How Dillard’s Is Using Radio Frequency Identification (RFID)

In an attempt to deliver better service to our customers through improved product availability, Dillard’s has begun an RFID item-level tagging pilot in our department stores. The pilot will consist of certain styles of merchandise being marked with RFID-enabled tags. The tags function like an intelligent barcode and contain only the product number unique to each garment called the Electronic Product Code (EPC). These new RFID/EPC tags will enable store associates to perform frequent inventory counts on merchandise and correct any out-of-stocks or discrepancies in a timely manner. The tags are made of paper and are designed to be removed at the time of purchase. They are not required in the event that the consumer wants to return the garment. No link will be made between the garment information held by the tag and the customer’s personal information. It is believed that the use of RFID technology can help improve the accuracy of our inventory control system and help ensure that we have the perfect fit on hand for our customers.

How RFID Works

RFID is a method of using radio waves to communicate information about products. An RFID/EPC tag can be attached to a product and consists of an antenna that is connected to a microchip that contains information about the product. This tag can then transmit the identification information to a reader. The reader converts the radio waves into digital information that is interpreted by computers. Readers can be fixed in a set location, such as a receiving dock door, or mobile in the form of a hand held device (scanner) or cart mounted reader. Mobile readers allow associates to walk around the store taking inventory of selected merchandise as necessary.

Where bar codes require an associate to scan a single ticket with a laser or imager before it can be read, an RFID system is capable of reading any tags that are in its interrogation zone simultaneously. Unlike bar codes, RFID/EPC tags can be read without being physically in line-of-sight with the reader. That means that they can be read while still inside a shipping carton, on a store shelf, on a rounder, in a display case or any number of locations. This makes processing and inventory taking much easier and quicker.

Like the bar code, the RFID/EPC tag contains a unique identifying number for a particular style, color and size of a product (the UPC). However, the EPC also contains a serial number that is tacked on to the UPC to enable unique identification of like items. So if Dillard’s has ten large, blue sweaters on the shelf with the same UPC, each of the sweaters will have its own unique serial number differentiating it from the other items. This allows a reader to view all ten sweaters instead of just seeing one UPC on the shelf.

The process efficiencies and inventory accuracies obtained by the use of RFID/EPC tags on merchandise at Dillard’s should help ensure that our customers have a more rewarding shopping experience.

Forward Looking Information

The foregoing statements regarding our intention to pilot and further implement RFID technology as well as statements made regarding our goals, beliefs regarding the potential benefits to us and our customers of using this technology are forward-looking statements within the definitions of federal securities laws. These statements represent the views of management at the time of this release, are based upon current information available and are not guarantees of future performance or results. Our actual results of the RFID pilot program and further implementation of this technology in our stores may vary from the forward-looking statements made above due to a number of risks and uncertainties. These risks and uncertainties include but are not limited to the continuing availability of equipment, technology and expertise to successfully pilot and further implement the RFID program, our continuing analysis of the cost-benefit aspects of RFID implementation and resulting determination of the appropriateness of continuing forward with the project and the ability and willingness of our current and future merchandise suppliers to participate in RFID tagging and technology. Dillard's disclaims any obligation to update or revise these forward-looking statements based on the occurrence of future events or the receipt of new information.

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