The Benefits of RFID in Apparel

By Mark Roberti

There are many advantages for third-party manufacturers, brand owners and retailers. Here are the big ones.

I received an email last week from a reader who asked, "What are all benefits/use cases of RFID in apparel?"

I was unsure whether she was asking about the benefits to third-party apparel manufacturers, brand owners or retailers, so I put together a list of some of the big benefits for each. I thought I would share them here, so that if anyone is interested, they can see them all in one place. It's worth noting that many of the benefits for the first two groups apply to manufacturers and brand owners outside of apparel as well.

Benefits for Apparel Manufacturers

Tracking raw materials: Companies can track raw materials. Esquel, for example, monitors different qualities of cotton used in the shirts it makes for different brands (see Internal Benefits for Apparel Makers).

Tracking finished goods: Chinese apparel manufacturer Affirm Heart Far East implemented an RFID solution to identify where materials and finished goods are located, and also when they are delayed, so that it can analyze the cause of such delays (such as identifying particular workstations that were slow) and rectify the issue (see Chinese Apparel Factory Improves Efficiency Via 80,000 Tag Reads Daily).

Improving shipping accuracy: RFID technology enables apparel manufacturers to audit every shipment to a customer. German shirt maker Seidensticker employs an RFID system which identifies boxes that are packed incorrectly so they can be repacked before being sent to retailers, thereby saving the company transport and packaging costs (see Internal Benefits for Apparel Makers).

Boosting customer satisfaction: By enabling companies to ship the right items on time, every time, apparel makers and other manufacturers can improve their relationship with their customers. Sharing data with customers gives a customer confidence that the right goods will arrive on time, which enhances satisfaction and loyalty.

Benefits for Brand Owners

Reducing counterfeiting: Garment manufacturer G&P Net deployed RFID at its four distribution centers in Italy to control distribution and combat gray-market sales, which tarnish product image and cost the manufacturer millions of euros in reduced product value and legal fees (see Internal Benefits for Apparel Makers).

Increasing customer engagement: Adidas put an NFC transponder, a form of passive HF RFID technology, in its Telstar 18 soccer ball, the official 2018 FIFA World Cup ball, as a way for fans to engage with Adidas, view the locations of other ball users and access more information about their favorite players and teams (see RFID Technology Scores Ticketing, Brand Engagement at World Cup). Swiss outdoor brand Mammut has done something similar (see Mammut Uses NFC to Engage Customers), as have others.

Reducing receiving time and errors: Brands that receive goods into warehouses before shipping them to customers can automate the receiving process and gain a more accurate count of what has been received. They can also match what's received against an advance shipping notice, enabling them to respond quickly to mis-shipments and avoid not having a product for their retail customers.

Improving shipping accuracy: Just as with manufacturers, brand owners can audit every outbound shipment, which can improve customer satisfaction and reduce the need for chargebacks. The decrease in chargebacks achieved by Herman Kay paid for its RFID system relatively quickly (see Herman Kay Gains Packing Accuracy Via RFID).

Benefits for Retailers

Improving inventory accuracy: This is probably the biggest benefit for retailers. Having items on the shelf when customers want to buy them increases sales and customer satisfaction. This is the case at Macy's, where an independent study found that the percentage of shoes not displayed on the sales floor fell from 30 percent to only 4 to 6 percent with RFID (see Platt Retail Institute Finds RFID-Based Inventory Accuracy, Sales and Satisfaction Gains at Macy's). And U.K. fashion and homeware retailer Matalan has boosted its inventory accuracy by 30 percent, thanks to an RFID-based solution deployed across all of its 220 stores (see U.K. Home Goods and Apparel Retailer Boosts Accuracy With RFID). There are many other examples on our website.

Higher sales and margins: Increased inventory accuracy means more sales at full price and fewer markdowns. A study conducted by the University of Leicester involving 10 European retailers that deployed RFID solutions found that sales rose between 1.5 and 5.5 percent (see Sales Are Up and Overstocking Is Down, Study Reports, Due to RFID Use in Stores).

Reduction in safety stocks: Being able to maintain accurate inventory counts means retailers don't need to carry as much safety stock. In one study, 10 retailers reduced their stock levels by between 2 and 13 percent (see Sales Are Up and Overstocking Is Down, Study Reports, Due to RFID Use in Stores). This may free up more room on the floor and reduce stock-carrying costs.

Reduction in receiving time and errors: Karstadt, a German department store, found that the amount of time associates spent receiving goods into the store declined by 85 percent with RFID (see Karstadt Readies for RFID).

Improving "buy online, pickup in store" (BOPIS) execution: Research suggests that up to 30 percent of items ordered online cannot be found in the store. This leads to customer dissatisfaction and lost sales. RFID improves stock accuracy (see above) and allows store associates to quickly locate items with a handheld RFID reader.

Improving ship-from-store execution: Many retailers are looking to compete with purely online competitors by leveraging their stores as local warehouses. RFID enables store associates to quickly find items and verify that an order ready to ship is 100 percent accurate.

Inventory visibility for omnichannel retailing: Tagging all stock with RFID enables a retailer to know where all items are in retail, and to merge online and offline channels. So, for example, a store can make items in the store visible to customers online because the retailer using RFID has confidence the item is actually in the store. Similarly, a warehouse might ship to store in time for an item to be picked up in the store, rather than shipping it directly to the customer's home.

Reduction in shrinkage: RFID doesn't necessarily reduce shoplifting (though it will tell you what was stolen so you can replenish that product), but retailers such as American Apparel have found that it does reduce employee theft and administrative errors (see RFID Delivers Unexpected Benefits at American Apparel). The technology gives security personnel data about when and where unpaid items are leaving the store, so they can deploy strategies to counter shoplifting.

Improving the customer experience: Rebecca Minkoff and others have deployed smart mirrors in dressing rooms that use RFID to determine what items (including their size, color and style) the customer is trying on (see Rebecca Minkoff Store Uses RFID to Provide an Immersive Experience). The mirror then provides information about other available sizes, as well as other items that might match the garments being tried on. Companies are currently experimenting with a wide array of RFID-enabled in-store experiences.

Enabling big-data analytics and artificial intelligence: There is a lot of talk about big data and artificial intelligence (AI) these days, but the reality is that most retailers lack good information. When your inventory accuracy is only at 65 percent, it's hard to apply analytical tools or AI to the data generated. RFID provides accurate, near-real-time data, enabling retailers to gain new insights into customer behaviors in their stores.

These are the major benefits. There are others, and individual firms might find additional benefits based on their own business models, operations and existing problems. I wonder how many other technologies can claim to do as much.

Mark Roberti is the founder and editor of RFID Journal.