Last week management at JC Penny stated that within the near future RFID (radio frequency identification) bar code labels will be attached to all of their merchandise in all of their stores.  These “intelligent” labels will allow a store to track the exact location of every piece of every item.   Advantages management sees from the implementation of this technology include:

  • Allowing customers to “check themselves out”.  They will not need to interact with a salesperson to pay for their purchases.  If they try to leave a store without paying for merchandise the RFID labels will trigger a security alarm.
  • Maintaining an accurate on-hand quantity of the inventory of every item. The RFID labels will inform JC Penny’s computer system when each piece of each product enters or leaves a store, so they will always know exactly what is in stock.  Replenishment orders can automatically be issued when stock of a product runs low to avoid stockouts.

But is the implementation of RFID technology a panacea?  Will the convenience to customers boost sales?  Will it allow JC Penny to significantly reduce its payroll as fewer salespeople will be needed?  Is the significant investment in RFID cost effective?   This is very expensive technology.  RFID labels are more than 10 times the cost of conventional bar code labels, not to mention the cost of the “portals” necessary for their computer system to communicate with the labels.

JC Penny may be hoping for too much from its investment in this technology:

  • A good salesperson generates additional sales.  They interact with customers helping to find exactly what the customer is looking for and suggesting complementary items to the merchandise the customer has already selected.  They also promote other products that might interest the customer.  Effective salespeople are an important element to success in a retail environment.  Have you ever watched a salesperson assist a customer at Nordstroms, the Men’s Warehouse, or Joseph A. Bank?  The salesperson engages the customer in conversation regarding his/her preferences, needs, and lifestyle pertaining to style of dress.  It’s a Win/Win situation: the store makes additional sales, and the customer feels confident in the additional purchases.  And if the customer is happy, he’ll probably return to the same store and salesperson the next time he/she needs something.   An RFID label doesn’t have the ability to “build the sale”, build the relationship, and generate additional profits.
  • While an RFID label can track the location of a product within a store it cannot ensure that the items are properly displayed.  A shirt or sweater may be on the right shelf, but if it is rumpled or turned inside out are you going to buy it?
  • It is probably less expensive to maintain accurate on-hand quantities using a conventional bar code system (where a clerk physically scans the bar code at the checkout counter) and the implementation of a comprehensive theft protection system.

As Walmart and many other retailers (as well as manufacturers and distributors) have discovered, RFID has great potential to improve warehouse operations by tracking the location and movement of pallets, cartons, containers, trucks and large pieces of equipment.  But it cannot replace the human touch necessary for success in many retail stores.  Perhaps JC Penny should pause and consider taking the money it plans to invest in RFID equipment and put that money into training their salespeople in the art of sales and maintain an attractive sales floor rather than function simply as a cashier that can be replaced by technology.