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Information, information, information

The mantra of retail used to be location, location, location, but I believe that a new mantra is due. RFID is often discussed from the process point of view. Today I will discuss the topic from the information point of view.

"Once the decisive factor of production was the land, and then later it has been the capital…Today the decisive factor is the man himself, especially his knowledge that is." Such wise and true words come from the mouth of the late pope John Paul II. The late 20th century as well as the early 21st century has been very information intensive. One could almost argue that we have an overflow of data today with everybody (myself included) being able to create content on WWW. But at least for me the word knowledge means more than information: knowledge suggests that the person possessing it has already processed some information and hence has a deeper understanding on the issue than someone who just has information. And thus, knowledge is what we all seek.

According to a study conducted by Gartner in October 2011, the main challenge in Apparel IT lies in product lifecycle management (PLM) - from the 109 executives within Fashion IT as much as 37% noted PLM related issues as their number 1 IT topic in 2012. From PLM sub-categories the matter at hand for 2012 was Product Development. And it goes without saying: knowing your customer is key to all product development. It should then come as no surprise that the majority of the companies interviewed also plan or have already started RFID deployments. For RFID promises to increase the level of information you have on your assets, inventory, processes and customers.

INFORMATION ACCURACY

According to a study in the US, it is suggested that the majority of fashion retailers believe to have information accuracy of 99% on their stock in different stores. The reality has proven this to be closer to 75%. More recently whilst travelling in Scandinavia and Western Europe, I have met a number of people who have confirmed this to be reality for them, often due to limitations in their IT systems, but sometimes also due to human error.

What's going on in the store?

Let's consider a classic: the cocktail dress. Let us imagine that our store is concentrated into selling evening wear: gowns, full dresses and the already mentioned cocktail dresses. Currently the store stocks five different collections of cocktail dresses and all of the collections include black and rasberry coloured dresses. But for now, let us concentrate on the black (for it being a classic) and rasberry (for it being my personal favorite color). All dresses are sold in 6 different sizes, meaning that there are 30 (6 sizes x 5 styles) different black and 30 different rasberry dresses - altogether 60 SKUs. A client in search of a cocktail dress will come in and select her favorite dresses in her own size (+ perhaps an adjacent one) and take these to a fitting room. Knowing myself and a number of friends I believe it is fairly common to try on at least five different dresses. I'd probably take 10 - for I'd want to be sure at least one fits. And as the client then leaves the fitting room, she doesn't necessarily return all of the 5-10 items to their original place, but leaves them on the wrong racks because she

  1. didn't find the correct place for the lovely black dress
  2. thought it was the same dress as the other black one
  3. was too hot, too busy, too lazy, too … to return the item to the correct place
  4. left everything in the fitting room in the first place.
  5. was so excited of the dress she's chosen

What just happened is that some of the dresses I tried on are in the wrong place, some of them perhaps even in the fitting room. And how is the sales assistant of the store to know that this has happened? Well, practically there is no way. When the assistant later starts counting the items, she will perhaps count wrong, as the black cocktail dress called Layla, I tried on, is now next to the dress called Hannah, although they are not supposed to be on the same rack. They look similar enough that it is only human to think they are the same dress and hence the assistant will now count Layla and Hannah both as belonging to the Hannah category and that we have two of the same size. She will also think she has no Layla dresses in size M in stock (although she really does - my misplaced one) and orders more of them. And I don't have to explain to you what a domino effect this has on the stock accuracy.

Cocktail dresses

Reasons behind stock inaccuracy and how RFID helps to prevent them

The stock inaccuracy may already be born at the DC. If a third party DC is used, perhaps the third party system does not provide the stores an automatic update of a delivery, hence the store will not be able to receive goods correctly ie to register goods into their system as theoretically the goods had not yet left the DC, although the reality is quite different. Let's then assume that all of the items are tagged. The need to synchronize information with the DC IT system (although still beneficial) is no longer as crucial. Provided that the ERP / PoS or Merchandising system knows which tag represents which item (or that we use a standardized method of coding the tags), it will always be possible to perform the goods in.

When we talk about store level inventory accuracy the key factor in all is the goods in procedure. The data exchange between a DC system and that of the store is not the only place where things can go wrong. When the goods in procedure is based on EDI messages and for example reading a barcode from the side of the box, we must rely on the information from the partner who sent us the EDI message. But not all partners are as reliable as others and the information on the packing list, the fax or the EDI message does not correspond with the reality. And of course human error during the packing of the items can also happen. Today, many decide to tackle the issue by using spot checks. Yet, that too is time consuming and at a busy season, the stores do not necessarily follow the HQ instructions on the control as it is so much more important for them to just get all items on the shop floor. RFID will fix the goods in for good. The items will be read either with a fixed reader or with mobile units and the information is forwarded automatically to the store IT system.

The goods in lays the foundation on stock accuracy, yet a lot can still go wrong. One question is the stock location: are the cocktail dresses on the shop floor or in the back room, or perhaps in the fitting room. RFID offers a cost effective way to monitor the different physical areas of a store and helps the staff to locate items while performing cycle counts or searching individual items. Additionally the store personnel may be instructed to monitor certain problem categories with the help of mobile readers. A vertical retailer with over 850 stores reported a 10% sales increase after implementing RFID. One of the main reasons behind this sales uplift was the operation of reading all clothing racks on a daily basis and when items were found on wrong racks, they would be returned to their correct locations. They explain the effect by the fact that consumers simply were able to find the items.

