Best Buy Sees A Growth Future In RFID

At stores where the retailer has tested RFID technology, revenue has increased by 18.7%, and number of units sold are up 14.1%.
When it comes to enthusiasm for RFID, the technology may have no bigger cheerleader than Best Buy International CEO Robert Willett.

"It's the single most important thing that's ever happened in the supply chain," Willett declared in a speech to hundreds of attendees at the RFID World conference in Dallas Tuesday.

The biggest potential of RFID is improving the customer experience, Willet said. Best Buy is already proving it can keep products in stock better, which keeps more salespeople out on the floor helping customers. He sees RFID in the future increasing the speed and accuracy of the payment process, and is convinced item level tagging will happen more broadly.

Willett showed a video about the success of RFID tagging on movie and video game DVDs that's running as a pilot program in some stores. Employees can check on the in-store computer system how many of a specific DVD title should be on the floor and how many are in the backroom based on information picked up by RFID readers. Previously, employees had to scan each DVD case with a handheld barcode reader to get the information they needed to keep products at proper stock level. The system also tells them where specific titles are located in the backroom.

Willett said that at stores where Best Buy has tested the technology, revenue has increased by 18.7%, and number of units sold are up 14.1%.

"For folks who think [RFID] hasn't arrived, it has arrived," he said. "Things need to happen, but it's definitely going to happen."

"RFID might not be the best thing since sliced bread, but it's close," Willett added. But he also stressed the need for patience; it took 22 years after sliced bread was developed in 1906 before the toaster was created because of intellectual property issues and "lack of coordination around the industry."

Best Buy clearly has some advantages with RFID over Wal-Mart, which is also using the technology for reducing out-of-stocks, but is facing some problems getting a critical mass of suppliers on board to tag their cases and pallets with RFID. In distribution centers where Best Buy has RFID, about 80% of pallets coming from suppliers are tagged, Willett said. But Best Buy primarily works with big companies selling big-ticket items, while Wal-Mart deals with many small companies selling products at sometimes very low costs.