Executive Briefings

Retail Apparel Industry Taps RFID for Inventory Accuracy

Analyst Insight: The retail apparel market continues to lead the charge when it comes to deploying innovative technologies like RFID that allow for much higher inventory accuracy levels and can pave the way for omnichannel retail strategies. Both Inditex and H&M have made strong commitments to RFID technology, following in the footsteps of Macy's, long considered the leader when it comes to RFID and apparel. According to industry estimates, nearly 4 billion apparel items were tagged with RFID in 2015. - John Johnson, Senior Content Specialist, Gartner Supply Chain

Retail Apparel Industry Taps RFID for Inventory Accuracy

Inditex CEO Pablo Isla calls the deployment of next-generation RFID technology "one of the most significant changes in how the group's stores operate."

Inditex, the parent of the Zara chain and others, began deploying RFID in 2014, and 2016 is shaping up as a big one for the company. It expects to have RFID deployed in all of its 2,000 Zara locations by year’s end. More than 1,000 Zara stores and all of its distribution centers have been using RFID for well over a year.

The RFID system codes and reads each garment in the logistics center, which means that when shipments reach the stores two times each week, the system immediately identifies which sizes and models need replenishing. The solution drives enhanced customer service by enabling the immediate identification of size availability either in-store, in nearby stores or online.

Aside from improved inventory accuracy, apparel retailers see numerous customer-facing benefits from RFID, including building brand loyalty by reducing out-of-stocks. Innovative apparel retailers are also experimenting with RFID-enabled “magic mirrors” that suggest comparable outfits and accessories matched to those being tried on by consumers.

Macy’s has already attributed significant sales uplift from its effort to tag more and more apparel merchandise with RFID tags. Improved visibility has allowed Macy’s to offer ship-from-store and in-store pickup at all 725 of its full-line stores.

In general, RFID increases item availability, which research from the RFID Lab at Auburn University says can lift stock-keeping unit level sales from 2 to 20 percent. Using RFID, inventory accuracy within SKUs can improve from as low as 63 percent to between 95 and 99 percent.

The Outlook

Inventory visibility will continue to be of major emphasis to apparel retailers, who should consider the following:

• Create the shopping and return services that are most valued by your customers. Be innovative and courageous in taking direction from them, rather than the market as a whole.

• Align key supply chain processes to remove channel-specific silos, duplication or conflicts in order to deliver the seamless shopping experience expected by consumers.

• Consider all inventory as available to be sold in any channel. This will drive adoption of single inventory pools, freed from channel ownership constraints to maximize demand fulfillment at full price.

Inditex CEO Pablo Isla calls the deployment of next-generation RFID technology "one of the most significant changes in how the group's stores operate."

Inditex, the parent of the Zara chain and others, began deploying RFID in 2014, and 2016 is shaping up as a big one for the company. It expects to have RFID deployed in all of its 2,000 Zara locations by year’s end. More than 1,000 Zara stores and all of its distribution centers have been using RFID for well over a year.

The RFID system codes and reads each garment in the logistics center, which means that when shipments reach the stores two times each week, the system immediately identifies which sizes and models need replenishing. The solution drives enhanced customer service by enabling the immediate identification of size availability either in-store, in nearby stores or online.

Aside from improved inventory accuracy, apparel retailers see numerous customer-facing benefits from RFID, including building brand loyalty by reducing out-of-stocks. Innovative apparel retailers are also experimenting with RFID-enabled “magic mirrors” that suggest comparable outfits and accessories matched to those being tried on by consumers.

Macy’s has already attributed significant sales uplift from its effort to tag more and more apparel merchandise with RFID tags. Improved visibility has allowed Macy’s to offer ship-from-store and in-store pickup at all 725 of its full-line stores.

In general, RFID increases item availability, which research from the RFID Lab at Auburn University says can lift stock-keeping unit level sales from 2 to 20 percent. Using RFID, inventory accuracy within SKUs can improve from as low as 63 percent to between 95 and 99 percent.

The Outlook

Inventory visibility will continue to be of major emphasis to apparel retailers, who should consider the following:

• Create the shopping and return services that are most valued by your customers. Be innovative and courageous in taking direction from them, rather than the market as a whole.

• Align key supply chain processes to remove channel-specific silos, duplication or conflicts in order to deliver the seamless shopping experience expected by consumers.

• Consider all inventory as available to be sold in any channel. This will drive adoption of single inventory pools, freed from channel ownership constraints to maximize demand fulfillment at full price.

Retail Apparel Industry Taps RFID for Inventory Accuracy