In the past few years, there have been many developments involving radio frequency identification and the apparel retail industry. Clothing merchandisers—including American Apparel in the United States, Charles Vögele in Switzerland and Throttleman in Portugal—have been using RFID technology to better manage store inventories and improve on-shelf availability. At the same time, studies, including those by the University of Arkansas’ RFID Research Center, have documented the business benefits item-level tagging can deliver to apparel retailers.
In July, Wal-Mart announced that it was working with suppliers of men’s jeans and basics (socks, undershirts and underwear) to track these items using ultrahigh-frequency RFID tags with Electronic Product Codes. And in November, Voluntary Interindustry Commerce Solutions (VICS) and standards groups GS1 US and GS1 Canada announced the launch of the Item Level RFID Initiative, which brings together apparel manufacturers and retailers—including Conair, Dillard’s, JCPenney, Jockey, Jones Apparel, Levi Straus, Macy’s, VF Corp. and Wal-Mart—to develop a roadmap for the adoption of RFID at the item level.
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These advancements have been made possible, in part, by technology developments. “The readers have improved on the hardware side, the middleware from a software standpoint has improved in terms of processing those reads, and the tags themselves have improved and gotten cheaper,” says Casey Chroust, executive VP, retail operations, at the Retail Industry Leaders’ Association (RILA), and a member of the VICS board of directors.
Development of item-level retail solutions is also making it easier for apparel retailers to deploy RFID technology and get value from the data collected. Checkpoint Systems, which acquired OATSystems, offers a turnkey system that includes hardware, software and services. Other vendors, such as Overheer Systems, Truecount—a company launched in October by Zander Livingston, who played a key role in American Apparel’s RFID deployment—and Xterprise, focus on software, but partner with hardware vendors to deliver a complete solution to retailers. The solution providers offer different deployment models, including on-premise installations, and hosted and cloud models.
Inventory Visibility
The RFID Research Center found that inventories at U.S. apparel stores are accurate only 65 percent of the time, which results in lost sales and many customers leaving stores disappointed. “Today, most retailers don’t really trust their inventory systems, so they don’t typically use them to find things in the store,” says Gordon Adams, Tyco Retail Solutions’ senior VP of sales and professional services for store performance solutions. “But if you have confidence you have accurate inventory, you will go look for an item.”
RFID-tagging apparel at the item level provides visibility that can improve inventory accuracy, reducing out-of-stocks and ensuring on-shelf availability. A fixed RFID reader stationed between the back room and the sales floor can track the movement of merchandise, and employees can use handheld readers to take daily inventory of items on store shelves and racks. “Probably the most critical impact that the real-time aspect of RFID affords a retailer is better inventory management,” says Alan Sherman, Checkpoint Systems‘ marketing director. “They have to have what customers want to buy on the shelf.” Retailers can also use real-time information to reduce inventory stocks, which, in turn, reduces the amount of working capital tied up in the business.
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Today, retailers can get the necessary hardware and software from a single provider. Tyco Sensormatic, for instance, purchased Vue Technology for its software platform; it makes some RFID hardware and sources other products, such as handhelds, from partners. Checkpoint recently introduced a starter kit for closed-loop apparel retailers that includes a handheld reader, RFID tags and labels, software and services.
As read rates of both handhelds and fixed readers have improved, some retailers find they’re reading tags on items they don’t want to track. Say, for example, you’re tracking tagged merchandise as it moves through a door from the back room to the sales floor. You might also read tagged items that are already on the sales floor, on a rack near the door.
To address this problem, Checkpoint developed a solution that filters out stray reads. Truecount’s solution instructs the reader software to identify a tag’s distance and movement, to calculate when an item passes through a portal and differentiate it from a tag that just happens to be near the reader, CEO Livingston says.
Business Intelligence
Each EPC RFID tag carries a tremendous amount of data, such as vendor name and item color, size and style. Item-level solution providers are making it easier for apparel retailers to leverage all that data with out-of-the box software applications, such as workflows and reports. Other applications automate key functions, such as receiving and point-of-sale.
“A number of us [vendors] invested in developing a rich application layer to specifically enable [retailer] use cases,” says Xterprise president and CEO Dean Frew. “In 2003 to 2006, the focus was on data collection and can we get the reads on item-level in the retail environment. In 2007 through 2010, it’s not only do we collect that, which is table-stakes, but how we actually use that information to drive use cases… to drive value.”
To view a larger version of the above table, click here.
Beyond providing visibility to better manage inventory, workflows and reports can help retailers improve store operations, but the applications must have an intuitive interface so employees can quickly learn how to use them, Truecount’s Livingston says. “We can drive workflows to say that six items go to the customer pickup area and 20 to the sales floor at a time, but if they sit too long in one place, they should move elsewhere,” he says. Alerts can indicate issues such as whether there are too many of a particular item on a sales floor according to existing rules, and monitor the workflow process to make sure those items are returned to the back room. Managers can adjust the system and design workflows to abide by new rules—for instance, to see whether having more items than dictated on the floor can raise sales.
It’s the analytics that matter, says Dan Sandler, cofounder of startup Overheer. The company’s Reflect product focuses on building an array of metrics and letting retailers choose which metrics are most appropriate for their businesses to implement. A retailer, for example, might want reports on whether one store is replenishing better than another. “Our real focus is delivering information they couldn’t get without RFID,” Sandler says.
