RFID ENABLES INVENTORY ACCURACY AT MACY’S
E-commerce/m-commerce mean retails must embrace multichannel operation. Millennials get what they want, when they want it – delivered how and where they need it. How can RFID help Macy’s make the shift?
The growth of e-commerce and m-commerce means retailers must make the shift from one- to multichannel operation. In retail, this transition means companies must meet the ever-changing needs of demanding millennial consumers amid a lack of transparency of inventory due to constantly shifting consumer behavior. Millennials get what they want, when they want it – delivered how and where they need it.
Founded in 1858, Macy’s is a department store chain that operates 728 locations in the greater U.S. Since January 2015, the company has shuttered nearly 20% of the chain’s locations due to a decline in same store sales.[i] Sales and net income have been declining over the last 5 years. (Consumption trends are a cause for concern for retail as well, as Americans spend more on experiences and less on impulse purchases, either online or instore.)
With the proliferation of global fast-fashion concepts like Zara and H&M and e- and m-commerce competition from the likes of Amazon, department stores like Macy’s, Kohl’s, and J.C. Penney are struggling to remain competitive in a cluttered retail landscape. In response, many chains are either closing a number of their stores, reducing footage in these locations, or doing both in an attempt to compete with these new nimble entrants to the space. But a contraction in brick-and-mortar square footage isn’t the only option.
Inventory management accuracy is perhaps an easily disregarded solution. Logistics and operation executives are hoping that tracking merchandise inventory digitally along the supply chain, from warehouses right to ladies shoes, will allow for greater awareness and visibility of supply. This greater dependence on radio frequency identification (RFID) technology, first implemented when the company began shifting to a digitized supply chain in 2011, can drive sales and boost performance. In the short term, in Q4 2016, Macy’s announced plans to have 100% of in-store inventory tagged by the end of 2017. 100% RFID gives Macy’s a 6.1% greater ability to fill orders of RFID-tagged merchandise[ii],[iii]. It also allows the company to capture incremental sales and avoid missed opportunities with disappointing ‘out-of-stocks’[iv].
Looking to the future, Macy’s has instituted magic selling[v], a training program for sales associates that encourages them to “think omnichannel”[vi], pushing inventory in-person that may not be in store, but instead only online. In 2016, Macy’s piloted a pick-to-the-last-unit (P2LU) program. Powered by RFID, P2LU allows Macy’s the flexibility of omnichannel fulfilment of consumer purchases, right down to the very last unit of in-store merchandise. [vii] P2LU delivers flexibility that the store hopes will build customer loyalty, resulting in repeat sales and an ROI that should justify Macy’s costs of RFID implementation.
Going forward, Macy’s should lean more heavily on RFID technology, expanding RFID-enabled programs like “Buy Online, Pick Up In Store”[viii] to deliver more value as shoppers buy across platforms. Furthermore, the company should look to digitize their supply chain in other ways too, relying on different yet equivalent progress in technology. Smart fitting with interactive mirrors in brick-and-mortar smart fitting rooms is one such possibility. These fitting rooms can utilize RFID technology to analyze customer behaviors, but also request additional sizes and styles from an in-room tablet. Another option, already begun, is transitioning away from massive warehouses, instead storing inventory in facilities at individual stores.[ix] This allows the chain to fulfill orders much more quickly as the supply chain shifts to an “agile” model.
In warehouse management, RFID boasts benefits such as fast locating of products and greater accuracy due to the visibility of real-time inventory information. But as Macy’s transitions away from warehouses, saving money on real estate and labor by storing merchandise at its stores, will the benefits of RFID still outweigh the costs of implementation?
[i] Thomas, Lauren. “Macy’s Needs to Close 100 More Stores, Former Retail Exec Says.” CNBC. May 11, 2017. Accessed November 4, 2017. https://www.cnbc.com/2017/05/11/macys-needs-to-close-100-more-stores-former-retail-exec-says.html.
[ii] Quantifiable Benefits and Analytical Application of RFID Data. Platt Retail Institute. Http://plattretailinstitute.org/. January 2017. Accessed November 10, 2017. http://plattretailinstitute.org/downloads/quantifiable-benefits-analytical-application-rfid-data/.
