May 31, 2006, 12:00 AM

The RFID `SmartStore`

With RFID tags on each book, Netherlands` BDG chain gives new meaning to speed-reading.

In the Netherlands, leading bookstore chain Boekhandels Groep Nederland is five years into redefining itself. Once focused mostly on the science and education market, it realized at the start of this decade that the Internet had altered its competitive position, forcing it to rethink what it would sell and how it would sell it. “We decided the science and education market, with all the new competition brought on by the Internet, didn’t offer enough growth,” says Jan Vink, BGN’s director of information technology.

BGN conducts most of its sales through 42 stores; its retail e-commerce presence is limited to a collection of separate, local-market web sites operated by fewer than half of its stores. But just because it doesn’t sell much on the web doesn’t mean the company isn’t using web technology to battle the competition from Internet-based retailers. At the core of its new strategy is a system of marking individual books with RFID tags-becoming one of the first retailers anywhere to tag individual items-to make its stores more competitive while laying plans for a corporate retail site. “We needed to strengthen our brick-and-click strategy,” Vink says.

The key to change

Its new focus on Internet technology became a key part of an overall effort to drastically change BGN’s course as a company. It has sold most of its science and education business, retaining only its contracts to sell to universities, and is rebuilding itself with a new focus on the general consumer book market.

In April, BGN, which is changing its store brand to Selexyz, officially launched its RFID-based “SmartStore” model in its Selexyz Scheltema store in Almere, Netherlands. In tests of the system, the RFID-driven SmartStore program has produced positive results in controlling inventory, improving customer service, reducing labor costs and increasing sales, Vink says.

Although BGN is taking a lead in implementing RFID technology, one of the first beyond major companies like Wal-Mart Stores Inc. and the U.K.’s Marks & Spencer, it may soon have a lot more company among RFID users, experts say. “We see an increasing number of retailers doing pilots and making plans,” says Kevin Ashton, former director of the Massachusetts Institute of Technology’s Auto-ID Center, one of the early promoters of RFID technology, and now vice president of ThingMagic, a provider of RFID tags and readers.

RFID is becoming increasingly recognized as a tool that can support multiple efforts to manage inventory and improve customer service, because retailers and their customers can use the data that RFID records and transmits across multiple applications, from warehouse management systems to store POS systems to self-service kiosks. “RFID is one technology that can bring it all together,” says Shyam Krishnan, technology analyst at research and consulting firm Frost & Sullivan.

The challenge, he and others say, is making a business case for making RFID pay its way and producing returns.

No more warehouse

At BGN, the business case stems from two main sources: its association with a major Netherlands book distributor Centraal Boekhuis, and BGN’s software partner, Bedford, Mass.-based Progress Software Corp., which provides BGN with a suite of applications that distribute RFID data throughout the enterprise using Internet technology through web services-based architecture, including customer-facing in-store kiosks as well as store inventory management systems and personnel.

As part of its plan to rebuild itself, BGN last year closed its own warehouse and began placing all of its orders through Centraal Boekhuis, which also handles orders for BGN’s largest retail chain competitors as well as more than 1,000 independent bookstores. Through its contract with Centraal Boekhuis, which places the RFID tags on the books delivered to the Selexyz Scheltema store, BGN is able to keep down the cost of its item-level RFID program, Vink says.

In addition to the tags, which cost under €0.25 each, BGN is paying about €13,000 for an RFID “tunnel” or reader, of which it expects to have one per 1,100-square-meter store, though more for its larger stores, Vink says. In addition, there was the initial cost of about €200,000 ($256,000) for its suite of Progress software, says Stephan Leferink, Progress Software’s Netherlands-based retail industry manager, adding that it will cost far less to connect additional stores to the Progress system.

The 1,100-square-meter Selexyz Scheltema store holds about 38,000 books and receives at least 650 and sometimes more than 1,000 new books per day. The store displays books on 800 shelving sections and other display and storage areas.

Speed reading

Open for business ten hours a day, six days a week, the store has traditionally operated with 18 or 19 staff people, whose shared duties include a single employee spending about five minutes to check in each box of new books, a several-minute process that required the removal of each of about 30 books to check them against order sheets. It was common to have lost or damaged order documents and invoices, and occasionally shipments that didn’t match what had been ordered.

RFID has streamlined the book check-in process, cutting the time per box to less than five seconds, Vink says. An employee now places the unopened box into an RFID reader, which instantly checks the RFID tag on each book against an electronic record of an advanced shipping notice forwarded over the Internet earlier from Centraal Boekhuis. If there is a discrepancy, the system automatically sends an alert to Centraal Boekhuis to rectify the order.

Checked-in books are then placed on store shelves and other displays, with their exact location scanned by employees with handheld RFID scanners, a process that enables clerks or customers at kiosks to get an instant look at a book’s exact location as well as its availability. “We now know that 100% of books are checked in properly, and we can save three to four employees per 1,100-square-meter store,” Vink says.

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