RFID Adoption by Apparel Retailers Gains Momentum

By Mark Roberti

American Apparel, in the United States, as well as Kaufauf, NP Collection and other European companies, are proving that the technology's benefits are just too big to be ignored.


I’ve been surprised, over the past two years, that apparel retailers were not moving more quickly to adopt radio frequency identification. But it seems this sector is now embracing RFID, and some leading early adopters are sharing the benefits they’re achieving with the technology.

I’m not sure why RFID adoption took longer than I expected, because the technology is ideally suited to apparel retail for a couple of reasons. First, clothing is very RF-friendly—there are no issues with water and metal to work around. You can very easily achieve near-perfect read accuracy. Second, apparel retailers face bigger challenges than other retail companies when it comes to managing inventory. That’s because they have many different products, each of which comes in a variety of styles, colors and sizes.

It’s difficult, for instance, for employees to tell the difference between a small- and medium-size shirt, so a shelf could have 12 smalls and no mediums, and there would be no way to know unless someone physically checked. It’s easier for employees at a mass-merchandise store to replenish missing items, because they just have to look at a shelf to see there are 12 eight-ounce bottles but no 12-ounce bottles.

RFID can help apparel retailers better manage their complex inventory. For those that sell their own brands and have goods made in Asia under their own label, they can have tags applied at the point of manufacture. Companies such as Avery Dennison offer services that now include printing and encoding hangtags with an embedded RFID transponder. When the goods are shipped, the quantities, styles and colors are verified by reading the tags, so the retailer knows it will receive what was ordered. This solves the problem of mis-shipments from Asia, which can lead to a loss of sales if an excess of one item were shipped, and write-offs if too many of another were sent.

RFID also dramatically reduces the cost of receiving goods into a warehouse and checking each item that arrives. When goods are picked from the warehouse, the technology can be used to automatically read each tag and verify that what is being shipped to the store is exactly what the store requested. Again, order accuracy improves while labor costs decline, because items can be read automatically and matched against orders.

Finland’s NP Collection deployed RFID at its boutique stores, and found that the technology reduced the time spent receiving goods at the store by 75 percent (see Finnish Fashion Designer Begins Item-Level Tagging). Since the German department store Karstadt deployed RFID, it determined that the time required to receive goods into inventory at the store declined by 85 percent (see RFID Readies for RFID). In both cases, inventory accuracy improved.

The University of Arkansas has studied the inventory accuracy of apparel stores in the United States, and has found that it is correct only 65 percent of the time. That means retailers are losing sales because customers cannot find goods on the shelf. Often, an item is in the back of the store, and not yet replenished.

With RFID, inventory accuracy on the sales floor can be increased to 98 percent by using handheld interrogators or fixed shelf readers. At Karstadt, the time required to take inventory on the floor fell, with RFID, from 1 hour and 20 minutes to 20 minutes. This enables employees to replenish missing items, and move those that are in the wrong location. From what I hear, this improvement in inventory accuracy can lead to a 5 percent increase in sales, or more.

American Apparel has been a leader in the United States in using RFID to improve on-shelf availability. The company recently expanded its RFID rollout (see American Apparel Makes a Bold Fashion Statement With RFID and American Apparel Expands RFID to Additional Stores). Zander Livingston, who leads American Apparel’s RFID efforts, will discuss the deployment at RFID Journal LIVE! 2009, being held on Apr. 27-29, in Orlando, Fla.

Markdowns are another headache for retailers. Locating items that are not selling, and then lowering their price, is time- and labor-intensive. It previously took Karstadt employees four days over a two-week period during the change of seasons to markdown goods that it wanted to sell, in order to make way for the new season’s items. With RFID, workers were able to locate the items and re-price them in only two hours.

A new interactive RFID price tag developed by VRF Holdings, which employs electronic paper, could make price changes automatically. Retailers could even increase a price when goods are selling more quickly than expected.

RFID is also being combined with electronic article surveillance; when items are stolen, retailers will know what was stolen so that they can replenish them. And some retailers are experimenting with kiosks that enable customers to read an RFID tag, get information about the item and determine which colors, styles and sizes are in stock. These kiosks can even recommend shoes and accessories to go with a particular dress or pair of pants.

Charles Vögele Group, a fashion chain in Switzerland, is one of the first apparel retailers to utilize RFID from the point of manufacture in Asia to the point of sale. Thomas Beckmann, the retailer’s head of supply chain and logistics, will explain how the system was deployed, and why, as well as the benefits being achieved, at RFID Journal LIVE! The company, along with American Apparel and the State of Hawaii Department of Agriculture, is an RFID Journal Award finalist for best RFID implementation.

These are exciting deployments that reveal just how significant the benefits are for apparel retailers. Tomorrow’s Mother, a maternity apparel company, was picked as an RFID Journal Award finalist for the most innovative use of RFID, for a system enabling it to monitor inventory on standalone displays without requiring electrical power or an Ethernet connection (see Maternity Apparel Maker Gives Birth to Smart Displays in Stores). Other major rollouts are also under way, but have not yet been made public.

Many retailers are still adjusting to the new economic conditions, and might be too stunned to launch a major new technology deployment. But as apparel retailers accept the new reality—that sales will not return to 2007 levels for a couple of years—they will look to technologies such as RFID to reduce labor costs and improve sales. I’m willing to bet on it.

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 or click here.