In order to operate profitably, it is imperative that retailers maintain a precise real-time view of the inventory residing in each of their stores.
A recent Retail Marketing Society webinar explored how radio-frequency identification (RFID) technology is doing exactly that for many retailers. Not only is this technology benefitting their in-store and online customers, but it is also making life easier for their front-line employees.
What is RFID Technology?
“Think of it as a smart label,” explained Marshall Kay, founder and principal of RFID Sherpas. “It looks like a sticker you would expect to see on the outside of a box, but this sticker has a microchip inside that has the product’s [universal product code (UPC)] information and a serial number. Then you have a device that’s like a barcode scanner, using radio waves, that can read the sticker up to 25 to 30 feet away. You can also put RFID at a doorway between the sales floor and the stockroom, at the exit of a store to determine what’s passing through and even at checkout if you want to speed up that process.”
Substituting a smart label for a traditional label costs approximately four to five cents per label — an investment that reaps many rewards and can quickly pay for itself.
During his tenure as head of retail operations, Ralph Lauren, Europe, Mark Berryman focused on using RFID to help with business operations, basically concentrating on the stores. “Predominantly, it was around replenishments and making sure that all the inventory was in front of the customer, available on the sales floor,” said Berryman. “In collaboration with RFID Sherpas, I was able to redeploy a lot of the hours that were otherwise spent on very monotonous manual tasks in our stores and further down the chain as well.”
Every Store Can Be a Distribution Center
RFID makes it possible to turn every store into a fulfillment center. Across the board, the technology provides inventory accuracy, inventory visibility and inventory “find-ability.” It allows retailers to capture demand whenever and wherever it materializes, to identify a singular SKU in a remote location and make it available to a digital customer. And if they don’t know exactly where an item is, a mobile device, much like a Geiger counter, can lead them to the product, whether it be on the sales floor, in a fitting room or in a stockroom. Once they get to within 25 or 30 feet of the item, it will beep. This system is useful not just for finding an item for a customer, but also for replenishment, for in-store pickup or for a ship-from-store.
To quote Mark Parker, who is the executive chairman of Nike, “RFID gives us the most complete view of our inventory that we’ve ever had.” In 2019, he told the investor community that RFID was “quickly becoming the most precise tool in our arsenal to meet a consumer-specific need at the exact right moment.”
Getting a Handle on Theft
“Disappearing” merchandise is a problem for every retailer. Joe Coll, vice president, asset protection operations & strategy, Macy’s Inc., pointed out the misnomers in the world of asset protection. Typically, a store might be focused on the summer product, but as it begins to get cold and winter coats start to sell, asset protection resources shift to outerwear departments. The conventional wisdom is that if a category starts to sell in the stores, people will start stealing it.
But data from the RFID system showed Macy’s that significant theft of outerwear was occurring well before winter. Organized crime rings operate much like retailers: getting their products into fence locations in advance of the onset of cold weather. Macy’s found this data to be immensely helpful.
Employee theft is also a reality. From an internal perspective, RFID helps a retailer to identify who and how merchandise is being secreted out of the store. who is secreting merchandise out of the store and how they are doing so. All employees — new hires and veteran employees — are screened as they go through the employee exits. This takes bias and human error out of the equation, and the revelations can be surprising. Macy’s discovered that some of their longest-tenured and most-trusted employees were routinely stealing from it.
Staying Ahead of the Pack
According to Kay, staying ahead in the apparel sector now boils down to three questions:
• How many ways are you utilizing these tools in these capabilities?
• How good are you becoming in each of those different ways?
• What are you doing with the new data that you now have at your disposal?
“The gap keeps widening between management teams that understand this stuff and management teams that don’t,” said Kay. And he believes that certain apparel businesses are running out of time, whether they realize it or not. Already facing a slew of pressures, the absence of inventory accuracy at the store level will, in Kay’s view, “prove to be as dangerous to them as a carbon monoxide leak: a silent killer!”
Retail Marketing Society
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