This story first appeared in the January 19, 2005 issue of WWD. Subscribe Today.
NEW YORK — As attendees at the National Retail Federation show here were trolling the convention floor for the next big idea, one thing became clear: retailers are committed to radio frequency identification technology.
Seminars at the show, which kicked off Sunday, discussed trends in merchandising and real estate as well as technology. During one keynote address, major retailers shared how close they are to realizing last year’s goals for remaking retailing with RFID technology.
Wal-Mart chief information officer Linda Dillman was upbeat about Wal-Mart’s RFID initiative, defending the retailer against press reports that the project is troubled.
So far, Wal-Mart has read 7,161 palettes and 210,390 cases tagged by 57 suppliers and bound for three distribution centers and 104 stores in Texas, she said.
“You can believe that it’s been scaled back or not working, or you can believe that it’s going well and suppliers are not spending as much as expected,” she said. “All I can tell you is what we’ve seen.”
Most of what Dillman shared has been previously reported in WWD. Among the new findings: The store is averaging a 66 percent read rate on individual cases stacked on fully loaded palettes as they move from the back room to the store.
Employees are able to locate inventory in the stockroom by keying an item number into a handheld computer, which beeps like a Geiger counter as the item is approached. This is particularly helpful for promotional and dated products, Dillman said.
In addition to helping reduce out of stocks — only half of which may get replenished on a busy Saturday, she said —the new system is expected to speed up distribution centers and help suppliers by reducing overproduction.
“We all believe that it’s going to benefit everybody,” Dillman said, apparently responding to criticism that Wal-Mart has pushed ahead with the project at the expense of its suppliers. As previously reported, the retailer did not test whether RFID will deliver the expected benefits before asking its suppliers to commit to the costly technology.
Tesco’s approach is different. “We won’t ask suppliers to do anything until the technology is low risk and stable,” said Colin Cobain, Tesco’s top technology executive. “We only undertake technologies that deliver real benefits.…We’re focusing on what you can do [now] rather than what you can’t.”
In Metro’s presentation, chief information officer Zygmunt Mierdorf gave a live video tour of the company’s RFID demonstration center in Germany that included suggestive selling in the dressing room. Eventually, Metro plans to have fully tagged assortments and auto checkout, he said.
Booths at the show were unusually crowded, perhaps because of the truncated show schedule. Attendees said they were excited about new point-of-sale systems and shopping for assortment and allocation software, among other things. In the next 12 months, 57 percent of retailers plan to replace or upgrade their POS systems, according to an NRF and BearingPoint study released Monday.
On Sunday, holiday sales, the validity of monthly same-store sales reports and an outlook for 2005 were some of the topics discussed during an analyst roundtable session.
“Wall Street Evaluates the Newsmakers of 2004” was hosted by CNBC on-air correspondent Rebecca Quick. The panelists of economists and analysts included Richard Hastings, retail economist at Variant Research Corp.; Diane Swonk, managing director and chief economist at Meisrow Financial, and George Strachan, managing director at Goldman Sachs.
Fresh off the holiday shopping season, the panelists first tackled the conflicting reports of holiday sales, which varied between a gain of 3 to 6 percent, depending on the source. “This was probably the strangest holiday season I have ever seen,” said Quick, who read aloud divergent media headlines on the strength (or lack thereof) of sales recorded during the holidays. “You can dice these numbers any way you want.”
Swonk agreed, saying that, while 2004 showed the best percentage retail sales gain since 1999, the strength was not broad-based. “Some retailers were left in the cold,” she said.
Regarding monthly same-store sales reports, which detail sales at stores open at least a year, Quick wondered if the reports are indeed “the best way to measure sales.”
Hastings admitted that comps can be misleading. “Comps are, unfortunately, influenced by so many things,” he said, citing Kohl’s, which has been opening stores recently. As a result, total monthly store sales at the discount department store chain have been up in the double digits, while its comps have either been negative or up in the low-single digits.
Looking to 2005, Swonk expects to see increased restructuring and consolidation in the retail space. She predicted that more existing retailers will close stores, while others, such as Chico’s FAS, will continue to open more stores in heavy tourist or affluent areas.
At a separate session on real estate, it was revealed that more than 600 malls are in the development pipeline for India, said D.L. Narayanan, chief operating officer of Ebony Retail Holdings Ltd.
Narayanan spoke at the “State of Global Retailing” forum on Sunday.
Narayanan and co-panelist A.K. Sharma, director of the retail department of Pearl Academy of Fashion, invited developers and retailers to explore India’s retail potential with tempting statistics. The country supports the world’s largest retail network, with 12 million outlets, but 98 percent of that retail is mom-and-pop, leaving massive opportunities for national companies and investors.
“There are no huge organizations here,” said Sharma. “India can support players averaging $1 billion in grocery retail and up to $500 million in apparel within the next 10 years.”
The Indian government also is stepping up its efforts to attract retailers: It is currently discussing legislation that will standardize taxes and finalize land reforms, making development less expensive.
— Cate Corcoran, Meredith Derby and Amy S. Choi