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Zipping Up Benefits

In the new economic reality, where the apparel and footwear industry can't count on consumers' boom-time shopping sprees, retailers are turning to RFID to increase sales, reduce losses and gain efficiencies.
By Elizabeth Wasserman
Jun 01, 2009—Even before the economic crisis, apparel and footwear retailers had recognized the benefits of using item-level radio frequency identification technology in stores to keep shelves stocked, better account for inventory, and reduce theft and loss. Now, retailers in the hard-hit industry are more interested than ever in using item-level RFID to cut losses, improve efficiencies and boost sales. Some retailers are even pushing back RFID tagging to the point of manufacture, so theycan achieve benefits along the supply chain.

The RFID projects winning approval in the apparel and footwear industry promise quick returns on investment. This has been the case with a number of apparel companies that manufacture and sell their own brands at retail stores and have successfully implemented the technology in a closed-loop setting. These retailers include Levi Strauss & Co. in Mexico; American Apparel in the United States; NP Collection in Finland; Eren Holding, the Turkish conglomerate that has territorial rights to produce and sell Burberry and Lacoste; Marks & Spencer in the United Kingdom; and Charles Vögele Group in Switzerland. Recently, department stores including Falabella in South America, Dillard's in the United States, and Karstadt in Germany, have jumped into the RFID arena, even though it's more challenging to deploy the technology in an open-loop supply chain.

An RFID pilot in an apparel store in Tokyo showed the technology can provide a more granular view of product movement than traditional point-of-sale systems, and can shed light on the true level of consumer interest in specific items.

RFID projects in apparel and footwear remain strong, because the technology is uniquely suited to address the industry's pain points. In fact, the jury—consisting of retailers that have deployed the technology, analysts, researchers and trade groups—has delivered a unanimous decision when it comes to item-level tagging, summed up by Michael Liard, RFID practice director at ABI Research: "RFID is perfect for fashion, apparel and retail. It says not just what it is, that it's a Liz Claiborne blouse, but what size, color and SKU, and it provides each item with a unique serial number."

Since specialty retailers control their own supply chains, they can begin enjoying the benefits of RFID relatively quickly. Department stores and their branded suppliers, by contrast, must as a group coordinate and agree on certain standards to reap the benefits of RFID, says Gay Whitney, standards director for GS1 EPCglobal.

Item-Level Intelligence
Keeping store shelves and racks stocked with the latest fashion apparel is one benefit of item-level RFID tagging. "As you see the retail industry struggling with the economy and see the major layoffs, it's probably more critical than ever to make sure that when a consumer walks into your store, you have that item out and not in the back room," says Mary Howell, VP of industry relations for the American Apparel & Footwear Association (AAFA). In footwear, RFID can boost sales by improving customer service.

At American Apparel, a Los Angeles-based retail chain known for wardrobe basics and racy advertisements, it's store policy for shelves and racks to be properly stocked: All styles must be available in all colors and in at least one of each size. To that end, employees spend 60 to 80 hours per week manually counting T-shirts, jeans and other items. On any given day, they need to restock between 60 and 300 items that are missing from the sales floor.
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