Even before the dreadful coronavirus pandemic, most specialty apparel retailers were already playing a dangerous game. They continued to operate their online and brick-and-mortar businesses with levels of inventory inaccuracy that were clearly ill-suited for the omnichannel era.
RFID and Covid-19
The solution to this problem had been evident all along. Use RFID in your stores to maintain an accurate view of your inventory. In the recent article Zara Owner Built A Post-COVID Retailer Before Virus Came Along, in Bloomberg News, their Chairman explained that the company’s smooth experience with omnichannel would not have been possible without RFID. And he also spoke publicly about RFID back in 2014, and many more times in the interim. In fact, Zara Builds Its Business Around RFID was the headline of a 2014 article in the Wall Street Journal.
But Zara wasn’t alone. The world’s second and third-largest specialty apparel retailers, H&M and Uniqlo, each embraced RFID. By 2017, the Chairmen of both companies had publicly declared their intention to have their factories begin applying RFID tags to all merchandise. Behind the scenes they had been working with RFID for quite some time. Today H&M and Uniqlo have RFID in stores worldwide.
RFID provides an accurate view of the inventory inside each store in a retailer’s fleet. It also helps employees retrieve product more quickly. Omnichannel made these capabilities important. The coronavirus pandemic has now made them essential.
It may seem odd then to be reading an article about specialty apparel’s inventory visibility problem when the world’s three largest players have already fixed that issue. Amazingly, though, very few of their peers have followed suit. So it’s still fair to say that the sector as a whole has a massive problem on its hands, a problem that doesn’t get nearly as much attention as it deserves.
Consultants and technology vendors presented RFID to these retail executives on countless occasions over the past 10 years. Some of these retailers did pilot projects. Many did nothing at all. They may not have prioritized RFID, but they certainly can’t claim they weren’t aware of it.
RFID Creates Clarity
RFID helps retailers maintain an accurate, continuous view of the inventory residing in each of their stores. Myths about RFID being too costly have long been overblown. It only costs a nickel to add it to a garment. Heck, even Walmart USA directed its suppliers to tag all clothing they ship, beginning with the Summer 2020 product range.
Nike, Adidas and Under Armour are putting RFID labels on all apparel and footwear. And, pandemic aside, RFID has quietly played a major role in the resurgence of Target’s apparel business and the stellar performance of Lululemon. In the department store realm, over 85% of goods shipped to Macy’s now have an RFID tag.
In June 2019, Nike’s chairman said on an earnings call, “RFID gives us the most complete view of our inventory that we have ever had.” He then added, “It’s quickly becoming the most precise tool in our arsenal to meet an individual consumer’s specific need at the exact right moment.” And he was talking about in-store consumers too, not just people shopping on their phones or laptops.
For a variety of reasons, specialty apparel retailers have traditionally operated without accurate real-time visibility into the true inventory positions of each of their stores. For any given SKU — like an orange XL polo shirt, for example — when an apparel retailer compares the number of units it thinks it has on hand in a specific store to the number of units it actually has, the average retailer is only correct 60-70 percent of the time. Operating a business this way was never ideal. Today? It’s lethal.
Each store is essentially a black box. Once a year they perform a tedious inventory count to satisfy their auditors, touching every piece of merchandise manually. Unfortunately, the problem quickly returns, often in under two weeks. This is the equivalent of flying blind.
The second major shortcoming of traditional retail operations is the lack of an accurate real-time tool that automatically shows, for each different SKU, the number of units on the sales floor and the number of units in the stockroom. Retailers have dreamed of a solution for this for over a hundred years. RFID simplifies the work of store employees and creates a database of valuable information that can be put to good use by many different teams at headquarters, including the team managing the online business.
Accuracy In A Post-Pandemic World
Smart retailers already knew that encouraging BOPIS purchases (buy online, pickup in store) was a smart move. It eliminated the cost of last mile delivery. It also drove foot traffic to their stores, where the consumer often purchased additional items. Nudging consumers towards BOPIS, or even curbside pickup, instead of home delivery, will now be increasingly important. Last mile delivery is expensive, and those costs keep rising. FedEx, UPS and the United States Postal Service are struggling to keep pace with the spike in home deliveries. Surcharges are being added. FedEx has even imposed limits on certain retailers, temporarily restricting the number of parcels that can be shipped from their stores.
Why Clarity Matters
Retailers who use RFID have many advantages over their peers:
- Enterprise-wide business decisions are driven by accurate inventory data, including those powered by machine learning and artificial intelligence.
- Less working capital tied up in inventory, in some cases reduced by over 10 percent.
- A much greater percentage of fleetwide inventory can be made available to online shoppers,
- Headquarters gets a separate view of each store’s precise stockroom and sales floor inventory holdings — a capability retailers have wanted for decades.
- In-store pickup programs (BOPIS) can be scaled and executed profitably.
- Store managers and employees are better able to keep their sales floors properly stocked.
- Ability to drive store traffic by providing accurate product availability data at the store level.
- Store employees are better able to assist customers who visit the store.
- Inventory that is moving slowly in certain districts can still be sold at full price online.
- Fewer profit sapping “split shipments” of online orders.
Playing with Fire
It would be a grave mistake for clothing retailers and their financial advisors to ignore RFID and simply kick this can down the road, deeming other projects more critical. They have already been doing that, on an annual basis, for each of the past ten years.
As we emerge from the shutdown, the capability gap between the “haves” and the “have nots” is going to widen considerably. Those retailers with accurate inventory visibility already in place will have a huge advantage. They will keep gaining proficiency, both in their stores and at headquarters. With RFID, it’s not about whether you use it, it’s about how many ways you use it.
The economic crisis triggered by the COVID-19 pandemic has, quite understandably, put most clothing brands and retailers in survival mode. But companies that wait 12 more months to catch their breath before even entertaining the idea of approving these investments will then need to wait an additional 8-12 months for tagged merchandise to flow from their factories to their stores. And that assumes that they immediately authorize this critical upgrade, rather than delay that decision even further. For their sake, let’s hope that’s not the case.