Beyond Replenishment: Three Tipping Points for RFID in Fashion

In recent years, a growing number of retail RFID use cases have clearly demonstrated the benefits of being able to track inventory at the item level, leading to better shelf replenishment and fewer out of stocks.  Many retailers quantify the benefits of reducing out of stocks not just at the item level (potential lost sales) but at the transaction level, since retailers closely track the number of items that comprise the average transaction (e.g. 3.6 items/sale).  Using that example, an out-of-stock item (especially in a core category such as denim) could result in lost sales of an additional 2.6 items that were to be purchased with it.

Many fashion retailers, however, aren't too concerned with out of stocks; in fact, their goal is to "sell out" certain items, creating scarcity and cachet for their brand.  They have ignored the replenishment benefits of RFID simply because replenishment items comprise a small percentage of their overall business.  But recent retail trends are creating three new tipping points for RFID in apparel and fashion: Omnichannel fulfillment, the addition of "up market" merchandise, and national and global retail store expansions. 

Omnichannel fulfillment: RFID is ideal for customer-facing supply chain execution and store operations, because it helps retailers honor customer promises, including when they tell customers that specific items are in stock, that those items will be delivered in a given number of days, or even that they will be delivered more quickly than usual from a specific local store.

Retailers have spent millions of dollars and a tremendous amount of time to build sophisticated algorithms that enable them to source and ship customer orders quickly and cost-effectively. Unfortunately, this doesn't always work as planned, because if retailers don't trust their inventory numbers (and they don't, most of the time), they tune their systems to only ship merchandise from given locations if a large quantity (eight or 10) of that specific item is thought to be in stock in that location. So even if the retailer could ship a pair of designer jeans from a customer's local store, it instead will ship from a more distant one if the retailer doesn't have confidence in its inventory.

This "buffer" prevents customers from getting goods sooner and costs retailers more in shipping fees and inventory investments. RFID addresses this issue by letting retailers know exactly how many of a given item they have in each specific location, enabling them to reduce their buffers. The result: customers are delighted by quick shipments and stores reap the benefits of lower costs and loyal customers. 

Moving up-market: Many retailers have found that by carrying a small number of luxury items beyond their traditional lines, they can drive more sales, while providing a fresh, exciting look to their brands. But when moving up-market, retailers must focus both on maintaining a positive customer experience and protecting their valuable inventory. That's where RFID comes in.

Consider the retailer that offers designer handbags that cost hundreds of dollars more than those in its regular product line. These bags may be displayed by the retailer in a "store-within-a-store." By setting up an RFID zonal system, retailers can monitor movement of designer bags in real time, whereby customers are offered special service assistance within the zone if they are spending time with a particular bag, and security personnel are alerted if those bags are taken into "red" zones, such as fitting rooms, back-stair areas and stock rooms.  This sort of targeted system around high-value items means customers can be assured of the highest service levels, while retailers safeguard high-value merchandise. Process alerts can be established so that security personnel monitoring from surveillance video areas can pay extra attention to see if merchandise is returned to the original store-within-a-store or to point-of-sale counters.

New market expansion: Traditionally when expanding to new regions, retailers have used historical data to determine what and how many goods should be stocked there. But this can be a problem when, for example, it bases its inventory needs on the historical performance of a suburban store and then opens an urban site with a smaller format, or when it expands overseas. Likewise, opening another suburban location can be an issue if historical data from 12 months ago is used, and the weather at the new site is more temperate or frigid, or the shopper demographics vary.

RFID can help retailers achieve greater success with these capital-intensive market expansions. By tracking every piece of merchandise in every store, retailers can quickly gain insight into exactly the type and quantity of inventory that is required in specific retail locations. This ability to quickly sense needs and swiftly respond can help stores optimize inventory to maximize sales and provide the best customer experience.

RFID has proven effective at solving a large number of retailer needs. But the most compelling cases in fashion retailing – the ones that reach the tipping points for implementation-- are likely to be found in these three scenarios.

Su Doyle, Industry Solutions, CheckPoint Systems. 
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