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The perfect fit - Fashion retailers and RFID: how to make the move

Adoption of RFID is spreading widely in the retail sector. As many more retailers are now contemplating where to start, how to proceed and what to expect, we gathered a few tips by experts and early adopters on how to run a successful RFID project.

Author: Carl Michener

Many major fashion retail chains have moved to in-store RFID with excellent results, unequivocally establishing RFID as a 'must' technology for high volume fashion retail. It's a technology that is quickly moving beyond the early adopter phase, with retailers large and small jumping on board throughout Europe and North America.

As the technology matures, RFID is experiencing growing pains including patent challenges. Once we get through those, it will be full speed ahead. The question that most retailers will have to answer is: what's involved in getting into RFID? Is there massive change require, what are the costs and how quickly can an organization go from zero to fully functional? This article illustrates some of the requirements, challenges and benefits that you can expect in making the move.


Fashion and RFID: the perfect fit


RFID is such a good fit for apparel and specialty retail because it shines most brightly where there are thousands of SKUs and high volume sales. At present it's also a key differentiator in an extremely competitive segment of retail.

What makes RFID ideal for fashion retail is that unlike barcodes, RFID tags can store item-specific information. Tag information can be very detailed, including size, colour, price, model number, batch and other data pertaining to the individual item. In addition, information can be added along the product's journey-time in, time out, inspection, modification, etcetera-from point of attachment to destination. All of this information, on hundreds of tags, can be read through cartons and from distances of several metres in a second or two.

"Not needing to rely on line of sight is key to fast access to goods in a warehouse, stockroom and on the shop floor," says Jorma Lalla, CEO of Nordic ID, a Finnish manufacturer of handheld RFID computers. He notes that RFID interrogators can be mounted in ceilings or walls, and a 3,000 square foot store can be completely inventoried by a team of two with handheld computers in less than half an hour. But the big news isn't timesavings: it's increased accuracy. "You can walk along quite quickly with a handset and read every tag that you pass with 100% accuracy," says Lalla. "That makes it easy to know what you have and that it's properly racked."

PRIMARY DRIVERS OF RFID ADOPTION

The consensus among fashion retailers that have implemented RFID is that a 5% lift in sales is a conservative forecast. Other benefits include better inventory management on many levels, a drastic reduction in stock-keeping man-hours and 98%+ inventory confidence-a threshold high enough to make multi-channel fulfilment and similar options a distinct possibility.


CA-Saarbruecken


These benefits formed part of the impetus for recent pilots executed by C&A, one of Europe's leading retailers of affordable fashion apparel. In both the 2012 and 2013 pilots, however, the primary driver was something else: guaranteeing that items in highest demand were always on shelves. "Our brand promise is to make wonderful fashion available to you at a reasonable price," says Joachim Wilkens, Head of Supply Chain Development with C&A Europe. "Sometimes the available part was missing."

THE REAL COSTS OF CHANGE

The benefits of RFID are important, but adopting a new technology is still a big step to take for any retailer, large or small. According to a 2009 RFID Journal report, retailers were spending $30,000 on average on a single store pilot, and that figure didn't account for employee time directed at a non-core project. That cost has come down in the four years since the study, and of course cost per store takes a steep nosedive as you add more locations to the pilot.

But dollar cost is not the big hurdle for many retailers; they know the ROI is there. What C&A was more concerned with-a common fear-was the potential disruption that introducing RFID might cause. "With the first pilot it was a big commitment in time especially at the store level," admits Wilkens, "but parts of the daily routine also became much more efficient. So it was a kind of trade-off." He adds that the initial five-store pilot required a lot of in-store support, whereas the current 20-store pilot does not. This is typical of what other retailers like Gerry Weber have experienced with staged rollouts.

When asked whether significant change was required at C&A, Wilkens acknowledged that it was, at a sales floor level. "But staff were very interested in the new processes to see if there was a benefit for themselves as well as for the company," he adds. He also noted that there were two distinct attitudes that employees adopted when faced with the prospect of RFID: a small group of employees called into question the legitimacy of the numbers that RFID was producing, while the majority quickly embraced an intuitive technology that they believed would help them in their daily work. In both cases, the eventual result was improved job satisfaction. This was due in equal parts to increased inventory confidence, reduced out-of-stock-induced frustration-especially at busy times-and far less time spent performing rote tasks.

