Success At the Store

How much can Radio Frequency Identification (RFID) deliver at the store level? According to leading retailers other than Wal-Mart, like the METRO Group, Walgreens and high-end Mexican retailer El Palacio, the benefits of RFID are far-reaching. METRO's RFID Innovation Center, for instance, invites suppliers and partners to learn more about the business benefits of RFID, while shoppers in its Future Store can experience the advantages of a real-world "supermarket of tomorrow". Walgreens is ringing up success with a collaborative RFID effort that involves tracking of promotional displays while El Palacio is using RFID to encourage real-time collaboration with its suppliers.

Innovative Approach

Zygmunt Mierdorf, METRO Group's chief information officer, explains the company's innovative approach. "We recognized the potential of RFID early. Indeed, we were one of the first trading and retailing companies in the world to begin the gradual introduction of RFID along our supply chain. But nowadays, no company can hope to establish a technology like this on its own, so we are delighted to have around 45 renowned partners who have joined us in pushing ahead with innovations in the trading and retailing sector."

Closely involved since the inception of METRO's RFID journey, Philips is still helping develop concepts for the store. Today, as one of the most active members of the METRO RFID solution team, Philips provides vital RFID hardware and systems know-how as well as technology. Given the success of these smart label products, METRO expects even better results once the ongoing transition to the Gen 2 specification is complete.

METRO is also testing the benefits of item-level tagging using Philips' ICODE chips, which are the only commercially-available HF tags to support a kill-command that permanently destroys the IC -- an essential feature to reassure consumers that data on their purchases will not be kept against their wishes. ICODE offers a reading speed of 200 tags per second, so inventories can be established quickly and "smart gates" can handle a large throughput of tagged items.

Addressing Supplier Concerns

In contrast to the consumer-oriented Future Store, the RFID Innovation Center focuses on the needs of METRO's suppliers. Since November 2004, the company has been rolling out RFID throughout its supply chain, starting with pallets and moving on to carton-level tagging. Today this involves key suppliers, but ultimately medium and small suppliers will also be asked to adopt the technology.

"The aim is to help our suppliers -- particularly medium and small-enterprises -- to test RFID systems, such as readers and smart tags, with their own products and packaging units under real-life conditions," explains METRO Group's spokesman Albrecht von Truchsess.

High-End Benefits

El Palacio, a high-end department store based in Mexico City, has implemented RedPrairie's DLx Warehouse for distribution management. El Palacio implemented the RedPrairie solutions in its 300,000-square-foot distribution center located in Mexico City on September 30, 2005. Since implementation, El Palacio consolidated 80 percent of the 750,000 items sold at its stores, and has dramatically improved the efficiency by which it receives goods from suppliers. As part of its supply chain solution, El Palacio implemented RedPrairie DLx Supplier to provide real-time collaboration between trading partners. The tool gives El Palacio the ability to link suppliers into the process flow enabling them to anticipate receipts, work with Advance Shipping Notices (ASN) and standardize barcode labels for fast throughput at their warehouse.

"Distribution runs so much more smoothly since implementing RedPrairie. We are saving a lot of time and money in the supply chain. Merchandise gets to the stores much more efficiently, reducing labor costs at the stores and dramatically decreasing our shipping costs," says Carlos Mendez, director for El Palacio.

A Measurable Medium

Thanks to RFID, in-store marketing not only becomes a measurable medium, but one that can be measured more reliably and precisely than traditional mass media such as TV and radio. In December, Goliath Solutions announced a multi-year agreement with Walgreens, the nation's largest drugstore chain, to install its display tracking systems chain-wide at Walgreens more than 5,000 stores.

Working initially with 15 consumer packaged goods manufacturers, Walgreens will use the Goliath system to analyze in real time the sales impact of store displays.

The patented Goliath tracking system uses RFID to capture when, how long and approximately where displays are placed in Walgreens stores. When combined with Walgreens point-of-sale information, the Goliath data will allow the drugstore chain to design and implement displays that are proven to drive sales. The system also can be used to notify store managers of which displays to put up or take down.

"Goliath's tracking system will help us customize our merchandising on a store-by-store basis and ultimately increase sales and profit per square foot," says George Riedl, Walgreens senior vice president of marketing. "It also will help both our own purchasing department and our vendors evaluate past promotions and plans for future programs."