Customers leaving empty-handed is a leading cause of decreased profit margin in retail, and entirely preventable. Some retailers only count inventory once per month, and others count it (gasp!) just once per year, because it takes so much time. Cataloguing each item on the shop floor with barcode scanners can take dozens of man-hours, and different sizes and colours of garment must be noted manually.

Move from barcode technology to RFID and sizes and colours form part of the information scanned, virtually eliminating human error - plus time is reduced to mere minutes. When American Apparel staff performs a store count with handheld RFID computers, it takes less than an hour to inventory 20,000 items.

ITEM-LEVEL INFORMATION TAKES BUSINESS ANALYTICS TO A NEW LEVEL

IMPROVING STOCK ACCURACY AND OPERATIONAL TRANSPARENCY IS JUST THE FIRST STEP

The reality of American Apparel's inventory counts is that 25 minutes are spent on inventory and 35 on filling the floor with items identified as missing. It's because store inventory replenishment is accurately managed with RFID that American Apparel is able to replenish shelves on a daily basis - the retailer is almost never out of stock at the store level. When a box of clothes is delivered to the storeroom, a quick scan will reveal the size, colour and item model within, synching the order with the store's inventory system. All of this helps to drive out-of-stocks down from an industry average of 8% to below 1%. For this and other reasons, the industry is beginning to see a wholesale move towards RFID.

Here's another example of RFID coming to the rescue on the sales floor: over the course of the day items get left in the change room and misracked. When you have six each of five styles of black sweater in ten sizes, customers arriving later in the day can't find what they are looking for. That's because store staff are more apt to order more from the storeroom or the distribution centre rather than spend time combing through sweaters by hand. With RFID, a quick scan will show you what you actually have and facilitate reorganizing the racks.

Many store processes can be optimized with RFID, and German fashion retail heavyweight S. Oliver recently wrapped up a three-store RFID pilot to quantify the advantages. The retailer's secondary objective was to identify inventory differences on the shop floor and in stores owing to loss and theft. With the assistance of Nordic ID RFID mobile computers, the retailer found the root causes not only of shrinkage but also out-of-stocks, and realized an acceleration in stock taking of 10 to 15 times. Project manager Patrick Szostak is enthusiastic:

"Being capable of correcting stock differences as well as optimizing replenishment from central logistics made it possible for us to generate tangible growth in sales that is intriguing enough to think about a rollout of RFID technology."

So many fashion retailers are thinking along these lines that Jessica Säilä, Business Development Director at Nordic ID, predicts a coming widespread adoption. "Within the next five to ten years, the efficiencies of RFID will permeate the entire fashion industry," she says. "We're seeing incredible movement in that sector now, and some fashion houses are really ramping up quickly."

S. Oliver's pilot and dozens of other retail implementations serve to illustrate that stock accuracy and operational transparency - the most widely discussed topics in fashion RFID - are greatly improved with an RFID implementation. Accuracy and speed are almost always the factors upon which ROI calculations are predicated, so it's good news that the numbers are even better now that the technology is moving beyond the company boundaries of individual companies.

GERMAN FASHION: MOVING BEYOND THE COMPANY PERIMETER

Several German retailers have taken steps to create efficiencies beyond the company perimeter. One such is Modehaus Jost GmbH & Co, the first mid-sized fashion retailer to get into the RFID game, now sharing RFID-based information with suppliers. In a recent pilot project, Jost exchanged inventory data with clothing manufacturer Seidensticker.

"Seidensticker receives inventory reports with EPCs from us, thus gaining an accurate view of which goods are available on the sales floor," explains Patric Knoll, Commercial Director at Modehaus Jost. "The feedback to the suppliers enables correct and efficient supply replenishment." Results include increased process transparency and a high level of merchandise availability. Of course when customers find what they are looking for - in the desired size and colour - sales figures and customer satisfaction experience a lift as well.

Another German pioneer in the field is Gerry Weber, manufacturer and retailer of fine casual clothes for women. The company has integrated RFID processes from end to end, going so far as to send special clothing labels with RFID tags integrated to their manufacturers worldwide. This prevents manufacturers from creating and selling extra copies of Gerry Weber clothing, and of course allows the tracking process to begin right at the source. RFID tracking moves from manufacturer facilities worldwide to distribution centres and company stores. Gerry Weber even has resellers implementing RFID in their own shops and sharing data.

