Evan Schuman's StorefrontBacktalk

According to American Apparel, item-level RFID can pay for itself by cutting employee theft. The 285-store chain’s VP of Technology, Stacey Shulman, told RFID Journal that in stores using RFID for inventory accuracy, internal shrinkage has dropped by an average of 55 percent. (The chain started by putting RFID in 50 of its stores with the highest shrinkage rates.) As a result, the savings covers the deployment cost. Of course, that’s something of an accounting trick. Deploy any surveillance technology in a store with lots of employee theft and some thieves will get nervous and stop stealing—for a while.

Shrinkage drops, and IT can declare that RFID’s ROI is 100 percent. Then, by the time the thieves start stealing again, it’s hard to argue with item-level RFID’s other benefits in better accuracy and faster replenishment, which is why Macy’s is pushing item-level RFID hard. Besides, the theft rate might never return to its original levels, right? It’s also wise to remember that the only retail people who care about ROI are the people can say “no”: your CFO’s team. And for IT projects, they check ROI once. So if it looks like thefts have been avoided, you get the credit. And given that the team won’t check again in four months, you’ll likely never get dinged if the reductions were short-lived. Short attention spans can be your friends.

Macy’s on Wednesday (Sept. 28) pledged an aggressive chain-wide RFID rollout, promising to item-level tag some 700,000 UPCs in every Macy’s and Bloomingdale’s by the end of 2013. That will represent about a third of all of the $25 billion chain’s products and one of the most aggressive retail item-level deployments yet. Macy’s won’t be tagging any of the replenishment goods directly, leaving that task to its suppliers, who will ship products to Macy’s already tagged.

This massive item-level selling-floor-to-the-stockroom project began as a pilot at the Bloomingdale’s New York SoHo, which is a pilot-friendly place apparently—the chain is now using Bloomingdale’s SoHo to test Google Wallet. As a practical matter, this rollout will give Macy’s a wide range of technology options as the potential of full item-level RFID gets closer. But Macy’s is officially focused fully on just one RFID function: faster and more accurate inventory.

Early this month, The New York Times R&D Lab started talking up some work it is doing to create an interactive mirror. The idea is that consumers would replace their regular mirrors with this souped-up, voice-recognizing networked version. It responds to the command “Mirror?” You can place a bottle of antacid on the ledge and it will identify it, offer instructions and perhaps a coupon. It will also create a digital tie and “place” it on your neck to try and match your shirt.

This is a very clever project, but I have to wonder whether it has any practical value. There is something ultra-sensitive about a bathroom mirror. Yeah, there’s that naked thing and the video-streaming thing that may not play well together. When I think of all of the potentially creepy implementations of RFID, mobile geolocations and facial recognition, I think an interactive video-capable mirror using Microsoft Kinect has got to rank right up there.

Starting today (Sept. 14), we are making our monthly topic-specific newsletters available for all of our readers, for free. These five newsletters—each one covering solely E-Commerce, Mobile, PCI/Security, In-Store or CRM issues—have until now only been available to Premium subscribers.

For readers focused on any of those areas, the Monthlies provide an easy way to keep up-to-date and to make sure you don’t miss any story important to your operation. The Monthlies also have two other helpful features.

What does the “price” of an item mean? If you pick up a can of corn at the Piggly Wiggly and the electronic shelf label (ESL) says it is $1, but the price changes when you walk up to the register, what price is the merchant legally required to deliver? Although any reasonable merchants would likely honor the lower price, must they do so? What about an online store, where the price of an item might easily be changed between the time a customer puts it in his shopping cart and the time he checks out?

There are two different legal precedents for these situations, writes Legal Columnist Mark Rasch—and in fact, they go in exactly opposite directions. That creates an inherent problem, for both consumer relations and the law. Customers could feel cheated if price changes don’t work the way the customer expects. And as ESLs make in-store pricing work more like online pricing, that could change the way courts see it.

While U.S. retailers—including Macy’s and JCPenney—are just starting to get comfortable with item-level RFID, a pair of German supermarket chains is already taking the next step—tagging associates, too. By using active tags, the chains are able to not only handle access to sensitive areas but flag when an employee has been in a freezer too long and may need help.

