It remains to be seen who the winners and losers will be in retail following the Christmas holiday. It’s a good bet, however, that retailers utilizing RFID technology will fare well.
You can draw that assumption from the transcript of Target’s Q3 earnings that were announced last month. The giant retailer credits RFID with helping to reduce out-of-stocks to an all time low, a key advantage during the crucial holiday buying season. If that trend continued in December, Target is certain to benefit. Although third quarter sales were flat compared with last year, Target’s comparable digital channel sales grew by 26 percent.
Over the last 18 months Target has invested in its inventory position and key commodity categories to ensure stock levels remain high, especially for categories where reliability is most important to consumers.
“However, now that we’ve annualized these investments, and we’re beginning to see the benefit of our work to make our supply chain faster, and more reliable, we’ll be able to deliver outstanding in stocks on a smaller base of inventory over time,” said Target COO John Mulligan in the company’s earnings report.
“The accuracy of our inventory data is key to our speed and reliability, and we’ve been investing in our systems and processes to achieve greater accuracy.”
Target has rolled out RFID at more than 1,600 stores on a portion of its apparel goods. Target was expected to consume more than a billion tags in 2016 in retail’s largest retail deployment.
“In affected categories, overall inventory accuracy has increased dramatically, meaningfully reducing the number of occasions in which we can’t physically locate an item,” Mulligan said. “In addition, we’ve made system changes to optimize replenishment of products that our guests purchase in multiples and made changes to minimum on hand standards and higher volume locations, both of which have dramatically reduced our stocks on effective items. We will continue to test and roll out these enhancements throughout next year.”
Mulligan says that Target will expand and benefit from RFID for years to come.
“We think there continues to be significant opportunity for us. And I think we see opportunity first at a store level ensuring we always have what the guest wants when they walk in, because even though we’ve improved meaningfully there’s still a lot of distance there to go.
“And then more important than that digitally ensuring we have the right unit at the right place for the guests whether they want to come in-store and pick it up whether we’re going to shift that from a store or ship that from a fulfillment center. And today we’re not completely optimized there either and so while we’ve seen great progress and there’s absolutely benefit to the guest and their trust with us when they come into the store over time. We still think there’s a lot of runway there for us to improve and you’ll continue to see us focus on reliability and speed in our supply chain and those are the two things that we will continue to drive against over not only next year but the next several years.”