The real-time information RFID provides can transform the way apparel retailers manage their business, says N. Arthur Smith, CEO of GS1 Canada. Retailers can analyze RFID data to better manage recalls, fashion cycles and markdowns, he says.
RFID also can help prevent swindling in the form of “sweethearting,” which is when a sales clerk works in cahoots with a friend posing as a “regular” customer to get a high-priced item at a lower price, according to Tyco’s Adams. “There are ways to use RFID to control what gets fed into the point-of-sale system,” he says.
Software solutions should require little or very light integration with existing retail systems, Truecount’s Livingston says. “We just overlay our solution [with legacy systems].” You don’t need integration to conduct fast and accurate cycle counts, analyze stock on the sales floor or locate specific items quickly for the customer, he says.
Return on Investment
Retailers have a growing number of options to run the software components of their item-level solutions. Tyco, for example, lets retailers use a server at the enterprise or run software at individual store sites, and then periodically feed their data into the enterprise application that resides on a server at corporate headquarters. Checkpoint, Overheer, Truecount and Xterprise offer either hosted managed services on-premises or in a data center, or cloud models that offload the cost of installing and managing in-house hardware. “That way, the retailer isn’t forced to make a big commitment and also can have very little IT infrastructure,” Overheer’s Sandler says.
Another issue to consider is the size and scope of your retail organization. Checkpoint and Tyco, for example, can deliver solutions globally, while Overheer says its service targets midsize North American apparel and footwear retailers.
How much does it cost to deploy an item-level RFID solution? Vendors say fees vary enormously depending on the system—which can range from using handhelds for inventory management to RFID-enabling dressing rooms—and on how many items and stores the deployment covers. But retailers typically realize returns on these investments within 12 months, according to solution providers. (Go to RFID Journal’s Web site to download the free RFID Fashion Retail ROI Calculator, an interactive tool that estimates the benefits your company can achieve by RFID-tracking apparel, footwear and accessories, based on the results of real-world RFID deployments.)
“Retailers are as savvy as you can get, and if there is not a clear-cut, expedient ROI, they move on to other things,” RILA’s Chroust says. “The fact that they are embracing this technology, investing further dollars into it and rolling it out more widely implies that it is a successful solution for this market.”
Pushing Back Benefits
Most apparel retailers that have deployed RFID solutions tag items either in their distribution centers or when the goods arrive at their stores. They like the in-store benefits RFID delivers, including inventory visibility and business intelligence, so now they’re asking, “What else can I gain from item-level tagging?”
“The most valuable asset you can get from RFID technology out of the box is removal of distortion,” says Zander Livingston, who played a key role in American Apparel’s RFID deployment and recently launched Truecount, which provides item-level RFID apparel retail solutions. Tagging anywhere in the supply chain—including at the supplier level—is critical in removing distortion, which includes items being shipped to the wrong location.
If you make your own goods, you can apply RFID tags at the point of manufacture and achieve efficiencies throughout the supply chain. If you sell apparel from different manufacturers, you’ll want to work with your suppliers and encourage them to tag items for you. That’s the approach Wal-Mart Stores adopted. The retailer is helping its suppliers use RFID to improve their own inventory accuracy and reduce errors when picking and shipping merchandise.
The Item Level RFID Initiative, a group of apparel manufacturers and retailers that is developing a roadmap for the adoption of RFID at the item level, recommends RFID systems that use the Electronic Product Code standard. EPC numbers let you uniquely identify items (as well as cases and pallets). You need to associate each EPC number with the item you’re tagging. In addition to in-store applications, the software solutions from Overheer, Truecount, Tyco Sensormatic and Xterprise offer EPC number management. If you decide to tag apparel at manufacturing facilities or distribution centers, you’ll need printer-encoders to print and encode EPC RFID tags before attaching them to apparel items.
Avery Dennison’s Global EPC Solution also can be used to generate and manage the EPC numbers that will be written to the RFID tags. If you or your suppliers don’t want to invest in the equipment and processes to support EPC RFID tagging, you can hire an apparel-labeling service bureau to do the work. Avery Dennison has a network of service bureaus in Asia, where it’s less expensive to RFID-tag apparel because the cost of labor is lower than in Europe or the United States. Avery’s service bureau can print and encode EPC RFID inlays and tags, to embed in labels or adhere to hangtags. “We do any combination of those things, which then enable other systems to do things with RFID data and information along the supply chain, such as creating advance shipping notices, to help track and trace products from manufacturing through to receipt at retailers,” says Rose Depoe, Avery’s global director of partnerships and alliances.
Checkpoint Systems recently introduced the Open EPC Number Management Solution, intended for global deployments. Checkpoint says it lets customers use multiple service bureau suppliers rather than relying on a single provider that bundles EPC number management and print service bureau offerings. The company’s cloud-based software, built on OATSystems’ software suite, can generate EPC numbers for tags, at service bureaus or in-house facilities.
As retailers push back tagging to achieve supply-chain benefits, the Voluntary Interindustry Commerce Solutions group is turning more attention to studying the return on investment and business case from the supplier end. “What decisions would a supplier make differently once it has information visibility into where the product is at any one stage?” poses N. Arthur Smith, CEO of GS1 Canada.