The grocers, ALDI and Lidl, wanted to offer hands-free access to security areas, said this report from RFID Journal. “Lidl installed a reader inside the freezer near its entrance. When a person with a transponder arrives, the ID number is recognized, unlocks the door and allows him entrance,” the story said. “As he remains in the freezer, the reader continues to read the tag once each second. If it is still reading the tag in 15 minutes, it triggers a loud siren that can be heard outside the freezer.” It’s long been argued that RFID can deliver retail ROI, but only if retailers forget what vendors have promised and start getting creative about discovering their own ways to profitably use the tags to do what can’t easily be done any other way. Looks like ALDI and Lidl have already started thinking outside the box—and inside the freezer.

It’s a time-honored retail tradition to identify—and try and pamper—the group of best (most profitable) customers. But social media has provided a new way to define VIP shoppers, with “most influential” having the potential to trump “spends the most.” Consider: Who do you want to take care of first and in the most boot-lick fashion? The person who personally spends $100 thousand a year with your store or someone whose friends and followers spend a total of $25 million? Is someone with a huge number of Twitter followers, Facebook friends or a popular shopping blog more worthy of the royal treatment than someone who personally spends a lot?

Granted, there are shopping carts full of complexities and nuances in analyzing such profiles—generating a meaningful influence rate, if you will—but that’s where the fun comes in. Even worse, beyond those analytical complexities, there’s the issue of how to get this data in front of the eyes of store associates and also how to do it in a timely matter. Of course, to start things off, there needs to be a reliable way to identify these influencers as they enter your store.

A comment from a reader on an E-Commerce Web site caught my eye. Forget about improving POS terminals for mobile, he said. It should work like this: I see something I want to buy. I scan the tag with my phone. I type in my PIN. Bang—it’s mine. That sounds like the perfect merger of in-store and M-Commerce—no more lines at the cash wrap for the retailer, instant gratification for the customer. There’s just one nagging problem. OK, there are lots of problems, but consider this one: When everyone is walking out the door with their items in hand, how do you tell what’s been bought and what’s being stolen?

Clearly it can be done—Apple Stores let roving associates complete transactions and so does Home Depot for some transactions. But doing it on a large scale with easy-to-shoplift items? The obvious answer is to use technology—and it’s possible to do with currently available technology. Unfortunately, there’s a tradeoff between privacy and loss prevention that customers may not be ready to make just yet.

If you’re selling books in California, you may soon have to handle all customer data very differently. If a piece of legislation now winding its way through the California legislature becomes a law, new restrictions on your record-keeping and file maintenance will extend far beyond the sales of actual books.

The legislation, which has more holes than a chuck of Swiss cheese, would place these burdens on retailers while ignoring a lengthy list of other people in the retail environment who have access to the identical data. The key problem, pens Legal Columnist Mark Rasch: The writers of the legislation didn’t think much about how retailers do their magic.

Macy’s is quickly moving ahead with its RFID item-level tagging efforts, with one report saying the testing has expanded to six distribution centers. But the retailer is saying that significant additional moves will only happen when key competing retailers make their item-level RFID moves. It seems that the $25 billion chain has figured out the difference between being an industry leader and leading an army of one.

Nowhere is that distinction more critical than with item-level RFID. Suppliers will resist—if they resisted the early Wal-Mart edicts and risked the wrath of Bentonville, they’ll resist Macy’s—and they’ll only sign on either when they see concrete benefits or when the percentage of retailers making the move is so high that they have no option but to comply.

As retailers try to master the new terrain of today—with mobile payments, item-level RFID, QR codes on subway walls or digital receipts—it’s good to know the largest insurance companies have their backs. It’s just that some of them seem to be holding knives.

At least that’s the sense one gets from The Hartford (Hartford Fire Insurance), which has now filed federal lawsuits in Illinois and New Jersey to tell two of its retail customers—Children’s Place and Crate & Barrel—that they’re on their own in defending against some POS lawsuits. The specific litigation involves consumers suing the chains because store associates asked for Zip codes at checkout. How prohibited such conduct is remains under debate, but not at Hartford, which has a fine-print exclusion for defending anything “arising out of the violation of a person’s right of privacy created by any state or federal act,” according to copies of both lawsuits. Whatever happened to the days when insurance companies saw their duty as defending their customers? (Answer: They were all April 1.)

