By Mary Catherine O'Connor
FORTUNE -- In June 2003, Linda Dillman, then CIO of Walmart (WMT), laid down the hammer. At a retail supply chain trade group meeting, she revealed that the retailer would require its suppliers to apply radio frequency identification, or RFID, tags to pallets and cases of goods sent to its distribution centers. Initially, the company would only require this of its top 100 suppliers, companies such as Procter & Gamble (PG) and Hewett-Packard (HPQ). But by 2006, it wanted all suppliers to get on board.
By 2007, after various delays and slow starts -- and with many suppliers balking at the high costs and meager benefits of their investments in the technology -- Walmart changed its RFID strategy. Neither it nor many suppliers completely abandoned it, but the promise to foment the smartest darn supply chain in the world, with every product landing at the right place at the right time, did not materialize.
RFID lets retailers identify individual items, cases or pallets the same way bar codes do, but wirelessly, with richer data and without need for a line of sight. But it was a solution looking for a problem. Today, RFID has landed a high-demand job: Helping retailers become more competitive with online sellers, through "omnichannel" sales -- closing a sale on the buyer's terms, whether in the store, on the Web, using social media, or through some combination of those channels.
According to market research firm Monetate, one in five online purchases were made on a mobile device in 2012. That jumped nearly 50 percent, to one in three, in 2013. Knowing its customers will stand inside a Macy's (M) store and comparison shop, the company is making sure that what its website says is in the store is actually in the store.
"RFID enables frequent [inventory] counting, which enables inventory accuracy. You can't be great at omnichannel without having high confidence at the store level, at the size and color level," said Bill Connell, Macy's senior VP of logistics and operations.
"Hindsight is always 20/20," said Bill Hardgrave, dean of Auburn University's College of Business. Hardgrave founded and directed the RFID Research Center at the University of Arkansas until 2010, where he led research into various RFID applications for Walmart and other retailers. "But when we look back, it almost seems silly that we started it as a supply chain tool. If you think about the way many manufacturing centers and distribution centers operate, for many retailers those were already Six Sigma. How much more efficiency or accuracy can you squeeze out of that? Well, by definition of Six Sigma, there's not much left to squeeze out."
Yet some retailers found RFID to be useful as they continued to tinker with it. In 2009, Macy's started piloting the technology in its Bloomingdale SoHo location. "We tagged virtually everything in the store and began scanning and doing cycle counts," Connell explained.
The tags, which contain a simple chip and antenna, are embedded into product pricing labels, such as those that hang from apparel. They are powered by the radio signal emitted from readers, which can be hand-held or fixed in place. It allows store associate to check the inventory of an entire rack of hanging dress shirts, for example, by simply walking around the display with a handheld reader. Software then displays a list of sizes or styles that need to be replenished, and the associate can narrow in on the needed items in the stockroom by turning the reader to a "Geiger counter" setting.
Attempting this kind of replenishment by visually inspecting items or scanning bar codes would take an untenable amount of time. "You can count [inventory] once or twice a year with bar codes with limited accuracy, because the person can be distracted, or scan the same code twice," Connell explained. "We can count up to 24 times a year using RFID. It just enables us to keep inventory accuracy in the high 90s [in terms of percentage]."
Based on early pilot success, Macy's began installing RFID infrastructure in all its 850 stores. Starting this month, Connell says, Macy's is expanding substantially the number of vendors it is asking to ship items that are pre-tagged with RFID. By the end of the summer, the retailer plans to have half of all replenishment vendors sending RFID-tagged merchandise.
As it turns out, RFID helps retailers much more significantly on the sales floor than in their supply chains. This is especially true with apparel, which thanks to multiple size and color combinations can be troublesome to keep properly stocked. "A warehouse can be Six Sigma, but [inside] a store is No Sigma," Hardgrave quipped. "Stores are chaotic. The processes are not repetitive; customers don't behave the same way every day; the weather isn't the same every day and that impacts buying patterns. So this is where RFID has the most value."
Second stop on a 5-city tour is a renovated century-old theater on a wide Berlin boulevard.
FORTUNE -- After Paris, the big Apple Store on the tree-lined Kurfürstendamm -- the wide boulevard that is Berlin's version of the Champs-Élysées -- was a bit of a shock.
