Item-Level RFID Being Crippled Due To Retail IT Fears

Is item-level RFID a surveillance technology? Of course it is, if you're a thief—particularly a sticky-fingered employee. When missing product can be routinely discovered within hours instead of weeks, it's much easier to scan store security recordings to spot the theft. RFID wasn't designed for surveillance—that's just a side effect. Another side effect: item-level RFID's ability to let executives track exactly how well stock is moving in and out of stores on a daily basis. If you're the manager of a store with problems, that might feel like surveillance, too.

For many retail IT execs, it's more than a little uncomfortable. Store managers are on the same side as IT. Setting up systems to see who's underperforming—and exactly how, in near-real-time—can feel, well, a little dirty. Maybe that's why so few chains are doing it—and why most of the systems offered by vendors for using RFID data aren't built for that type of visibility. "Our number-one fight with software vendors is, your software doesn't do enough," said American Apparel VP of Technology Stacey Shulman. "'Well, it's what everybody else uses.' Well, it's not enough."

That's the politically incorrect reality of the visibility that item-level RFID can deliver if it's done properly. It's not just visibility into inventory. It can also be visibility into how each store is being run. More, that visibility extends all the way back to corporate—and it lets management look over store managers' shoulders in real time. As American Apparel's Shulman, who has rolled out item-level RFID in 100 of her stores and is pushing it into the company's other 150 stores, put it: "You start to see problems you had all along." It's just not polite to point that out.

Item-level RFID is quite popular these days, but are chains—for a wide range of reasons—leaving a lot of ROI dollars on the table? Certainly Wal-Mart, JCPenney and Macy's are talking about how RFID will help keep shelves stocked, especially for hard to track product categories such as apparel. But are they going beyond that?

Shulman is blunt about her belief that RFID is wasted if it's only used for sales-floor replenishment. "Right now, people are focused on counting," she said. "Unfortunately, people did the Banana Republic model"—just replenishment—"and are getting a tenth of the benefit of the system."

And where's the other 90 percent of the benefit? Management and visibility. "I get reports every day that let me see exactly how many items are missing, exactly which stores need to cycle count, exactly what the trend has been, exactly the in-stock percentage, exactly what stores are having problems," Shulman said.

That's kicking RFID up from a way of counting inventory to a way of tracking store management. In practice, that means tracking how well store managers are doing their jobs. And for managers who aren't running their stores well, that comes down to surveillance—not to see whether they're criminals but to see whether they're failing the business.

In a perfect world, that wouldn't be necessary—and for many retail IT execs, it's more than a little uncomfortable.In a perfect world, that wouldn't be necessary. (Neither would worrying about associates walking off with merchandise.) And for many retail IT execs, it's more than a little uncomfortable. Using CRM data and mobile phone signals to stalk customers online or even in-store is one thing. Verging on creepy, maybe, but still in bounds. Using it to manage fellow employees, well, that's very different.

The fact that retail IT is willing and even eager to monitor customers in real time—exactly what and how much they buy, what path they follow in the store or the mall, which competitors they're visiting—but shy away from putting store managers under the same type of microscope says everything about that unpleasant reality. You know that a lot of retail IT is about surveillance—about watching what people are doing. You're just a bit queasy about who's under the microscope.

There's an irony here. Consider a little boutique shop, where the owner knows half the customers by name and can usually spot an inventory item that's out of place because she knows what has been sold and how many items should be in each stack. That store owner doesn't need much technology to watch everything like a hawk—including how well associates and the store manager are doing their jobs. In reality, they're all under surveillance. The store's survival depends on it.

A big part of the job of retail IT is bringing that level of visibility to chains. That's the point of POS systems that update inventory with each transaction, inventory systems that trigger orders and dashboards that let executives see everything that's going on. And it should be the point of item-level RFID—not just to track what inventory is doing but to track how well associates and store managers are doing their jobs, too.

You may not like calling it surveillance. But whatever you call it, your chain's survival depends on it, too.