[iii] Journal, RFID. “Macy’s to RFID-Tag 100 Percent of Items.” Macy’s to RFID-Tag 100 Percent of Items – RFID Journal. October 12, 2016. Accessed November 4, 2017. http://www.rfidjournal.com/articles/view?15081.
[iv] Thau, Barbara. “Is The ‘RFID Retail Revolution’ Finally Here? A Macy’s Case Study.” Forbes. May 15, 2017. Accessed November 10, 2017. https://www.forbes.com/sites/barbarathau/2017/05/15/is-the-rfid-retail-revolution-finally-here-a-macys-case-study/#f67180732944.
[v] Skorupa, Joe. “Macy’s Blueprint for Omnichannel Dominance.” Retail Insight Blog | RIS News: Business/Technology Insights for Retail, Supermarket Executives. March 5, 2013. Accessed November 6, 2017. https://risnews.com/macys-blueprint-omnichannel-dominance.
[vii] Waldron, John. “Macy’s Inventory Management Strategy P2LU.” Future Stores Miami 2018. September 12, 2017. Accessed November 7, 2017. https://futurestoreseast.wbresearch.com/macys-inventory-management-strategy-p2lu-ty-u.
[viii] “Buy Online, Pick Up in Store | Macy’s.” Macy’s | Department Store, Dept Store , Department Stores, Clothing, Apparel, Accessories. Accessed November 7, 2017. https://www.macys.com/ce/splash/buy-online-pickup-in-store/index.
[ix] Mattioli, Dana. “Macy’s Regroups in Warehouse Wars.” The Wall Street Journal. May 14, 2012. Accessed November 7, 2017. https://www.wsj.com/articles/SB10001424052702303505504577404123150295102.
Student comments on RFID ENABLES INVENTORY ACCURACY AT MACY’S
Great article! I agree that Macy’s movement to digitize their supply chain will improve efficiency and lower costs end-to-end, but I doubt that these changes will be enough to overcome the e-commerce threat. Structurally, big box retailers as they currently operate cannot compete with the Amazons of the world. As you argue, Macy’s needs to double down on their “Buy Online, Pick Up in Store” program and re-imagine the in-store customer experience. I’m not fully convinced that Macy’s can successfully fend off leaner online competitors, but the actions you suggest represent their best chance to do so in my opinion. As to your final question of whether the benefits of RFID and digitization are worth the cost of implementation, I believe they can’t afford to not make these changes. They’ll fail if they maintain the status quo.
I agree with you that in actuality Amazon can’t really afford *not* not to make these changes. Interestingly, the Macy’s CEO has lately been just as wary of competition from discounters such as T.J. Maxx as well, not just the internet behemoths like Amazon. It seems the lighter and leaner a department store can become, the better.
My last trip to Macy’s gave me some experience with this new system of inventory. The sales associate helping me found that the item I wanted was out of stock but instead pushed me to order online through the store for at home delivery. This was a useful feature except he put in the wrong item number requiring an annoying return process! Human error still exists even in completely automated systems.
This is an unfair story because it’s just one incident. In general, I agree with the previous comment that Macy’s must make these changes to survive. The one advantage that they have over Amazon is the in-store experience where customers can try on items. By creating a hybrid system where customers can view and purchase both online and in-store, Macy’s can create a customer experience that competes with Amazon.
I thought this was a really interesting article!
As an electrical engineer, I have a soft spot in my heart for RFID. I agree that Macy’s is in quite a difficult position–being squeezed from above by Amazon and below by discount retailers like TJ Maxx. It makes sense to double-down on the one area where Macy’s might actually have a strength: their stores. I really don’t see a downside to using RFID inventory tagging. In the worst case, it will make their operations more efficient. In the best case, they can introduce a better customer experience by leveraging the RFID technology (like Smart Mirrors, as you mentioned). Having a differentiated in-person experience could drive people to stores who (like me) would otherwise just purchase online.
Amazon is actually exploring this as they (ironically) open brick and mortar stores. They’re called “Amazon Go” stores , and they allow consumers to walk in, pick up items, and walk out, without ever needing to scan the items or pay. I believe Amazon is using cameras and other sensors to achieve this, but I don’t see a good reason why Macy’s couldn’t implement something similar. It would further make Macy’s more efficient by eliminating the need to have personnel checking out customers.