Clothing Retailers Hang Hopes on Item-Level RFID

Discussion
Feb 17, 2012

The question of a "tipping point" for the use of item-level radio frequency identification in apparel retailing has been around for years as prominent merchants such as American Apparel, Bloomingdale’s, J.C. Penney and Macy’s have used the technology to better manage stock and reduce shrink.

In a RetailWire poll last September, one-third of respondents said that 51 percent or more of all apparel merchants would be using item-level radio frequency identification technology in the next five years. Half said somewhere between 26 and 50 percent of clothing store operators would be doing the same.

A survey conducted by Accenture for the VICS (Voluntary Interindustry Commerce Solutions Association) Item-Level RFID Initiative bears out the RetailWire findings. According to the report, Item-Level RFID: A Competitive Differentiator, "Most major apparel and footwear retailers will adopt RFID technology in some part of their business within the next three-five years if recent momentum continues."

The latest chain to go all-in on item-level RFID is American Apparel, which is rolling out the technology to all of its stores in the Americas, Asia, Australia and Europe after two years of testing.

According to the Accenture/VICS research, American Apparel has gained 99 percent greater inventory accuracy and improved sales by 14 percent where it has used item-level RFID to date. Stacy Shulman, VP of technology for American Apparel, recently told RFID Journal that internal shrink has dropped up to 75 percent at stores with item-level tags.

Discussion Questions: What do you see as the greatest benefits for clothing and footwear retailers using item-level RFID? What impediments, if any, are slowing adoption of the technology in apparel stores?

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9 Comments on "Clothing Retailers Hang Hopes on Item-Level RFID"


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Dick Seesel
Guest
7 years 2 months ago

Like any new technology (aimed at consumers or businesses), the cost of early adaptation is relatively high. It becomes practical for smaller or specialty retailers only after larger stores (Macy’s, Walmart and the like) have driven down costs through economy of scale.

But the move to RFID is definitely accelerating. The benefits for more accurate inventory management are huge. Being able to monitor SKU details (style, color, size) more precisely should benefit margins, shrinkage and (most importantly) top line sales through improved in-stock rates.

Rick Boretsky
Guest
Rick Boretsky
7 years 2 months ago

The adoption of RFID is highly overdue. There are many benefits to be achieved with RFID, aside from inventory counts/tracking, such as speedy (hands-free) checkout. A few years back, we developed a system for the dressing room, known as the Dressing Room Assistant. Item level RFID is critical to its success and value. Imagine tracking what a consumer takes into the dressing room to try on — what works, what doesn’t, etc. What is the conversion rate of try-ons? We tracked all that and more. With a tablet (or kiosk) in the dressing room, you can display additional information about the products being tried on, recommend other products, and allow the customer to request other colors/sizes right from the dressing room and communicated directly to a salesperson on the floor. Needless to say, such a solution requires an effective store-wide RFID implementation.

It sounds like this might finally be coming!

Steve Montgomery
Guest
7 years 2 months ago

Cost of implementation has been the greatest barrier. As costs move down, more retailers will adopt and as more retailers adopt, costs will continue to come down. Right now RFID is in the “needed to win” category, but as more and more retailers deploy this technology, it will move to the “needed to play” area.

Based on the numbers quoted in the article, I would say increased sales would be the greatest value. I can’t imagine any retailer who wouldn’t be thrilled with a 14% increase in sales in this economy.

Joseph Andraski
Guest
Joseph Andraski
7 years 2 months ago

There are several retailers and brands engaged in the use of item level RFID in apparel replenishment that are sharing the benefits they have experienced. A list of the primary challenges facing these companies, with some applicability to suppliers, clearly illustrates the opportunity for item level RFID in today’s marketplace:
Reducing out-of-stocks
Increasing sales and increasing store and supply chain productivity
Lowering the cost of inventory
Improvement of speed to market
Reducing labor
Generating data to maximize programs
Preserving brand integrity
Consumer satisfaction
Reducing shrink

The case for action on item level RFID has been made and now it’s about the process of adoption and implementation. Education, or the lack thereof, is the primary barrier to implementation. There are some that believe that the industry is still dealing with RFID for cases and pallets, where as it is all about item level RFID.

Verlin Youd
Guest
7 years 2 months ago

Greatest benefit — immediate understanding of actual inventory and location, IF the retailer uses that information to deliver better customer service and experience. Greatest impediment — that darn bar code is just so affordable, ubiquitous, and enabled by a tried and true infrastructure.

RFID at item level will happen, but full rollout will take longer than five years, as retailers struggle to justify the investment and successfully execute the required refresh of hardware, software and communications systems to enable its use. It would be smart to learn from the very similar experience with barcodes in decades past.

Cathy Hotka
Guest
7 years 2 months ago

One key reason for the shift to item-level RFID is that retailers’ out-of-stock numbers are considerably worse than they want to think. Once they get an opportunity to be fully stocked, sales shoot up. Frankly, I think retailers who sell restockable items can’t afford NOT to adopt.

Dan Raftery
Guest
7 years 2 months ago

For the apparel industry, item-level RFID promises to improve inventory sell-through at full retail. In order to realize the full potential, retailers need (in addition to the tags) the following: readers on the floor or at the register; an accurate perpetual inventory by store; near-real time data analysis across stores in a given region; and the ability to physically and financially transfer specific SKUs among stores.

Tim Callan
Guest
Tim Callan
7 years 2 months ago

American Apparel’s experience is a case study in the power of greater visibility inside the store and the benefits retailers can get out of it. Now only can visibility on what’s happening inside stores reduce shrinkage, but it also becomes a powerful tool in understanding how to optimize the in-store shopping experience to generate more sales at the register.

RFID can deepen that information. Imagine what you could do with a detailed view on how your products move around the store. Which items travel to the register or to the dressing room. Which items leave their hangers and then return later. This information, correlated with sales data, becomes a deeper insight into the sales drivers inside the store. And that is how retailers learn the lessons they need to improve the bottom line.

Kai Clarke
Guest
7 years 2 months ago

Data, Data, and Data are the clear benefits of RFID. However, the big question is how the retailers are going to be using this data, and whether it is simply too much information that will not be properly used, in a timely fashion. On top of this, RFID adoption is expensive and still not a proven winner in terms of cost/value comparisons. This issue has plagued its implementation for years. RFID is really a solution looking for a problem, in my opinion.

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