RFID DATA REVOLUTIONIZES OPERATIONS AND CUSTOMER SERVICE

Gerry Weber and other German fashion retailers like Jakob Jost, Seidensticker, K L Ruppert and S. Oliver - as well as American and U.K. retailers like American Apparel, Laura Ashley - have achieved better inventory accuracy and streamlined their logistics processes thanks to RFID. Logistics efficiencies and accuracy, after all, remain the things upon which ROI calculations are predicated. But according to Säilä, that's just the beginning.

"The key to the future of RFID in fashion retail is data," states Säilä unequivocally. "The most exciting thing is when accuracy has been achieved - then you begin to see analytics put to use in ingenious ways. Once processes are streamlined and everything is accounted for, you can focus on leveraging the wealth of information made available by RFID."

Barcodes gave fashion retail executives insight into the frequency and time of day that different items were bought, how best to launch and leverage loyalty cards, and similar information. In short, the advent of barcodes gave retailers valuable purchase behaviour information that they had never had before. It was the beginning of something very good, and something that is getting vastly better with RFID.

In a study conducted by Gartner in October 2011, the majority of companies surveyed were planning or had started RFID deployments. For RFID promises to increase the level of information you have on your assets, inventory, processes and customers.
Säilä cites American Apparel and Van Vuuren Mode, a Dutch retailer, as examples of an emerging trend. Both retailers have such a tight handle on the location of all items within their distribution centres and networks of stores that they can fulfil website orders direct from stores.

"RFID is revolutionizing the way retailers handle their merchandise, says Säilä. "There's no longer a need to allocate separate stock for stores, online etc., because you have total visibility of all stock. With RFID it's not about having sufficient stock here, here and there to serve demands. It's about knowing precisely where all the size 8 raspberry (Säilä's favourite colour) cocktail dresses of a certain style are located throughout your store and distribution centre network."

That gives retailers more flexibility when it comes to multichannel shopping. With 40% of Europeans now multichannel buyers, according to Forrester, 2012 will see more retailers attempting to bridge the online/offline gap. Van Vuuren and American Apparel have not only done this for the customer, but internally as well. Both eliminated the distribution centre from their Web sales models and instead use their existing army of sales staff to pick, pack and ship from retail storerooms. Van Vuuren Mode also offers customers the option of picking orders up from the store of their choice, increasing the likelihood of impulse purchases.

THE POWER TO CHANGE CULTURE AND PROFITS

If you look at RFID holistically, it becomes obvious that its overall effect can add up to more than the sum of its individual effects. RFID can be a powerful agent of change - something potentially of even greater business value. To illustrate how RFID changes retail operations, here are some real-life examples: Keeping the sales floor full: Gerry Weber can perform a stock count in 10 minutes for a 200m store, allowing employees to cycle count several times a day.More efficient logistics: In a world of just-in-time inventory, knowing what size, colour and model of garment you need to resupply daily - rather than weekly or monthly - reduces the size of shipments, the amount of stock required in a shop store room and time spent looking for items that aren't there. In addition, improving the efficiency of stocktaking by a factor of 10 or 15 times reduces man-hours required and frees staff to serve customers.  Less shrinkage: Better information also lets you know at what points shrinkage occurs, which helps to eliminate it. American Apparel reported a 55% drop in internal shrinkage.Increased sales: A vast reduction in out-of-stock situations will noticeably lift sales. In the case of one Swiss fashion house, the lift was on the order of 10%. The table on the right side lists some RFID benefits researched and reported by ABI Reserach.

THE NEXT FRONTIER: PRODUCT LIFECYCLE MANAGEMENT

According to the aforementioned Gartner study, the main challenge in Apparel IT lies in product lifecycle management (PLM), the process of managing the entire life of a product from conception through design and manufacture, distribution, marketing, sales and ultimately to disposal or repurposing.

