American Apparel uses RFID to take better stock of its stores

Retailer credits tagging of every item with bumping sales in pilot store by 15% to 25%

American Apparel Inc. wants to make sure that shoppers in its stores will always be able to find their size and favorite colors when they're looking for T-shirts -- and its using RFID technology to do it.

The hip retailer today announced that it has wrapped up a successful pilot program in which a radio frequency identification (RFID) tag was attached to each item for sale in one of the company's stores in Uptown Manhattan. Now, American Apparel is moving to roll out the same system in 16 more stores -- 15 in New York and one in Santa Monica, Calif. -- by early June.

"We want to maintain the sales floor at 100% capacity," said Zander Livingston, a research-and-development strategist at Los Angeles-based American Apparel. "We're a boutique-style store. Only one of every color, style and size is on the floor at any time. The volume of items transported between the stockroom and sales floor during busy hours is very high. Every time someone buys something, it has to be replaced."

Livingston said as many as 10% of items that should be on the sales floor could be missing at any given time. Sales increase by 15% to 25% when all items are available on the floor. The RFID system has made 99% of sales-floor inventory available to customers, he said.

"I find it interesting because of the large-scale adoption," said Pete Poorman, an analyst at ABI Research. "There's been a lot of experimenting with RFID. The fact that they're going into production with this on a big scale tells me that the technology solves a real business problem. And it's a positive indicator for the RFID industry as a whole. I think we'll see more of people using the technology in the near future."

American Apparel is using fixed and mobile RFID readers and antennas from Motorola Inc.'s Enterprise Mobility business, tags and printers from Avery Dennison Corp., and hardware and software from Vue Technology Inc.

American Apparel, which manufactures its own goods, is tagging each item at its manufacturing facility in Los Angeles. Livingston noted that the company is installing RFID readers between the stockroom and the sales floor, as well as at workstations in the stockroom and at each cash register.

As an item leaves the sales floor -- because it has been sold, accidentally returned to the stockroom or stolen -- its departure will be displayed on stockroom workstations, enabling workers to quickly get the item restocked.

Livingston noted that American Apparel has a problem with customers trying on clothes and then leaving them in the fitting rooms. Right now, the RFID system doesn't alert employees to this issue, but it's something he wants to address soon.

He said the company paid between $50,000 and $60,000 to get the pilot project up and running. "I think that's excellent," Livingston said. "It totally worked taking the plunge into RFID without much money. The amount of work we're saving -- two employees can do what six employees used to do. We're about 99% accurate with all of our inventory now. I think for that particular [pilot] store, you're looking at ROI within six months."

Most companies looking to begin using RFID technology dip their toes in the water by using RFID tags on pallets and cases in warehouses and stock rooms. Their focus is improving the supply chain.

However, Poorman noted that there's no right way or wrong way to jump into RFID because each company has its own issues. "You attack your pain point first," he added. "They're in a competitive environment. We've all been in a store trying to get some help. It will give salespeople more time to sell."

"At the pilot store, we used to have to hand count items on the sales floor twice a week to keep the inventory accurate. Now we're doing it once a month," said Livingston. "This visibility and granularity is really going to benefit the company even more than reduced labor and costs."

American Apparel has 190 stores worldwide. Livingston said the company plans to consider rolling out RFID technology to all the stores after it has evaluated how it works in the New York and Santa Monica stores.

Copyright © 2008 IDG Communications, Inc.

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