Question

The opening case, ‘RFID Helps Macy’s Pursue an Omnichannel Strategy’, discusses how Macy’s was able to remain competitive and relevant in the industry. Consider Macy’s as well as other companies that are utilizing and pursuing technologies such as RFID; discuss how Web 3.0, the Internet of Things, and wireless networking technologies are helping companies to remain competitive.

RFID Helps Macy’s Pursue an Omnichannel Strategy

Macy’s is a major retail chain with 850 department stores (including Bloomingdale’s) throughout the United States, Puerto Rico, Guam, and Dubai as well as e-commerce websites for online sales. The Macy’s chain is known for its diversity of popular clothing, shoe, furniture, and housewares brands.

To remain competitive and relevant amid other powerful retail chains that also have an Internet presence, Macy’s has adopted an omnichannel retail strategy. An omnichannel approach seeks to provide the customer with a seamless shopping experience, whether the customer is purchasing online from a desktop or mobile device, by telephone, or in a brick-and-mortar store. Macy’s wants its customers to be able to shop anywhere, anytime, and any way they choose. Macy’s sales staff are allowed to sell an item that may be out of stock locally by selecting merchandise from other store locations or from its online fulfillment centers. That means that Macy’s brick-and-mortar retail stores are serving as potential fulfillment centers for orders coming in from all sources. If the customer sees online that a pair of boy’s shorts is on the selling floor at the Southlake Mall Macy’s in Indiana, those shorts need to be in stock at that location.

This is not so easy. Retailers don’t typically list the last remaining item of a specific product as being available for online purchasing because they don’t have enough confidence in their inventory accuracy to ensure that the item is actually in stock. These last remaining units are usually marked down or not sold, and they account for 15 to 20 percent of inventory, significantly raising costs and lowering profits.

To solve this problem and maximize revenue from going omnichannel, Macy’s implemented an item-level radio frequency identification (RFID) system called Pick to the Last Unit (P2LU) based on Tyco’s TrueVUE RFID Inventory Visibility Platform. P2LU attempts to ensure that the last unit of an item in any store is able to be easily located and made available for sale. Macy’s suppliers attach ultrahigh-frequency RFID tags to each item in frequently replenished products, such as men’s dress shirts, underwear, and women’s shoes, throughout all of its U.S. stores. Macy’s sales staff use Zebra Technologies MC3190-Z handheld RFID readers to activate each RFID tag to broadcast data about the item to which it is attached. The RFID reader in turn transmits the RFID data to Macy’s corporate inventory system. With an RFID reader Macy’s staff can scan each pair of Levi’s jeans stacked on shelves and determine what is in the backroom that should be on the sales floor. Data from the scan automatically update Macy’s inventory system and are used to generate replenishment orders.

Before Macy’s implemented this system, inventory was degrading at a rate of 2 to 3 percent per month due to theft or items checked out improperly at the register. By the beginning of retailers’ peak selling season in November, inventory count at the floor levels was only 60 to 70 percent accurate. So much inaccuracy about inventory leads to very large numbers of lost sales.

Macy’s now has enough confidence in its inventory accuracy so that if only one of an item is left in stock, it can leverage every unit in every store to fulfill orders. Deploying RFID has reduced costs by lowering interim inventory requirements by a third, eliminating $1 billion of inventory from Macy’s stores. And, of course, having more items actually available when customers need them boosts sales.

In addition to expanding its use of passive EPC ultrahigh-frequency (UHF) RFID tags, Macy’s Inc. is also deploying Shopkick Bluetooth Low Energy (BLE) beacons at multiple departments in all stores. If a customer has the Shopkick app, upon entering a store’s handbag department, for instance, that shopper’s mobile device would receive a promotional message such as a discount on a specific handbag.

The experience of Macy’s illustrates some of the powerful capabilities and opportunities provided by contemporary networking technology. The Macy’s chain uses wireless networking and radio frequency identification (RFID) technology to closely track inventory and to make on-the-spot sales pitches to customers on their mobile devices. Bluetooth wireless networking technology also helps Macy’s increase sales by expanding its relationship with mobile device users.

The chapter-opening diagram calls attention to important points raised by this case and this chapter. Macy’s has many competitors and feels it has to adopt an omnichannel strategy to remain competitive. It also wants to take advantage of new mobile networking technologies.

Improving inventory accuracy is absolutely critical for omnichannel fulfillment and a “buy anywhere, fulfill anywhere” model. Instead of tracking cases of goods or pallets, Macy’s P2LU uses RFID to track individual items on store shelves. Thanks to its RFID inventory tracking system, Macy’s has a complete view of inventory in stores, online, and across the supply chain.

Now, Macy’s is able to maximize revenue. Macy’s is able to sell every single unit in inventory. There is no longer wasted inventory, and Macy’s maximizes revenue from omnichannel programs and improves the overall customer experience.

Here are some questions to think about: Why has wireless technology played such a key role at Macy’s? Describe how the RFID and Shopkick systems changed the sales and ordering processes at Macy’s.

Answer 1

Wireless technology played such a key role at Macy's because it is literally impossible to detect individual products, where are they located and how their stocks are getting reduced or wasted. Initially, the lack of the implementation of the latest wireless technologies, Macy's stores were suffering a huge loss and its stocks are getting wasted due to lack of track of leftover stocks of certain products.

RFID is a wireless technology that helped Macy's to determine the number of jeans in the backroom and the number of jeans on the sales floor. Therefore, data generated automatically updated the Macy's inventory systems and further helped in replenishing orders. After deploying RFID, the inventory costs reduced by third and this eliminated 1 billion dollars of inventory from the Macy's stores. More items were made available and this boosted the sales. Whereas, the Shopkick systems were the low energy Bluetooth beacons that were placed in the multiple departments. When the customers used to enter the stores, their phones used to receive promotional offers based on specific products. These two technologies highly helped Macy's to sell their products, keep a track of their inventories and sales.