FINDING ROI

The numbers and the ramifications of change worked for C&A, but before jumping into any kind of RFID implementation most retailers need some assurance that the technology will work for them specifically. To help with this, there are several RFID ROI calculators that demonstrate projected returns on a deployment. They are based on data collected from actual deployments, such as those of American Apparel, Marks & Spencer, and many other retailers. RFID Journal's Fashion Retail ROI Calculator, for example, was developed in consultation with independent academic and implementation experts. It shows an ROI of over $33,000 for each store in a 400-store chain during the first year of deployment. The ROI increases each year after that, for a total advantage of more than $25 million after three years.

ROI Calculator focus on in-store RFID deployments because research and early pilots indicate that's where the greatest benefits can be achieved. But as two German retailers have proven, ROI advantages accrue everywhere. Gerry Weber has deployed RFID end-to-end throughout the entire supply chain, from point of manufacture to point of sale. They report statistics like 70% timesavings on warehouse inventories, and up to 10% greater accuracy of factory picked orders.


ROI RFID


For many retailers, improved inventory accuracy-and not out-of-stocks on the sales floor-proves to be the unexpected lead benefit after implementation. Professor Bill Hardgrave, Dean of Business at Auburn University, has found time and again that without RFID retailers don't have a true handle on their numbers. "In working with major U.S. retailers, we found that systems invariably say 1% or so of items are out of stock, when in reality is it 12% to 15%." Hardgrave ticks off all kinds of benefits that high inventory accuracy delivers. "Faster optimal reorder cycles, reduced cycle stock, reduced out-of-stocks, multi-channel capability and the list goes on," he says.

TECHNICAL REQUIREMENTS

For a simple RFID implementation, the shopping list is not long. You will need UHF RFID tags-either reusable or single use-and at least one mobile handheld RFID computer for receiving goods and stocktaking. Fixed interrogators mounted under tables or counters are handy for receiving and for checkout, but can be substituted with handheld computers. A portal or fixed reader is also really good to have between the storeroom and the sales floor to validate that the proper items have been brought to the sales floor.

Unless you integrate with POS-to date, C&A has not-there's not a whole lot more that's required. Wilkens says that the hardest part is learning to switch to updating inventory systems with RFID data and not with POS-calculated data, as in the past. The vertically integrated private label company approached RFID as major players do: with a five-store pilot, followed less than 12 months later with a second pilot that added on Germany's twenty principal stores.

With more than 1,600 stores in 20 countries, one challenge C&A experienced was how to make RFID work in a very limited number of retail locations. They decided to handle tagging by printing and encoding the RFID hang- and adhesive tags at point of manufacture, and to apply them to certain batches of never-out-of-stock (NOS) items destined for pilot stores. "Obviously we will eventually send tags direct to all manufacturers to realize greater supply chain efficiencies," explains Wilkens, "but with only 25 stores right now that doesn't make sense."

You will, of course, need some integration work to make tags talk to readers and readers to transmit data to your computers. But implementations are getting simpler and less expensive as the industry moves closer to plug-and-play solutions.

One example of this is an economical RFID solution for retailers created jointly by Nordic ID and SML Group Ltd, a global brand identification solutions provider. The out-of-the-box solution pairs optimized handheld computers from Nordic ID together with SML's RFID-enabled apparel labels and the company's Vizit cloud computing solution. It enables storewide inventory counts and product tracking from manufacturer to point of purchase. "The tags and readers talk to each other from the get-go," says Nordic ID's Jorma Lalla. "That's one less integration step required."

IT'S NOT ABOUT RFID

In considering the considerable benefits that RFID is bringing to C&A, Wilkens is quick to point out that although RFID is a great technology, at the end of the day it's just a tool. He believe that what organizations need is a vision, an end-goal and a plan to get there. "It's not RFID that brings competitive advantage," he says. "It's our unique selling proposition. If RFID can help support that, we'll use it."

Given the success of C&A's pilots, Wilkens is confident that further investment in RFID is on the horizon. "But first we're going to wait and see what happens with the Round Rock Research case," he says in reference to the current RFID technology patent lawsuit launched against major U.S. and international retailers. "2013 is going to be a very important year for RFID."

No matter what happens in the short term, Wilkens has some advice for retailers about the inevitable adoption of RFID. "Make sure that your choices are business-driven and not IT-drive," he suggests. "And when you're ready to plan an RFID implementation, engage a consultancy rather than a solution provider. First they need to understand your business. Then they can decide how to apply the technology to support it." Wilkens also advises prioritizing privacy protection. "Whatever you implement has to be 100% acceptable to the public. Retailers live on public opinion."

 

Jorma Lalla Joachim Wilkens William Hardgrave

Interviewed for the article (from left to right): Joachim Wilkens is the head of Supply Chain Development with C&A Europe. Jorma Lalla is the CEO of Nordic ID. And Professor Bill Hardgrave is the Dean of Business at Auburn University in Alabama.

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