HOW SMALL & MEDIUM RETAILERS CAN BENEFIT FROM RFID

MARTY JOHNSON

RFID ITEM-LEVEL IN RETAIL WILL BE AS PERVASIVE AS BARCODE

• Started with largest retailers, Many more piloting

• Moving to Specialty Retailers pilots and rollouts

• Smaller Retailers are piloting

• Brand Owners who are tagging for big retailers are piloting in company stores

RETURN ON INVESTMENT

• The Age-Old Question

– How can I use RFID and get a return on my investment?

• The Age-Old Answer:

– Eliminate Inventory ‘Touches’ – Automate Manual Processes

– Eliminate Errors in Data

– Improve Visibility – Make better, faster Business Decisions

– Reduce Inventory Levels and Out of Stocks

– Reduce Expedited Shipments

VISIBILITY IS THE KEY

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• Visibility drives better business decisions

• Where do I need to see the asset?

• Where do I not need to see the asset?

• How often do I need to see the asset?

• How often do I need this info updated?

RFID EXTENDS BARCODE’S VALUE PROPOSITION

Barcode RFID

Confined by line-of-sight scanning Wireless/no line-of-sight dependency

1:1 Scan Ratio 1:100s Read Ratio

Approaching information storage limits Significantly more storage capacity

Limited information can be encoded / leveraged

Ability to add/edit data from new and existing sources

Less automated Enables automation

Deeply entrenched Increasingly easy to integrate with limited invasiveness

Before 2008• Does it work?

2008-2010• Does it work

reliably?

2010 - Present• How do I make

it work for my business?

THE RFID CONVERSATION HAS CHANGED

THE FUNDAMENTALS REMAIN

The right product in the right place at the right time.

• Inventory/Asset visibility and control result in:

– Efficiencies and cost control

– Lower Safety Stock

– Higher Asset Utilization

INVENTORY ACCURACY OVER TIME

THE COST OF POOR INVENTORY ACCURACY

• Decaying inventory accuracy is responsible for:

• High out-of-stocks (8%+)• Safety stock as high as 50%• High shrink (2%+)• Poor forecasting and decision

making

• The above contribute to as much as 4-15% in lost sales every year

• True costs of visibility are even higher due to markdowns, poor planning, etc.

• Item-level RFID can help… and is raising on the priority list

ITEM-LEVEL RFID SOLVES THE INVENTORY ACCURACY PROBLEM

Increase salesReduction in out-of-stocks and greater selection afforded by item-level RFID can lead to a 2-10% increase in sales

+2-10% lift

Reduce inventoryIncreased accuracy levels approaching 100% can lead to reduction in inventory across the system of greater than 5%

Enable & enhance omnichannelUtilize near-perfect inventory visibility to offer fast in-store pickup of online orders and same-day shipping of online orders from nearby stores

>5% reduction

Same-day fulfillment

Managing inventory at an item-level provides accuracy that can:

COMMON RETAIL USE CASES

• Cycle Counting / Inventory

• Handheld RFID Reader used to take frequent inventory of RFID-tagged categories

• Display Compliance

• Quickly verify displays and matches backroom inventory

• Item Location

• Quickly find a particular item

BENEFITS IN RETAIL STORES

• More accurate inventory– Move from an industry average of

63% to 95%

• Inventory labor savings – Inventory taking productivity

increased by 96%

– 200 items per hour compared to 12,000 items/hour with RFID

– 18% reduction in the time it takes associates to locate product

• Out-of-stock reductions – Reductions by as much

as 50%

• Sales increases– Examples from 2%-20%

*Source - University of Arkansas RFID Research Center

AMERICAN APPAREL CASE STUDY – THE CHALLENGE

• ~12,000 SKUs on floor, 1 item/SKU

• Manual Replenishment Process Requiring 2 Barcode Physical Counts / Week

• Physical Counts Require 240 man hours per month

• 100 – 300 Missing Items per count

AMERICAN APPAREL CASE STUDY – THE SOLUTION

• First Stores went live Fall of 2008• Driven by need to reduce of out of stocks

• 250 stores live in 20 countries

• 1 billion RFID transactions during 2013 holiday season

• RFID Tagging in Distribution Center• 30 tagging stations using Zebra RFID printers

• 15 Million Tags/year

• In Store Solution Includes: • Handhelds, RFID enabled POS and Backstock

workstations for replenishment, receiving, transfers and encoding

• Solution being used to implement Omnichannel strategy “click and ship”

AMERICAN APPAREL CASE STUDY – THE BENEFITS

• Sales per Store Up 14% Average

• 188 Labor Hours / Month Saved

• Per-store ROI in 4.5 Months

• Shrink Reduction

AMERICAN APPAREL 2012 SEC FILING

“..RFID (deployments)..have allowed us to reduce our unit inventory levels..”

“..RFID (solution) .. Increase sales, reduce costs and increase liquidity..”

AREAS TO FOCUS ON PRIOR TO IMPLEMENTATION

• Where and how is best approach to RFID tag product?

• What processes to enhance in the store and supply Chain?

• What measurements do I want to concentrate on during pilot to quantify value creation and ROI?

QUESTIONS

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