Clothing Business May Be Right Fit for RFID

Discussion
Mar 14, 2006
George Anderson

By George Anderson


The only thing standing in the way of widespread adoption of radio frequency identification (RFID) technology in the clothing industry is the cost of tags, according to Wilfried Kanzok of Metro Group’s Kaufhof Warenhaus business.


Mr. Kanzok said that his company’s test of RFID at two of its Gerry Webber women’s clothing stores over the past two years has found that the technology improves the speed and accuracy on the receiving end while making it significantly better at maintaining and tracking stock.


On the supply chain side, Mr. Kanzok said the company is now able to log in goods without having to open boxes to confirm contents. The result is products are moving through distribution centers and to stores at a much more rapid rate. The company has achieved tag rates of up to 160 per second and hopes to eventually improve to 500 tags.


One of the biggest issues facing the company on the sales floor has been having the right merchandise on shelf. A study in Germany, said Mr. Kanzok, found that 15 to 20 percent of clothing sales are lost because the right size is not available to consumers when they are ready to buy.


According to a report on the RFID Journal web site, cost remains the major stumbling block for Kaufhof Warenhaus and others in the clothing retail business.


“We are selling 70 million textile items per year,” said Mr. Kanzok. “At 20 cents per tag, it will cost us an additional $14 million to tag every item, so we need to find $14 million in savings or additional sales to justify the cost.”


Mr. Kanzok believes that the cost per tag will need to fall to 10 cents before retailers jump on the RFID bandwagon.


Moderator’s Comment: What sector(s) of retailing do you expect will make use of RFID on a widespread basis first? Why? Are there other impediments to
widespread adoption of RFID in addition to tag cost?

George Anderson – Moderator

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10 Comments on "Clothing Business May Be Right Fit for RFID"


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Bernice Hurst
Guest
14 years 11 months ago

You’ve made me think carefully here and regret the time difference. It is late night in jolly old England and I can’t get to my pharmacy until after I’ve had a good night’s sleep. But I will definitely head off tomorrow morning, in the name of research, to check out a notice that I’ve seen and ignored over the past few months about their use of RFID. Cain’t think why a little village shop, part of a mini-chain, would be using it so watch this space…I’ll come back with the answer tomorrow.

Herb Sorensen
Guest
14 years 11 months ago
In some ways there is a Catch-22 impeding RFID item level tagging. Early applications, in order to absorb the cost of the equipment and tags, need to be higher dollar, higher margin items. Adoption with these will help demonstrate the profit value of the technology, so that prices can drop, and make it practical for lower margin, lower dollar items. The problem is that the higher dollar, higher margin, (with lower turns) items are least likely to obviously require RFID tagging – they may already be making a reasonable contribution to profits. Here we are up against “the good is the enemy of the great.” Items making “adequate” contributions to profits are less likely to be aggressively managed to make them even better. Rather, there is a tendency to focus on the problem categories. Maybe they really do need help, but probably the real potential profits is with what is already making the greatest contribution. This thinking can lead to early adoption of RFID where it can make the earliest returns to profits.
Stuart Silverman
Guest
Stuart Silverman
14 years 11 months ago

There are additional opportunities for RFID in apparel retailing beyond the traditional supply chain / inventory management issues.

The easiest to see is the loss prevention aspect. At some point, RFID tags are going to be more cost effective and more ingrained in the operational infrastructure than the current security tags. However, much more interesting for fashion conscious consumers will be the cross selling opportunities. Strategically placed sensors in a store could identify the clothing selected when a shopper passes and then suggest other items that would go well with the clothing selected.

Would that be enough to justify the RFID investment on its own? Don’t know. But when you start adding up the opportunities from an integrated RFID infrastructure for inventory management, checkout, security and sensor based merchandising, the ROI becomes easier.

Ken Kubat
Guest
Ken Kubat
14 years 11 months ago

Adoption/utilization of RFID at the item/sku level will follow a couple of logical paths: 1) Classes of products that have high value/high risk (or security) such as pharmaceutical products will find a business case for ‘track and trace’ throughout supply chain due (e.g. the “e-pedigree” initiatives), and 2) products that have an exceptionally high volume of sales in an exceptionally short period of time will benefit from item-level tagging to insure in-stock condition during the critical sell cycle; examples most frequently cited are video games and DVD’s, where 90% of sales may occur within first couple days of release.

Don Delzell
Guest
Don Delzell
14 years 11 months ago

No offense, but RFID does not improve in stock performance at the size level. RFID is only an information gathering technology. It’s what you do with the information that improves in-stock rates. Fine tuned and managed replenishment systems, size curves which are driven by actual in-store selling history fueled by accurate customer segmentation…these improve stock rates at the size level.

Having said all that, RFID is no doubt an excellent way to improve the throughput and tracking of merchandise. Human error is eliminated or reduced drastically. I’m not all that clear on why apparel is a better fit than other categories, but maybe I don’t understand the technology well enough.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 11 months ago

My impression is that most everything worth having can be delivered via RFD (Rural Free Delivery), including seed catalogs, secret decoder rings, bull semen, and mail-order brides. For many years, now, folks in rural areas have not been restricted regarding the products they can access. Gone are the days of “haves” and “have-nots,” thanks to efficient delivery services to the hinterlands of our great land. To me, this is as widespread and impediment-free as a caveat emptor system can get.

Oh, you mean RF – I – D. Then, never mind.

Chris Kapsambelis
Guest
Chris Kapsambelis
14 years 11 months ago

I quote from The article:

“Mr. Kanzok said the company is now able to log in goods without having to open boxes to confirm contents.”

Question: Does anyone really open boxes to receive goods? I would think reading the label on the box and/or the packing list would be sufficient.

W. Frank Dell II
Guest
14 years 11 months ago
RFID has a future, just not on the time schedule forecast in the hype. Many of the claims are just as easy to achieve with good methods and procedures. The price of the tag is already coming down, just not as fast or as low as the hype wanted. RFID will first pay for itself by reducing shrink. To do this means it will first be most effective on higher value merchandise. Examples here are electronics and prescription drugs. Supply chain tracking from the end of the production line into the customer distribution center makes rational sense for these higher value items. To a lesser extent, from the retailer distribution center into the back of the store can work as well. Most retailers do store receiving on higher value merchandise. Other than store backroom theft it is unlikely RFID will provide much value. As the tag cost reduces, lower cost merchandise can be added to the process. One way to think of RFID is an advancement or replacement for EAN.
Matt Werhner
Guest
Matt Werhner
14 years 11 months ago

The cost of tags is certainly not a unique problem to the apparel industry. RFID will be the right fit for many industries once cost is justified either from an additional sales or savings perspective. Manufacturers of high ticket items will lead the way for RFID use because they can justify the current cost of tags.

From what I have been told, apparel is a comfortable fit for RFID because clothing is radio frequency friendly while the opposite is true for metal and liquid. With that being said, those obstacles are being successfully addressed. Each RFID implementation effort is a completely customized solution unique to each environment.

Mark Lilien
Guest
14 years 11 months ago

If a retailer truly believed that 20% of clothing sales are lost due to size stockouts, preventable with RFID tags, the 20 cent RFID tag cost would be no obstacle. The emphasis on “savings” return on investment as opposed to “sales” return on investment is unlikely to spur RFID implementation. And the “sales” return on investment business case is not easy to make, when compared to other readily available technologies.

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