European sporting goods and sportswear retailer Sport Zone is expanding its use of RFID technology to eight stores, following a two-store pilot that raised inventory accuracy to 99 percent, thereby boosting sales. The company expects to recoup its investment within a year after deploying an RFID solution that helps it track when merchandise leaves its distribution center, arrives at stores and is put out on the sales floor.
Sport Zone trialed the technology beginning in April 2015, by tagging and tracking all apparel and footwear sold at two of its stores. The technology includes Avery Dennison and Zebra Technologies hardware, as well as software provided by Tyco Retail Solutions.
Sport Zone sells athletic apparel and sports equipment, such as camping gear, bicycles, balls and treadmills, at its 120 stores—the majority of which are located in Portugal and Spain—and employs a total of 1,300 workers. About half of the retailer’s products are its own brands, developed internally, while the other half represent international brands. To meet the replenishment requirements for all of its stores, the company fulfills approximately 100,000 orders daily for all product categories.
Miguel Teles, Sport Zone’s head of supply chain, described the deployment at the RFID Journal LIVE! 2016 conference and exhibition, held earlier this month in Orlando, Fla.
Each store averages 1,200 square meters (12,900 square feet) in size, Teles told attendees, adding that inventory inaccuracies can force the sales staff to spend time “chasing out-of-stocks on the sales floor.” Three times a year, the stores assign employees to count all inventory—about 25,000 units located on each store’s sales floor and in the back room—about 70 percent of which comprise apparel and footwear. The process took around three days to complete. In addition, between those inventory counts, workers occasionally spent time before or after business hours conducting limited counts of everything on the sales floor.
Sport Zone hired an external auditing company to visit its stores. Based on the results of those audits, the firm found that even with the periodic inventory counts, 20 to 30 percent of its stock-keeping units (SKUs) were simply unavailable on the sales floor, despite potentially being in the store—often in the back room.
“We had invested heavily in fast replenishing of goods from the DC to the store,” Teles said. “But a good percentage was not making it to the sales floor on time.”
Sport Zone worked with Tyco and Avery Dennison to develop a solution suited to meet its needs. The company not only sought to increase sales by reducing out-of-stocks, says Francisco Melo, Avery Dennison’s VP and general manager of global RFID, but also wanted to position itself to be able to offer omnichannel sales by selling goods from specific stores online, based on a purchaser’s location.
The solution consists of Tyco’s TrueVue software that captures and interprets read data, then shares the results with the retailer’s enterprise resource planning (ERP) system. In that way, the company knows which goods have been shipped from the DC, received at a store and placed out on the floor, based on the RFID reads.
The retailer decided to launch the pilot at two of its larger, more active stores, each approximately 2,000 square meters (21,500 square feet) in size. Teles said his company opted to apply RFID tags to apparel and footwear at the DC so that the tags could be read before the goods are shipped to the two stores. In May 2015, the stores held “tagging parties” throughout the course of several days, during which employees attached a combined total of 58,000 Avery Dennison EPC ultrahigh-frequency (UHF) RFID tags to apparel and footwear already on site. At the DC, the firm began tagging 1,500 units per day that would be shipped to the two RFID-enabled store locations.
The system enabled Sport Zone to encode each tag with a unique ID and link that number to the SKU of the product to which the tag was attached. The company used a combination of RFID stickers and hangtags from Avery Dennison, though it plans to switch over to Avery’s AD237r6 tag as the system is further rolled out. The RFID labels and tags were printed and encoded on an Avery Dennison Tabletop Printer 1 (ADTP1). As goods were shipped to the two pilot stores, DC personnel interrogated the items’ tags via Zebra Technologies’ RFD5500 Sled handheld readers. Workers at the two stores then read the tags once more while receiving those goods, also using RFD5500 Sled readers.
In September 2015, with the system working well, the two stores added another step: using handhelds to capture the tag IDs of goods as they were moved from the back room to the sales floor. During the course of the trial, the company then measured sales to determine if the numbers were higher with the RFID system in place. To ascertain whether a sales lift occurred, Teles said, Sport Zone compared sales numbers against those from other stores of similar size.
In addition, the company used Tyco’s TrueVUE software to track which sales were driven by radio frequency identification. Each time an RFID-enabled inventory check showed that a product was found not to be on the sales floor, staff members would go to the back room and replenish it. When that item then sold, the RFID system was credited for having driven that sale. In some cases, a customer might have asked a salesperson for a specific product. He or she could use the handheld in “search mode” to input the item’s description or SKU or tag ID number, and then carry the reader around the store until it beeped increasingly louder, indicating that the item had been located. If that item was then sold, it, too, would be identified as an RFID-driven sale.
Additionally, Sport Zone measured inventory accuracy by means of manual stock counts, and found that it had achieved 99 percent stock accuracy during the RFID pilot, as opposed to 80 percent accuracy before the RFID system’s implementation. What’s more, it achieved a 92 percent reduction in stock-counting efforts, a 90 percent reduction in receiving efforts and a significant sales lift. According to Teles, the business case demonstrated that with a sales lift of 4 percent, the company would recoup its technology investment within one year; therefore, an even greater sales lift would further improve its ROI. The retailer also discovered that prior to its use of RFID, each of the two stores had approximately 1,000 items sitting in the back room that should have been out on the floor. Within a few months after the RFID system was put in place, that number was reduced to only 15 items.
“If you go through the store visually, stocks look OK,” Teles said. However, he added, the RFID data revealed that store managers can be fooled by the appearance that products are accurately stocked. “The fact was that 1,000 items were not there and could have been.”
Once the pilot was completed, Sport Zone shut down the RFID system. However, personnel at both stores asked to continue using the technology following the trial’s conclusion. After about two weeks, Teles reported, the system was “turned back on,” enabling employees to access the TrueVUE software, and the retailer continued tagging products at its distribution center.
Now, Teles told attendees, the company is rolling out the solution to eight other stores, with long-term plans to RFID-enable all of its locations. That will require an investment of about €2 million ($2.2 million) for all 120 stores. In addition, the company is currently in the process of setting up its own manufacturers to tag products at the source, while goods arriving from other brands can still be tagged at the DC. At this point, Teles said, the DC has committed to tagging 30 percent of the products passing through its facility, provided that the other 70 percent could be tagged at the source. The firm is applying RFID hangtags to apparel and RFID sticker labels to footwear, but is also considering the option of tagging the non-apparel merchandise it sells, such as camping equipment, bicycles, balls and treadmills.
Many brands are already tagging their goods with EPC UHF tags for their own purposes, Teles said. “We detect many brands’ products with their own tags” at the Sport Zone DC, he added, so the company is engaging with some of these brands to decide whether it could use those same tags, thus preventing the need for two EPC tags on a single item. “I think it’s a win-win,” he stated. Both the brands and the retailer benefit from Sport Zone’s RFID deployment, Teles explained, since they could share data regarding the status of goods in the supply chain, thereby further preventing delays or out-of-stocks at the store. “They can know that what they shipped really arrived,” he said, citing one example of how a brand owner can benefit.