One retail IT line that is too cynical to not share: In an unrelated interview, a senior IT manager discussed working with certain internal clients—business unit heads who had, until recently, been just colleagues.

What’s the difference, he was asked, between a colleague and an internal client? “Simple,” he said. “An internal client is a colleague who’s had his reasonability removed.”

Some of you may have noticed today that we have added a new pair of graphic icons for the newsletter: one that says Premium and one that says Free. Since we launched Premium back in late April, we have heard from multiple readers who apparently thought—quite mistakenly—that all of our stories are now Premium.

In fact, the vast majority of our stories (often 80 percent or more) are deliberately not Premium. We are hoping that these colorful images will make it easier to tell which stories are Premium and which ones can be read in their entirety by non-Premium subscribers. We’re hoping that this clarification cuts back on the frustration of non-Premium readers who click on stories that they can’t read fully as well as encourages readers to click on a story, confident that it’s entirely available to them. This is also a good time to explain how StorefrontBacktalk decides which stories are Premium.

Retail CIOs are much more aggressive than their other sector counterparts in planning for more IT hires, according to new survey figures released this week by Robert Half Technology (RHT), which surveyed 1,400 CIOs (of multiple industries) from companies across the United States with 100 or more employees. But when RHT—at StorefrontBacktalk‘s request—isolated the answers to solely the 148 retail CIOs surveyed, the conclusions changed.

The most glaring difference was for projected hiring. When compared with the national numbers and against seven other verticals (manufacturing; finance, insurance and real estate; professional services; construction; wholesale; transportation; and business services), retail CIOs were the most optimistic about hiring IT people, tying manufacturing, with 9 percent of both segments’ CIOs saying they plan to add staff and one percent saying they plan to reduce staff. The national average is 7 percent to hire and 3 percent to reduce. Three percent of wholesale CIOs say they plan to hire, with zero planning to reduce. Finance CIOs also have 3 percent planning to hire, although 8 percent plan to reduce.

As retailers struggle with geolocation, it turns out that Apple has already done the heavy lifting when it comes to iPhone users. On Wednesday (April 20), two U.K. researchers announced that they found an unencrypted iPhone database that records the user’s location (by latitude and longitude) as many as 100 times each day, based on cell towers, in addition to IP addresses of Wi-Fi access points the phone has connected to and data from geofencing applications. The downside: Some data is wildly inaccurate, and Apple isn’t saying why it’s being stored for as long as a year.

Of course, if there’s a way to create potential privacy problems, Apple will find it—from preserving every iPhone keystroke to recording the user’s heartbeat and guessing the user’s mode of transportation. Unfortunately, because Apple hasn’t explained why this location data is being kept (dating back to whenever iOS 4 was installed on the phone), retailers can’t count on the data being available for anything useful. But maybe Apple just likes keeping track of where its users have been—and always with their best interest at heart. If it was anyone else, this would sound like stalking.

The usual assumption about item-level RFID is that it’s perfect for managing inventory all the way from the stockroom to store shelves and through the checkout. But if JCPenney CIO Ed Robben is right, that approach is wrong. The 1,100-store chain has been testing RFID just on high-SKU items, such as athletic shoes, bras and denim apparel—and isn’t using it at the POS at all.

Of course, testing RFID on just a few items means it’s useless at checkout time—unless everything has a tag, you still need scanners for the items that don’t. But it also means instead of trying to speed checkout, RFID is only being used to keep shelves stocked in specific categories of goods. By dumping the end-to-end goal, it may be possible to get more real leverage out of RFID—and keep the cost and supplier headaches down, too.

Apple on Tuesday (April 19) added to its lengthy list of Patent applications (its Patent applications now have their own tagline: “All The Privacy Violations That Are Fit To File.”) with a way to make the iPhone/iPad’s touchscreen act as both an RFID reader and an RFID transmitter. And (for you early Saturday Night Live fans) possibly a dessert topping.

“The RFID antenna can be placed in the touch sensor panel, such that the touch sensor panel can now additionally function as an RFID transponder. No separate space-consuming RFID antenna is necessary. In one embodiment, loops (single or multiple) forming the loop antenna of the RFID circuit (for either reader or tag applications) can be formed from metal on the same layer as metal traces formed in the borders of a substrate,” the filing said before describing its potential uses.

