Fashion retail RFID pays for itself in 24 months

Feb. 28, 2011 - PRLog -- 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 profits.
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 concerns.

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 become:

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 systems.
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.

Future plans
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.”

# # #

Nordic ID provides mobile devices for professional use enabling customers to improve their inventory management, customer service, communication and supply chain control.

Nordic ID also has self monitoring in its product category.