Wednesday, January 13th, 2010 | Posted by Reik Read

Retail Item Level Discussions at NRF Show

We attended the National Retail Federation show in New York and wanted to provide a few thoughts on the progression of RFID. In general, the show was much more well-attended than last year, and we were particularly interested to see a number of retail senior executives looking at a wide variety of new technologies – this level has been absent from the show in the past several years.

We see item level RFID gaining more traction than we appreciated. We have discussed in the past the increased activity surrounding item level apparel, which has many pilots that are showing strong returns. We see modest expansion of those programs in 2010. In addition, we are seeing expansion of activity beyond the pure apparel players that include more of the broadline retailers, including both department stores and big box players. Our understanding is that most of the key players are getting behind RFID. The only significant player not participating appears to be Target, which has generally not been supportive of RFID after its initial analysis in 2004.

Most of these players have been developing and piloting solutions, with most of the attention on better inventory visibility to enhance sales-lift, reduce inventory costs and increase payment. It is very clear from our perspective that the ROI is there, and that these projects need executive sponsorship, which we discussed in October 2009, “Item Level Source Tagging – It Makes Sense, but Getting Executive Buy-In Will Be Critical”) and improved prioritization of resources. According to our sources, more senior-level executives are becoming involved in RFID initiatives.

One important new thrust has been Wal-Mart/Sam’s Club, which has now outfitted RFID at approximately 25% of its distribution centers and several hundred stores. We now understand that they have approached all key vendors in 13 key categories (the categories are unknown) to tag at the item level, which we understand includes shelf-cartons (not necessarily individual product within the carton). Wal-Mart sees value in being able to better understand information at the category level to not only aid in replenishment, but to also lead to improved merchandising decisions.

We understand Wal-Mart’s approach with the vendors contains two benefits of compliance. First, with infrastructure now in at key DCs and stores, Wal-Mart is in a much better position to share information. We alluded to this in our piece regarding Conair, where that company indicated it was gaining visibility through RFID into its sales at Wal-Mart and Sam’s Club, which has resulted in evidence of sales lift. Second, with an improved receipt process which enables better visibility, Wal-Mart is apparently suggesting that vendors may be able to get paid faster. These are hugely important points as we know that compliance with no benefit tends not to work. Also, vendors that don’t tag will be faced with a charge for Wal-Mart to do the tagging for them. We expect this process will begin in February.

We continue to research this…more to come.

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