The classical Greek revival facade, with its tall windows and inset Ionic columns, is even more imposing than its Parisian sister store's.
The shopping area inside, however, has none of the Opéra's old-world charm.
It's a huge space, with 43 MOREPhilip Elmer-DeWitt - Apr 11, 2014 2:54 AM ET
First stop on a five-city tour is a 134-year-old edifice across the street from the Paris Opera.
FORTUNE -- Here's the irony in the retail store Apple (AAPL) opened with such fanfare four years ago just north of the Place de l'Opéra -- one of the grandest squares in a city that has way more than its share:
Despite the millions spent renovating the 134-year-old marble and limestone edifice, the hours spent scrubbing away MOREPhilip Elmer-DeWitt - Apr 7, 2014 3:16 PM ET
Enthusiasts line up overnight for the company's first Apple Store in Eastern Europe.
FORTUNE -- By the time Apple (AAPL) opened the doors to the first company-owned Apple Store in Turkey -- and its first in Eastern Europe -- a crowd estimated at 450 had joined the two-story queue that wrapped around the store twice, indoors and out, for a free T-shirt and a chance to check out the latest Apple products.
According to ifoapplestore's Gary Allen, who attended MOREPhilip Elmer-DeWitt - Apr 6, 2014 6:31 AM ET
Consumers haven't experienced the full value of it yet, argues Braintree CEO Bill Ready.
FORTUNE -- Consumers hate the idea of retailers tracking them through their smartphones. Overwhelmingly so, in fact: As I noted yesterday, a new survey from OpinionLab shows 77% of respondents found in-store tracking unacceptable; 63% said even if their favorite store offered tracking services, they would opt out.
No matter: Retailers, marketers, and investors love the idea because MOREErin Griffith - Mar 25, 2014 3:00 PM ET
New survey reveals overwhelming rejection of retail's latest innovation.
FORTUNE -- Despite excitement from the business world, consumers aren't keen on the latest innovations in retail advertising. A whole new category of technology has sprung up to serve "omnichannel" retailers, who combine online analytics with brick-and-mortar sales. They do that by connecting to a consumer's smartphone while they're in the store. And consumers are wary.
According to a survey of 1,042 consumers MOREErin Griffith - Mar 24, 2014 11:34 AM ET
The tech giant is rumored to be close to signing a deal on a NYC space, but is it beta testing for more stores or creating another tourist attraction?
By Courtney Subramanian
FORTUNE -- Just 295 feet down the block from Apple's (AAPL) first retail store sits an empty space that could not only make history but also change the face of the Google (GOOG) experience.
That's a lot to be said MOREMar 13, 2014 11:24 AM ET
Two changes in the company's vaunted customer-care policies won't be blamed on her.
FORTUNE -- One of the reasons Apple (AAPL) can charge a premium for its products -- and enjoy profit margins that are the envy of tech world -- is that they come, as Steve Jobs once put it, "with motherhood built in." Not only are they usually better made than the competition, but they are accompanied with unmatched MOREPhilip Elmer-DeWitt - Mar 13, 2014 8:01 AM ET
Apple plants its flag in Brazil in advance of the FIFA World Cup and the 2016 Olympics.
FORTUNE -- Apple's (AAPL) iPhone may be approaching saturation in North America, but Latin America is wide open territory.
Brazil is particularly interesting. It's the largest country on the continent (pop. 200 million) and it's demonstrated an appetite for iPhones despite prices that are the highest in the world. Due to stiff import duties, an unlocked iPhone 5s MOREPhilip Elmer-DeWitt - Feb 15, 2014 7:38 PM ET
How the sources of Apple's revenue shifted between 2010 and 2014.
FORTUNE -- Following up on Wednesday's snapshot of Apple's (AAPL) Q1 revenue by region -- which saw Greater China grow 29% and the Americas shrink 1% -- I've gathered the past four years of a data and summarized them in three charts.
The top graph shows revenue by operating segment (i.e. geographical region plus retail). The bottom shows share of revenue MOREPhilip Elmer-DeWitt - Jan 30, 2014 6:23 AM ET
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