Fashion retail RFID pays for itself in 24 months.
RFID in retail is nothing new. But in fashion retailing, where
stock-outs can shred profit margins, Radio Frequency Identification
is proving to be an advantage of incredible value, and for more
than just keeping the right inventory on shelves. In the U.S.
Bloomingdales is achieving impressive inventory accuracy rates of
95%, but in Europe high-end fashion retailer Gerry Weber is going
one better with 99% values, thanks to two things: complete RFID
integration throughout the supply chain, and store-wide inventories
performed twice weekly. The efficiency gains are so great, in fact,
that Gerry Weber‟s RFID implementation will pay for itself in just
24 months, then start helping the retail chain to increase
The German based company recently became the first fashion
retailer to realize complete RFID supply chain integration. This is
a move that Christian von Grone, Gerry Weber‟s CIO, says is saving
the company money on several fronts. "Each garment care label now
carries an RFID tag and electronic product code (EPC), at a cost of
just €0.08 more than conventional care labels," he says. "For that
small price we‟re experiencing zero shrinkage in transport, less
than 1 percent stock-out situations and we‟ve reduced theft while
saving money on security." The RFID component of care labels is
also designed to degrade after washing, quickly becoming unreadable
and alleviating any consumer privacy
RFID NOW FEASIBLE FOR ALL RETAILERS
Art Smith, President and CEO of GS1 Canada, an international
supply chain standards organization, and advisor to the
inter-industry Item-Level RFID Initiative in the United States,
thinks that the retail sector stands on the brink of a key
technology shift. He sees the use of the global EPC standard for
RFID as key to making this process more effective: "As the retail
sector moves towards real-time inventory views, standardized RFID
technology will enable efficiencies for manufacturers, suppliers,
retailers and buyers alike."
Jorma Lalla, CEO of Finnish RFID handset manufacturer Nordic ID,
the company that provides Gerry Weber with its handsets, believes
that he is witnessing widespread melting of opposition to RIFD use.
"When we began manufacturing RFID handsets fifteen-odd years ago,
our clients were mostly major retailers who wanted RFID tags and
readers just so that they could perform stockroom and warehouse
inventories more quickly. Other applications hadn‟t yet developed
and most other audiences wouldn‟t even give us the time of day. Now
that RFID is proven, we‟re getting calls from manufacturers,
logistics companies, service providers...you name it."
RFID HELPS RETAILER INCREASE PRECISION AND
REDUCE COSTS IN 4 AREAS
Von Grone has identified four areas where RFID is now helping to
reduce costs, showing just how efficacious the technology has
1. Lower shrinkage, higher transparency
All items wholesaled to other retailers-accounting for 80% of
Gerry Weber‟s business-are RFID-scanned after being boxed. This
100% accurate reconciliation of what‟s in the box with what‟s on
the manifest has reduced discrepancies in customer orders to zero,
as it provides ironclad proof of contents. The process of
redistributing merchandise between stores is also greatly
accelerated. On the other end of the supply chain, total capture of
delivery information has resulted in very low shrinkage, thanks to
high inventory transparency and reconciliation.
2. Faster goods in
When goods come into the store, most retailers do manual checks
and scan individual barcodes into the store‟s inventory management
system. This can take hours or days. With RFID, you can scan each
box with a handset, unpack it and get the inventory out on the
floor. Returns processes will also be greatly accelerated.
3. More sales
Better data quality-which itself delivers lower data-associated
costs-results in having the right inventory on the floor. In
addition to daily sales-based replenishment, Gerry Weber staff
performs storewide inventory checks twice weekly, replenishing a
missing size or colour and ordering more for delivery as needed.
This level of detail would be impossible without RFID.
4. Lower security costs
With the successful completion of a pilot program, Gerry Weber
proved that replacing their conventional radio frequency-based
electronic article surveillance (EAS) system with RFID would cost
less and improve aesthetics.
An EAS system consists of gates at store entrances and "hard tags‟
that are attached to items, then removed at the cash register. Hard
tags only last eight to twelve times, and one complete cycle costs
Euro 0.35 or about USD $0.48. Attaching, disengaging and recycling
hard tags is also a process that Gerry Weber will be happy to do
away with. In addition, the retailer looks forward to replacing
ugly gates with ordinary RFID antennas hidden in ceilings or walls.
Eliminating EAS systems alone has paid for Gerry Weber‟s entire
RFID integration with retail ERP, wholesale logistics and till
GREATER FOCUS ON CUSTOMERS
Cost savings are both a welcome and an expected result of
integrated RFID implementation, but they were never the main goals
for Gerry Weber. Von Grone‟s chief goals in putting RFID into play
throughout the company‟s operations were speed and precision. To
his way of thinking, increased speed and precision-otherwise known
as efficiency-will always deliver cost savings. But it also does
something equally as valuable: it puts employee focus back on the
customer. "When you reduce the time it takes to do all of these
inventory-related things in the store, there is more time for
tending to the customer‟s needs," he says.
This year, von Grone intends to further the customer experience
by launching a pilot that will introduce greater shopping
precision. The "intelligent fitting room‟ will give shoppers the
ability to see whether another size or colour of the garment they
are trying on is available, and have it brought to their change
room. Fitting room displays might also suggest complimentary
clothing or accessories.
"The next step beyond that," says von Grone, "is to mine fitting
room data for design purposes. For example, based on articles of
clothing that are frequently tried on but not bought, we will know
that the article needs redesign to become more saleable."
Von Grone also wants to extend RFID further up the supply
chain-right to delivery of raw materials-to points of manufacture,
typically in Asia. "By following materials through production,
we‟re likely to find more efficiencies, reducing manufacturers‟
costs and, more importantly, our time to market."