As RFID Adoption Increases, So Does Retail Inventory Accuracy

By Arthur Zaczkiewicz 
Published January 25, 2017

RFID technology seen as key to successful omnichannel retailing.

Fashion retailers have doled out billions in investments over the past two years to implement their omnichannel strategies, but supply chain and inventory management inefficiencies continue to create sour experiences for shoppers.

While there are no quick fixes, a recent panel discussion earlier this month at the National Retail Federation show in New York shed some light on the importance of using RFID to bolster inventory accuracy.

The panel, presented by Avery Dennison Retail Branding and Information Solutions, focused on why apparel and footwear companies are increasing the adoption of RFID. The session, titled, “RFID as Key Enabler of Omnichannel Success,” was led by Francisco Melo, vice president and general manager of global RFID at Avery Dennison, and included Jonathan Aiken, director of IT and retail store technology operations at Lululemon Athletica; Tobias Steinhoff, senior director of business solutions and global sales and direct to channel and franchise at Adidas Group, and Dr. Bill Hardgrave, dean of the Harbert College of Business at Auburn University.

Melo opened the discussion by noting the impact of the new “consumer evolution,” which is resulting in a more “connected shopper who is often much more demanding.” He added that “RFID can be the foundation of a retailer’s omnichannel success.”

Melo noted that the momentum of retailers deploying RFID has been tremendous, “especially in the apparel and footwear industries. But why?”

“The simple answer is that consumers are demanding it,” responded Hardgrave, who added that “customers are unforgiving, and if you don’t have what they want when they want it, they’ll go elsewhere. So it is the actions of consumers that is driving adoption.”

Citing data from his own research report on RFID adoption in the fashion retail industry, Hardgrave said 35 percent of companies are in the “proof of concept” phase while 22 percent are piloting the technology. And 39 percent are in a “phased deployment” of RFID. Full deployment in the apparel segment is just 4 percent.

But Hardgrave noted in the research report that overall, “new retailers adopting RFID increased a whopping 32 percent from 2015 to 2016. Many of these are new entrants conducting POCs, with a 42 percent growth in retailers doing POCs.”

Hardgrave said his experience with retailers over the past decade elevated the importance of achieving inventory accuracy on a stockkeeping level. “From a customer’s perspective, inventory accuracy occurs at the sku level,” he said. “And that’s where you have to meet their needs.”

By way of a case study, Aiken said in-store restocks were previously done manually and by “eyeballing it.” Today, Lululemon associates (known as educators to consumers) use handheld devices to achieve in-store, sku-level inventory accuracy of 100 percent. The goal is to “satisfy the guest.”

Steinhoff and the other panelists noted that today’s environment is complicated and small hiccups in the supply chain and with inventory can translate into a bad consumer shopping experience, which can hurt a brand.

In a statement prior to the event, Melo noted that the “entire shopping experience is strongly impacted by product availability. As the physical and digital worlds continue to merge, consumers expect a seamless experience across all channels.

“RFID not only improves inventory accuracy and visibility, it also enables item-level consumer engagement to transform the retail experience and build a consistent engagement platform both online and offline,” Melo added.

Hardgrave noted that the response from many retailers has been to bulk up on inventory with “buffers” to ensure that items are in stock. But a more efficient and cost-effective approach would be to have 100 percent inventory accuracy and visibility via RFID.

“Without RFID, a typical bricks-and-mortar retailer has about 60 percent sku-level accuracy, which is not acceptable in today’s retail environment,” Hardgrave said. “To provide a superior customer experience, a retailer must know what they have and where they have it. Otherwise, customers will easily find another retailer who can meet their needs.”

Left to right: Tobias Steinhoff, Jonathan Aiken, Bill Hardgrave and Francisco Melo.