have adopted RFID dramatically

Recently, famous department stores in the U.S like JC Penny, Macy’s, and Saks have been innovating RFID (Radio Frequency IDentification)[1]. One of the reasons is that the cost of RFID has become much cheaper than before. For example, whereas before one RFID tag cost about 100 cents in 2004, it is now 10 cents due to mass production[3]. Another reason is that department stores can reduce their labor cost. RFID automatizes human work like taking inventory and working behind a cash register. Finally department stores can expect to increase sales, improving store-inventory accuracy and avoiding a shortage by RFID.

RFID tag on the item

Source : Walmart, Macy’s, and JC Penney to use item level RFID tagging for shoes[1] 

Online stores’ strengths

Behind this rapid implementation, department stores have a sense of crisis that fast-growing online shops grab market share from them. The key to online shops’ success is that they can uniformly manage inventory at a distribution depot with accuracy rate of more than 99%, while department stores have most of inventory at a store with below 80% accuracy of individual product[2]. Another key is that they have archived high number of repeat customers. For example, Amazon recorded about 80% repeat rate since they run sales promotions targeting individual customer[2]. They recommend specific product for each customer based on one’s purchase history. Department stores have to address these challenges.

How to catch up with online shops

To sum up, effective usage of RFID enables department stores to catch up with online stores.They should not only carry out thorough inventory management but also collect the purchase history of each customer, utilizing RFID. These two efforts provide department stores with a useful approach of personal promotion.This would be the way for department stores to survive.

Question

Do you have any ideas for department stores to come out of this crisis?

Reference

1. Walmart, Macy’s, and JC Penney to use item level RFID tagging for shoes - SlashGear. (2011, February 8).SlashGear - Feeding Your Gadget and Tech Obsessions. Retrieved February 19, 2013, from http://www.slashgear.com/walmart-macys-and-jc-penney-to-use-item-level-rfid-tagging-for-shoes-08131543/

2.Department Stores’ New Reality—RFID - Kurt Salmon. (2012, July 23). Kurt Salmon - Transforming businesses to measurably improve performance. Retrieved February 19, 2013, from 

http://www.kurtsalmon.com/US/vertical-insight/Department-Stores%E2%80%99-New-Reality%E2%80%94RFID?vertical=Retail&id=240&language=en-us#.USOoBqUz3gt

3.Harrop, D. P. (n.d.). The Price-Sensitivity Curve for RFID. m-indya.com - Wireless Technologies Reference Site. Retrieved February 19, 2013, from http://www.m-indya.com/shownews.php?newsid=1615