Six Steps to Build an RFID ROI For Your Apparel Business

Olivier Burah 2

By Olivier Burah, Merchandise Visibility Director Europe, Checkpoint Systems

With RFID, store associates can easily restock merchandise on the sales floor, replenish out-of-stock items, improve inventory accuracy at the point of sale and process returns efficiently to make them available for resale. The technology helps retailers ensure merchandise availability in store as it provides clear visibility on the stock available for the consumers, so brick-and-mortar shoppers can find the garment they came in to buy in the size and color they are looking for.

To grow the business and win market share, brick-and-mortar retailers invest in online platforms, while online retailers are considering brick-and-mortar stores. Regardless of the platform, RFID is becoming a “must-have” for omni-channel retail strategies. Generation Y and Millenial shoppers i.e. the “I want what I want when I want it” generations want it now. Whether through “click & collect” for shoppers to go to a store to pick up the item or with a delivery in less than 24 hours, the challenge for retailers is having an accurate real-time inventory at all times. RFID is what enables retailers to ensure the right merchandise is available at the right place and at the right time.

Departments stores such as Macy’s and Kohl’s and retailers like American Apparel to name a few, are already benefiting from the advantages of this technology. In Europe, C&A and more recently fast fashion giant Inditex have also announced the use of RFID in their stores. Other companies like global sports retailer Décathlon, have even built a webpage to inform shoppers about RFID in their store.

Yet, starting an RFID project can be delayed by CEO and CFOs who will only invest in the technology if they see a proven ROI for their business. A powerful ROI calculator should enable retailers to enter their average number of units on the sales floor and in the back room, as well as the average unit cost, inventory turns and retail margins. By establishing the number of hours that store employees members spend receiving goods, conducting cycle counts and replenishing product inventory, the calculator should estimate the potential reduction in labor costs based on real retailers’ figures and compare with savings and sales uplift achieved in pilots and deployments by companies in Europe and around the world.

The key is in getting an accurate ROI before starting the pilot phase. For that, retailers can work with a proven consultancy method based on the 6 following steps:

1. Collect Consolidated Internal Data

RFID is a transversal project requiring the involvment of your sales, purchasing, store operations, supply chain and finance leaders at planning stage . Make sure you understand replenishment, fulfillment and processes from all angles and that you collect all ERP data related with your sales, deliveries, inventories and out-of-stocks. You cannot determine your ROI on industry assumptions. You need real numbers from your business.

2. Audit Your Stores

Merchandise availability and out-of-stocks are closely linked with store operations and processes. Don’t assume that every store follows the same processes to handle deliveries, check inventories, restock merchandise from the back room to the sales floor, fulfill online orders and handle returns. Different store have formats, layouts, operations and geographic locations that affect in-store processes. Understanding these variation processes will provide you with an overview of the number of hours spent and “lost” on handling deliveries inefficiently, on protecting merchandise against theft as well as on replenishment, sales and returns. This will help you build the business case for RFID.

3. Interview Store Employees

Your store employees are handling merchandise every day. They are on the front line of your organization and undersatnd operational challenges better than anyone else. They are directly in touch with consumers. They are used to handling merchandise from delivery to the point of sale and point of exit and they understand the challenges at every step. They are the ones having to tell shoppers that they don’t have the desired garment in stock just now so they will be key to the process moving forward.

4. Understand Resources for Each Store

Starting an RFID project is about understanding exactly what you need to improve with regards to out-of-stocks and managing inventories efficiently, fulfill customers orders to eventually increase sales. For that, you need to figure out the processes, technical tools and human ressources that you have in place today. This also means understanding how many employees are involved in managing deliveries, inventories and replenishment so you can estimate the hours spent on ensuring merchandise availaibility and the overall impact this has on your bottom line. It is about analysing the time allocated to attend shoppers versus “unproductive” time on tasks that do not bring value and how your cost structure can be impacted.

5. Understand the real cost of Your out-of-stock

Having an accurate forecast of the ROI for an RFID programme starts with knowing exactly how much you are losing today. Nobody likes to recognise their own weaknesses, but the more honest you are from the start, the better the results. With the data you have collected in the first 4 steps, you will be able to determine exactly how much you are losing from out-of-stocks, inefficient order fulfillment and return before you start using RFID. This also includes inacurate inventory, time spent by employees trying to sort-out an out-of-stock situation or missing order and lost sales when a garment is not available for the shopper who was ready to buy etc.

6. Choose the right RFID hardware, software and consumables

Based on the improved inventory accuracy and on-shelf availability that can be achieved with RFID, you will be able to define exactly what you need with regards to hardware, software and consumables. Once you have a clear idea of the human resources in store, you will know exactly how many RFID handheld and fixed readers you will require for each store or if an “eye in the sky” solution is more appropriate for instance. You may decide that inventories would better be managed by an external company because your stores employees do not have enough time to handle certain tasks. At the end of the day, when you have chosen to invest in the technology, you want RFID to provide you with a measurable increase in sales and in savings.

For a proven method of ROI to implement RFID in your business, contact Olivier Burah,

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