RFID adoption continues to gain pace in apparel retail. In the last year Thomas Pink, Gieves & Hawkes and Lululemon have released details of their RFID pilots, while River Island and Decathlon continued to expand their RFID roll outs to hundreds of stores. As we edge closer to the tipping point, RFID thought leader, Mark Roberti, has predicted 2018 will be the year RFID takes off with 57% of US apparel retailers already implementing the technology.
In the UK, most apparel retailers acknowledge it’s a case of ‘when’ rather than ‘if’ they’ll adopt the technology – but while many are thinking about RFID, a much smaller number are taking the plunge to implement. So what’s stopping them? RFID is a transformational technology with many applications and benefits. But, when a technology cuts across so many areas it can be difficult to measure its value.
Most apparel retailers adopt RFID to improve their inventory management. With rising operating costs, new omnichannel processes and excessive discounts - all driving retailers to improve visibility and control of their working capital - there’s a clear business need for the technology.
The ease and speed at which you can count stock using RFID means retailers can conduct stock takes on a weekly, daily or perpetual basis to improve stock accuracy. And stock accuracy in apparel is an issue. On average, stock records are only 63% accurate - meaning for every three to four items you think are on the shop floor, one is actually missing.
Macy’s, John Lewis and Walmart are some of the highest profile retailers to now have stock accuracy of 95-99% through the use of RFID. This is an impressive statistic but accuracy alone doesn’t drive value, instead it’s how they use the accurate data to inform business decisions and improve inventory range, allocation and quantities.
To make the business benefits of RFID truly tangible and prove its effectiveness, there are several KPIs that retailers can evaluate:
- On-shelf availability - Conducting regular stocktakes to support accurate replenishment orders can improve stock availability and reduce out of stocks on core items. Results published through GS1 US from RFID enabled retailers showed an improvement in on-shelf availability from 70% to 95%.
- Increased sales - Through better stock availability and more accurate replenishment, retailers tend to see a sales increase of 2-20% by adopting RFID. However, attributing sales increases to RFID can be controversial. With promotions and range also influencing customer behaviour it can be difficult to prove the sales increase originated from improved stock availability as opposed to marketing or buying activity. To avoid any confusion over the source of the additional sales compare the results of your test stores to control stores. And to really prove the results, don’t be afraid to remove RFID completely to assess any commercial movement. Early adopters of RFID, River Island, have reported up to a 10% sales increase in pilot stores. When RFID was removed, sales in pilot stores dropped by the equivalent percentage.
- Safety stock levels - When stock records are inaccurate, retailers tend to over-replenish to account for any shortages or errors in their data. However, when merchandisers can rely on up-to-date and accurate stock records, replenishment is far more precise allowing retailers to maintain appropriate inventory levels without creating excessive stock holdings in store. Using RFID, American Apparel reduced their in-store stock holding by over 20% – reclaiming valuable store space.
- Increase in margins - By reducing excess in store stock levels leading to fewer markdowns, retailers can also experience an improvement in margin. Kurt Salmon’s 2016 RFID study found on average retail profit margins were boosted from 8.9% to 14.3% after implementation. Efficiencies created through RFID processes can also boost operating profits. Less stock on hand will minimise wastage in terms of time spent looking for product in store, time to process stock and fewer errors in picking and shipping orders. Kurt Salmon’s research found a 12% ROI from the reduced time and labour costs associated with implementing RFID.
- Reduction in shrinkage - Retailers like Gieves & Hawkes are combining the stock counting and security functions of RFID to help combat shrinkage. Using discreet electronic article surveillance (EAS) technology, their RFID system sounds an alert if unpurchased merchandise is taken from the front door and stores data regarding which item has been removed. For those retailers not incorporating the EAS elements of the technology into their RFID pilots, conducting regular stocktakes with RFID can help identify high risk items and the exact areas where theft occurred. Through RFID, American Apparel uncovered problem areas of internal and customer theft enabling them to reduce shrinkage by 55 – 75%.
To identify the potential value of RFID for your business, GS1 UK has built an RFID ROI calculator. Developed in conjunction with RFID Journal, the calculator gives a basic understanding of the indicative costs and potential benefits you are likely to incur when implementing RFID technology. Click here to access it for free.