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What happens when the keys to a retailer’s supply chain show up on Google? In the case of one multi-billion-dollar regional chain this week, it resulted in the ability of anyone to change the information of all loads expected at the retailer’s distribution centers—dates, times, contents of the load, number of pieces, weight, pallets, the product ready date and the vendor call date.

In short, in the hands of an evil-minded competitor (in retail, are there any other kinds?), that Google-provided password could do a huge amount to slow down a rival, in addition to knowing inventory shipment plans so they can be countered. It represents a critical security breach—and one that started with the simple decision to put a confidential manual in a Web site subdirectory. That single password—which was printed in that Google-available PDF—unlocked a third-party’s servers and revealed a supply-chain security hole large enough to drive a fleet of Mack trucks through.

Approaching a product display table at her local L.L. Bean store, a consumer picks up a pair of boots that she thinks might work with a just-purchased outfit. Those same boots are equipped with a passive RFID tag, which detects the specific product being picked up, calculates the speed of its ascent and concludes that a customer is interested. A nearby digital display then starts running a video ad for those boots.

This L.L. Bean trial, which started in January, is trying to see whether highly targeted video—keyed into specific consumer actions—will push sales beyond traditional digital ads. The trial raises some interesting marketing issues, such as whether today’s younger consumers (who have been inundated with fast-paced background videos since birth) will be influenced by these videos. Heck, will they even notice? This is an especially critical point, given that many of these videos are without sound.

Starting April 18, StorefrontBacktalk will launch a whole new range of Premium features, including special monthly reports, exclusive private discussion groups (CIO-only, franchisee-only, CFO-only, etc.) and Premium-only access to StorefrontBacktalk‘s top stories. Best of all, readers who subscribe to the Premium edition before it launches on April 18 will get a 50 percent discount on the subscription price—locked in for the first year.

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The reader discussion part of StorefrontBacktalk has always been crucial to us; it’s a critical part of the sense of community we want to create. Ideally, this function is less about what our writers have to say to you, the readers, and more about what you have to say to each other. That’s why we’re introducing today our StorefrontBacktalk-style discussion forums: “Beyond The Story.”

It’s called Beyond The Story because our discussion forums thus far have been limited to comments on individual stories. And we policed those comments strictly, making sure that they were indeed about the story they were attached to and that they were non-promotional, non-offensive and respectful. (Well, as respectful as IT professionals debating RFID, PCI, CRM and Mobile are likely to get. We don’t seek miracles here.)

When RadioShack announced Monday (Jan. 24) that its board had chosen CFO Jim Gooch as its new CEO, it went out of its way to mention Gooch’s background in supply chain management and IT. This is just the latest example of retail boards showing new found respect for IT experience when sizing up folk for the big CEO corner office, including Home Depot, which is watching its own CFO’s IT chops when evaluating her for the CEO gig plus related IT respect demonstrations from Sears, Macy’s and Borders.

This IT love-fest is consistent with a move—started about 5 to 10 years ago—of assigning the CFO to oversee IT. Before that, it was more common for CIOs to report into COOs or often CEOs. The shift to having CIOs report into the financial group is an acknowledgement that IT is becoming more strategic and that it’s an area that CFOs must master if they want to run the whole ship.

When it comes retail technology sophistication, sometimes culture trumps everything else. How else to explain that Citigroup’s annual report comparing major retailers’ IT sophistication cites the same chains—in the same sequence—as the least and most IT-clever as it did a year ago? Is it really nature versus nurture that keeps Costco, BJ’s Wholesale, Family Dollar, Supervalu and Safeway at the bottom (least sophisticated) and CVS, Walgreens, JCPenney, Target and Kohl’s at the top?

Citigroup has long been considered the most influential technology tracker on Wall Street, so these annual lists are not to be dismissed. IT used to be a backstage corporate function in Wall Street’s eyes, but there are more indicators lately that the money folk are carefully watching the tech folk.

The $44 billion 3,900-store Sears chain has one of the lengthiest histories of any major U.S. retailer. But given how long its stores have lasted, its latest CIO’s tenure lasted not very long at all.

Timothy Kasbe, a celebrated IT exec who arrived at the chain in February 2009 after having served as the CIO of India’s largest retail chain, quietly left the company early last month. Very quietly.