By Mark Roberti

Dec. 1, 2011—Retailers worldwide are beginning to adopt radio frequency identification—specifically, passive ultrahigh-frequency technology based on GS1's second-generation Electronic Product Code (EPC) standard—to track apparel items. That's because the industry shares a common problem no other technology has been able to solve—poor inventory accuracy, which leads to out-of-stocks and lost sales. Item-level tracking improves inventory accuracy, which in turn improves in-store replenishment, and that can lead to increased sales and higher margins.

In the United States, Wal-Mart ($432 billion in revenue) is tracking men's jeans and basics (undershirts, underwear and socks) in all of its 4,300 stores. Just these two categories account for 250 million tagged items annually. JCPenney ($18 billion) is tracking bras, jeans and shoes in all of its 1,100 stores. The retailer expects to tag all items within four years.

As the major U.S. apparel retailers move steadily toward tagging billions of apparel items, the rest of the apparel sector will follow suit. Photo: Motorola

Banana Republic, part of The Gap ($15 billion), has rolled out RFID to 100 stores. American Apparel ($527 million) plans to have 100 RFID-enabled stores by the end of the year. Macy's Inc. ($26 billion in revenue) plans to begin item-level tagging in its 850 Macy's and Bloomingdale's stores next year. Dillard's ($6 billion), Jones Apparel ($3.7 billion) and others have been running RFID pilots and appear close to moving forward with deployments.