From the sample of over 100 fashion IT executives that the study polled in the Gartner study, as many as 37% listed PLM-related issues as their number one IT topic for 2012, especially surrounding product development. As Säilä notes, where product development is concerned, knowing customer behaviour is key. And thanks to the granularity of data that RFID provides, it's now possible to collect incredibly rich information and put it to practical use.

Installing RFID scanners at the entrance to fitting rooms, for example, can show trends that both clothing designers and marketers can use to boost sales. If statistics show that on Fridays women try shirts designed for weekend clubbing, merchandisers can place them strategically in stores on Fridays. They might also launch a Friday campaign: buy this shirt and get 20% off a pair of jeans that matches the shirt perfectly, for instance. Product developers and designers can also use statistical data from the fitting room correlated with point of purchase data to see what items were tried and purchased versus those that were not bought. This information can help designers to react more quickly to customer preferences by revising upcoming designs.

THE FUTURE OF RFID IN FASHION RETAIL

Taking RFID merchandising a step further, you can imagine a scenario in smart fitting rooms solicit customer feedback. By allowing customers to say why they didn't buy the items they tried on, you're gaining even more precise information: the colour was not ideal, something was wrong with the shape of the garment, the customer didn't like the material, the colour was wrong…all great feedback that can help designers to create garments that customers want to buy. Into the bargain, you're empowering the customer to provide feedback, which makes them feel that you care about what they like. Fitting rooms that double as focus groups may be a thing of the future, but smart fitting rooms of another kind are already being tested. At a Roberto Verino store in Barcelona, a new system allows customers to virtually try garments on before going to the trouble of disrobing. A customer selects garments and places them on a shelf beside a screen. Their RFID tags are read, and the customer can see how the garments look, including when she moves or turns, in an interactive mirror that employs augmented reality technology. By enabling shoppers to mix and match items far more quickly than trying on each garment separately, the store has the potential to increase sales.

Smart mirrors in fitting rooms can also suggest, for example, what items might complement whatever the shopper is trying on, or provide information on other sizes and colours available. In some cases, customers can select another colour or size and have it brought to them instead of putting their clothes back on and returning to the shop floor, then disrobing again. This can save time…or save customers the embarrassment of calling a shop assistant to bring a larger size.

Following items and serving customers in something that the RFID giants such as Gerry Weber also look at next:

"Now that we have stock-related issues under control thanks to RFID," says von Grone, Chief Information Officer and Global Head of IT at Gerry Weber, "we are planning to test smart fitting rooms and similar concepts. Before we do that we want to test the idea with our clientele, as we're not sure if such a feature would appeal to them _ they are not exactly technology oriented. If we feel that such a concept would not fly well, we might equip five to ten stores with RFID readers in the ceilings of fitting rooms. That way we can correlate items tried on with purchase data to see trends in demand and where further product development is needed, such as with items brought to fitting rooms but not bought."

But  while smart rooms make it easier to find the clothes you want, it's near field communications (NFC) that will make selecting and paying for items effortless. RFID-enabled credit cards, launched in the U.S. in 2006, promised contactless payment via RFID. But the rollout was plagued with security concerns and the cards never caught on the way they were meant to. Other card-based solutions have come out, as well as a variety of mobile phone-based NFC/RFID applications, some of which look promising. Advertisers are increasingly making use of RFID to capture new clients, notably Canadian indoor display advertiser Newad Media. The company is attaching a tag containing a passive NFC RFID inlay printed with a QR code to poster frames installed within Vancouver restaurant and bar bathrooms. Patrons with NFC-enabled phones can tap the poster to enter into a prize draw.

So far the jury is still out on what technology will win the battle for in-store payment, but successful promotional solutions are paving the way. We may find a winner sooner than later, however, thanks to initiatives like that of the Royal Canadian Mint. Canada's national provider of legal tender is offering $50,000 in gold to the person that invents the winning technology for its newly announced 'MintChip' - a small chip or card designed to eliminate the need for money in making very small purchases, like an iTunes song or a packet of gum. Think that RFID might factor in to the eventual solution? You can bank on it.

Editing: Carl Michener / IDBBN

RFID Roll-outs stories:

American Apparel

Van Vuuren Mode

Liwa Group - GANT

Gerry Weber