The manual counting of stock presents another possible cause for errors in inventory. I'll remind you of the black cocktail dress again: the store personnel counts the black dresses, yet mistakes an M to an L, very human to make such an error and an often reported problem too. Or perhaps one black dress will be mistaken to another, the assistant counted the items of one SKU, read the barcode, but from the wrong dress. Again an error known to many in the Apparel retail: and perhaps an even more challenging one for those who have accessories and cosmetics or underwear. Just think about counting the tens of different shades of lipstick and making sure you report just the correct color code. And then of course there is the pure counting error. I had my first experience with stock takes in a local grocery store at the age of 12. My sister worked there and arranged for me to learn a bit about retailing by having me participate in their stock take. This was a small family business and they were able to allow a young girl like me in to count the items. I would count and count cans of soup and bags of candy, and finally I'd believe it went right when I got the same amount 5 times. But from this personal experience I can already say, counting does not always go right.

RFID removes the human error effect as it recognizes each item as an individual. All that needs to be done is to allow an RFID reader to register all the RFID tags close by and then register all tags to the database. As long as the RFID information is collected, the IT system can handle the rest. 

TURNING THE INFORMATION INTO KNOWLEDGE

I feel that stock accuracy is the most widely discussed topic within Fashion RFID, followed by the transparency in operations. Accuracy is often the basis for the ROI. But actually, the most exciting thing around RFID follows when accuracy has been achieved. As a strong believer of RFID it is clear one sees endless possibilities for different applications. But before I get to dreaming of future marketing strategies, creating the internet of things and so on, let's stick to reality: I think a part of everybody's ROI calculation already today could (or should even?) be the possessing, gathering and analyzing the information available thanks to RFID.

RFID revolutionizes our ability to follow things. Up until to this point it has been at least difficult and in most cases extremely costly to follow individual items throughout their life. Tagged items can easily be followed from the production all the way to the consumer. A logistics operator can use such information for enhancing their own operations, creating new services or products and just to produce the information the customer wishes to obtain. A retailer will look at the time-to-market, the demand and its predictability, sale and the possible ways in improving logistics. Brand owners and designers may be interested in demand, interest for their product as well as better channels for promotion. All in all, the information offers something to many players on the field. I will now concentrate on the shop floor.

As we now recognize each individual item, we will be able to know where each item is. We will be able to recognize exactly when shrinkage has occurred and even if we cannot prevent all shrinkage, we will know exactly what to replenish. But how does the information turn into knowledge? The answer lies in combining the new information with other relevant information or in other words creating analysis. Already today many retailers take their daily point-of-sale information and reference it to local weather conditions and make the data available for their design department. It is then the job of the design department to analyze the information and make their conclusions for further product development. Imagine that all of a sudden you could add another factor to this scenario: what did people take to the fitting rooms (yet did not buy). Well, the fact is that this is no longer a question of imagination, or buying an expensive Smart Mirror. This is affordable and reality, and being piloted around the world. Your first step might be to apply fixed RFID reader at the entrance of your fitting room and just collect information of what goes in and out of your fitting room. Additionally this will inform the staff if there are items just lying about the fitting room. And why not take it up a notch: Why would you not ask your customers for feedback on your products? Collecting feedback is effortless when all the items are tagged: you just combine an RFID reader and a touch screen display and ask your customers to give you their opinion. As you recognize the hits and the less popular items in your collection you will boost your sale by reacting faster to the demand on the market.

The merchandising department also utilizes point-of-sale data. RFID revolutionize their work:

Already now RFID allows them to follow what interests people at a distinct time of the day, easily send instructions to stores on how to display the goods on the shop floor as well as finally to create a method for training the store staff to be better at their work. Furthermore they will see digital signage become digital merchandising with store displays promoting personalized content to each consumer: the basis for this: the items that the person is carrying. Soon they will assign two-hour-campaigns to individual items and this will be cost effective. They will know just how well certain campaign has reached the clients and finally, they will be able to connect all the campaigns to all the shopping platforms for the consumer: the store, the online store and the mobile.

RFID will shed light on the retailers' own operations. It is possible to see where certain merchandise has been moved, when and by whom. Categories with high level of shrinkage will be recognized faster, internal operations that may cause inefficiencies can be corrected and misbehavior or misuse can be stopped. I recently learned about a retailer whose staff has a 50% discount on all purchases. The staff would go in, buy goods and then hand them over to a friend. The friend would then return the items with price tags on, to a nearby store and collect the refund: 100%. In other words the friend and the staff member just made a 50% profit. Horrible! This too can and will be fixed in the future with the help of RFID.

And what about my rasberry cocktail dress, what happened? Well, if the store would have implemented RFID before I went in, the shopping experience for me and also for the store would have been different. I would have collected one size of each dress that I wanted to try on (so instead of 10 pieces I would have taken
only 5 to the fitting room). This would have released 5 more items to the shop
floor available for other consumers to see and possibly try on. If a dress had
been of the wrong size, I would've ordered the correct size directly in to the
fitting room, saving myself from the embarrassment of having to admit to
someone out loud that I needed size L instead of M and I would have left the store with my rasberry dress and perhaps a clutch to go with it as the merchandisers would have known I wanted it.

1 comment on “Information, information, information”

  1. Gravatar of Sini SyrjäläSini Syrjälä
    Posted 10 February 2012 at 13:16:20

    That is so true! How many items would you buy at once if you had a sales assistant (in form of a person or a technological device) to tell you what you can use with the dress you have just found? I, personally, would buy the clutch at least, perhaps also a necklace and shoes and a jacket and and and... Good luck for my money that all the shops do not have that kind of a service :)

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