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The Big Three Benefits

Apparel retailers are deploying RFID for inventory accuracy, product location and loss prevention.
Posted By Mark Roberti, 11.02.2011
Last week, I spoke at RFID Forum 2011 (see U.S. Apparel Retailers Drive RFID Adoption), where I met with the RFID program head at a $1 billion U.S. specialty retailer, who asked not to be identified. He told me that a few years ago, he was struggling to figure out how the technology could benefit his company. At the time, much of the discussion about RFID apparel tracking focused on how the technology could improve replenishment, thereby ensuring that store shelves remained well-stocked.

"Most of our inventory comprises fashion items that are not replenished," the executive said. "Once they are sold, that's it. We bring in different items. RFID Journal's Fashion Retail ROI Calculator actually helped me figure it out. I played with it a lot, and it showed that using RFID to ensure that product was in the correct place at the right time would deliver an increase in sales, even if items were not being replenished." Data from the calculator—which is available for free on RFID Journal's Web site (see A New ROI Tool for Apparel and Footwear Retailers and Fashion Retail ROI Calculator)—convinced his firm to run a major pilot, which confirmed that RFID could improve inventory accuracy and deliver a return on investment within 18 months.

Today, almost all retailers currently deploying RFID technologies—from upscale specialty chains to mass-merchandise stores—are looking beyond replenishment, according to Randy Dunn, the head of RFID marketing at Tyco International, which has installed RFID systems for several early adopters. "Inventory accuracy, product location and loss prevention are the three dragons that all retailers are trying to slay," he says.

Having high inventory accuracy and visibility into product location not only improves replenishment, but also ensures that fashion items that will not be replenished are out on the shelves when customers want to buy them. This means fewer items will need to be marked down, thereby increasing profit margins. What's more, knowing where items are located within a store helps sales associates better serve customers.

Unlike conventional electronic article surveillance (EAS) systems, Dunn says, RFID-based EAS solutions let retailers know what has been stolen, which improves on-shelf availability. And RFID might significantly reduce internal shrinkage. American Apparel, for example, discovered that shrinkage rates within stores that have deployed RFID declined by an average of 55 percent—and, at some locations, by as much as 75 percent (see RFID Delivers Unexpected Benefits at American Apparel).

Stacey Shulman, American Apparel's VP of technology, attributes this to a change in culture at the RFID-enabled stores. "Because we are tracking every item, we are reminding our staff that each and every item has value," she explains. That means employees treat each item more carefully, which reduces process errors. Tracking products also discourages most employees from stealing things they don't think will be missed.

When these three issues are resolved, Dunn says, retailers will turn to using RFID to differentiate themselves. "Right now, the use of RFID is all around the things that make retailers the same," he states. "They all have problems locating inventory, but eventually, RFID will be used to enhance the things that make them different."

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.

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