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RFID retail apparel tagging sees explosive growth; Macy’s and JCPenney lead the charge

Over the past several weeks Macy’s and JCPenney have provided a clear view of just how close RFID is to becoming ubiquitous in apparel retailing.

Last week JC Penney revealed it is pushing RFID-tagged jeans, shoes and bras to all 1,100 stores. Previously, the retailer was on record only as piloting the technology at 33 stores. Frank Cassara, vice president of operations for the retailer, said that JCP stores already equipped with RFID have not seen a double-digit sales increase from the technology. However, he said deployment is still well worth the effort.

That news followed Macy’s late September announcement that it will begin to roll out item level tagging at all stores by Q3 of next year. Macy’s will tag 30 percent of the company’s SKUs, representing approximately $8 billion worth of inventory.

Between Macy’s, JCPenney, Walmart and other tier two deployments, more than 5,000 retail outlets in the U.S. will receive RFID-tagged product  during 2012. That number could go much higher as retailers operating in  stealth mode make their deployments public.

“We’re starting to see massive growth in apparel tagging,” said Patrick Javick, vice president of industry engagement at GS1 US. “There is a lot of activity we know about that we are just not authorized to speak about. The interest in apparel from other countries has skyrocketed.”

Research firm IDTechEx recently predicted that apparel tagging alone will consume approximately 20 billion RFID tags annually within the decade, creating a market of $1 billion for tags annually in 2021. In addition, $670 million per year will be spent on RFID infrastructure for apparel in 2021, up from $80 million this year. Wal-Mart’s tagging alone accounted for approximately 400 million tags and 20,000 readers in 2010. According to VDC Research, tag volume is anticipated to reach 650 million tags in 2011.

During the final panel discussion at last week’s RFID Forum, Cassara confirmed the rollout to all 1,100 stores, and relayed his goal of reaching full deployment within four years. Speaking from the audience, Cassara said that the JCPenney stores that have deployed RFID have not seen double-digit sales gains from the technology, but “Without double digits you’ll get enough of an increase where [RFID] makes sense for everyone.” Cassara confirmed those remarks with RFID 24-7 following the meeting.

That revelation could lead to increased adoption, as retailers that are still on the fence about deploying re-consider their business cases that called for larger sales uplifts to achieve ROI.

“There is this fallacy out there in the marketplace that you need to hit 15 points, but you don’t need all these huge revenue numbers that people are talking about,” said one attendee at the RFID Forum. “Even with a five percent sales uplift, you have about a seven or eight month payback. This can pay for itself with relatively small revenue uplift. For me, that point is lost with a lot of people in that they have these lofty expectations of 15 percent sales gains.”

The confirmation from JCP and Macy’s also reinforces the item level movement, especially as Walmart faces delays in introducing new product categories. Most in the industry believe that Walmart is three to six months behind its initial deployment schedule.

“It’s good to see Macy’s and JCPenney being more vocal because it communicates that the retail apparel push continues despite some of the delays we are seeing at Walmart,” says Mike Liard, RFID research analyst at VDC Research.

Last  month Macy’s announced that it will begin to roll out item level tagging at all Macy’s and Bloomingdale’s stores by Q3 of next year to count size-intensive replenishment goods — items regularly stocked and automatically re-supplied as they are sold to customers.

The announcement represents about 30 percent of the company’s sales of $25 billion, meaning that Macy’s will tag approximately $8 billion worth of inventory. Additionally, Macys will use RFID to track replenishment goods on-hand by size, color and style at all stores by the fall of 2013. Macy’s move is likely to push tens of millions of tags – probably more — into the retail supply chain.

The initial 2012 launch of RFID will include size-intensive replenishment categories such as men’s furnishings, intimate apparel, men’s slacks, denim and women’s shoes in all stores. Macy’s and Bloomingdale’s private brands are included in the initiative. All SKUs will be included by fall of 2013.

At last week’s RFID Forum, representatives from Macy’s and JCPenney both indicated their desire to tag high-value cosmetics items as soon the technology allows.

“Cosmetics is one area we would like to engage in heavily,” said Roger Blazek, vice president of shortage control for Bloomingdale’s. “But first the technology has to change and some of the processes in packaging or some of the materials need to change.”

Macy’s plans to tackle as many replenishable categories as possible between 2012 and 2013, including cosmetics, although that category will likely be closer to the end of the cycle. “The bottom line is that the technology is going to be there so you don’t want to rule it out because cosmetics tagging truly represents a big opportunity,” said Pam Sweeney, senior vice president of systems and technology at Macy’s.

During a recent trip through Germany and France, Javick said that it has become apparent that vendors in the EU are now the driving force behind RFID. “In Europe it is the brands driving the activity, looking at it from within their own four walls as well as their own retail stores,” he said.

Challenges remaining for item level tagging include how store associates will take to the technology, and pushing the tagging process back to the point of manufacture.

“We won’t be successful until we get out vendor partners involved,” said Blazek. “We’ve tagged over one million units (in house) but to engage in that process for a long time is not something we want to see happen.”

To help vendors see the benefits of applying tags themselves, the VICS Item Level RFID Initiative will release a white paper on the vendor benefits of RFID by the end of the year. The group will present a web cast on the topic in December.

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