J.C. Penney Expects RFID to Enhance Customer Experience

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In a move to continue transforming its business model, J.C. Penney recently announced plans to place RFID tags on all merchandise, with the intent of providing cashier-free checkouts for customers. For its part, the retailer is hoping this will be the next big step toward transitioning its stores into a modern shopping experience, though the move is expected to nearly double the cost of garment hang tags.

For the most part, RFID tracking is generally used by retailers to assist in inventory management, but now J.C. Penney is looking to take it a step further. In an interview with Fortune’s  Jennifer Reingold, J.C. Penney CEO Ron Johnson explained what they hope to achieve with RFID:  “[When] you go to most retail stores, all you see is people doing work to execute the retail strategy.  It’s stocking shelves and transacting business. That’s going to all change, because of how we use WiFi, RFID, mobile checkout.”

Johnson further explained that nearly ten percent of J.C. Penney’s operations budget goes directly to covering transaction costs, a half billion dollar expense he hopes to reduce through implementation of the new customer-friendly RFID system. Johnson expects customers not only to be able to check themselves out quickly and easily, but to be able to do it from almost anywhere in the store.

When questioned about why he believes other retailers have not implemented a similar top-to-bottom RFID system, Mr. Johnson replied, “I can’t talk for someone else, but RFID clearly is a technology that’s been waiting for prime time based on the cost of the ticket.  You know, I believe the ticket cost, the increase in the ticket cost versus UPC label is now at a point where the benefits way outweigh the cost of doing it.”

According to Johnson, the retailer expects the system to be fully implemented and operational sometime in early 2013.

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