Kmart Group to expand RFID tagging to more products and to Target

Kmart Group is set to expand its use of radiofrequency identification tags for inventory visibility beyond apparel and into other product categories, as well as to Target Australia for the first time.

Image credit: Kmart Group

The expansion was revealed at parent Wesfarmers’ strategy day on Wednesday, where RFID was lauded by Kmart Group managing director Aleksandra Spaseka for its contribution to the retailer's “low-cost operating model” and as one part of the “foundation for [establishing] end-to-end supply chain visibility over time”.

Kmart started RFID tagging apparel items back in 2021. It utilises robots called TORY to roam stores after-hours to triangulate the precise location and number of clothing items in its stores.

“RFID has already delivered better on-shelf availability and inventory integrity in apparel, and now we’re extending that capability across additional categories and into Target,” Spaseka said.

“In parallel, we’re using AI-enabled solutions to improve inventory integrity in general merchandise, while the broader RFID rollout continues.”

Spaseka said that the retailer had run its first ever “RFID-enabled stocktake” in apparel “earlier this year”.

She said this had proven to be a “faster and more accurate alternative than our manual processes” for stocktaking.

Spaseka also said that more than 60 percent of apparel items are now tagged at source - that is, at the point of manufacture.

“We have now scaled RFID at source to more than 60 percent of purchase order volume in apparel, improving item level visibility and accuracy and building the foundation for end to end supply chain visibility over time,” she said.

The retailer did not say which additional product categories would be tagged, but it did tout strong sales in its home living category, and it is opening a dedicated store for this in Melbourne, called ‘K Home’.

It also did not disclose a timeline for the expansion of RFID tagging into Target, which is the other key retail brand in the Kmart Group.

Supply chain investment

Spaseka also said that Kmart Group is in the midst of a “supply chain modernisation program” that will see a number of IT system upgrades.

She said that the group has upgraded its online order management system, and is in the process of upgrading warehouse management systems “across our network”.

It now also fulfils online orders centrally in NSW and Victoria, and is in the process of building an “automated next gen fulfilment centre in NSW.”

“The site is expected to become operational in FY28 and will be a critical enabler of a more resilient, efficient and scalable domestic supply chain over time,” Spaseka said.

“The cost of commissioning the facility, including a period of dual site operation in NSW, will be reflected in our FY27 earnings with benefits expected to commence from FY28 onwards. 

“Together, these investments are creating a more resilient and agile supply chain platform that can support both growth and efficiency over time.”

Broadly, Wesfarmers is investing in AI and incorporating the technology into various parts of its operations - and Kmart Group is playing its part.

“Looking ahead, AI will become an increasingly important layer of optimisation across forecasting, inventory positioning and replenishment,” Spaseka said.

“This has the potential to further improve speed, consistency and cost outcomes across our network.”