Fighting Retail Fashion ‘Shrink’ With RFID Technology

For all the technology available to safeguard stock against theft, “shrink” remains a serious problem for fashion retailers.

According to the National Retail Federation, shoplifting incidents soared by 93% between 2019 and 2023, resulting in a 90% rise in dollar loss.

A recent survey of 250 retailers by Avery Dennison, a provider of software, labels and tags for item identification, found more than 64% of respondents blaming “inaccurate or incomplete” shipping information as a major reason for shrink.

“If you don’t know what’s missing, you can’t restock it, and that’s a double loss,” - Uwe Hennig (global segment senior director for general retail with Avery Dennison)

Only a few years ago, shrink was primarily the result of individuals stealing from a retail store, Hennig says. Now the problem is occurring further up the supply chain as well, in production locales such as China and Bangladesh.

“On the whole journey, there are a lot of opportunities for product getting lost. It happens everywhere.” - Uwe Hennig

Hennig declares himself “shocked” by the steep rise in incidents over a four-year period — a near-doubling in the years since the advent of the COVID-19 pandemic. NRF estimates overall losses caused by retail shrink at close to $100 billion a year.

For fashion retailers, the problem goes well beyond that of shoplifting or even organized crime. The real gap is one of information: a lack of visibility over inventories at stores and in warehouses. “Systems may tell you that you have this item in the store,” Hennig says, “but the physical item isn’t there.”

Even worse, the item in question might actually be somewhere in the network, but it isn’t showing up in tracking systems. Perhaps it’s nestled deep within some store backroom, was moved to another store without the transfer being properly logged, or is absent due to a sales surge caused by a recent promotion.

Many retailers have invested in mobile devices for use by store staff looking to keep tabs on inventory. That’s a smart move in theory, Hennig says, but in practice the inputted data might be inaccurate or out of date.

The solution, according to Hennig, lies in radio frequency identification. Given the age of that technology — its roots go back to World War II, and the first RFID patent was issued more than 40 years ago — that statement might come as something of a surprise. But Hennig says RFID wasn’t regularly applied to ensuring stock accuracy until relatively recently.

Using traditional barcodes, retailers would tend to take stock of inventory once a year, an expensive and time-consuming exercise that didn’t account for changes in subsequent months. With RFID, an apparel seller like H&M or Adidas can perform counts every second week or 10 days. “That means you’re updating the system with real data,” Hennig says.

The advent of the omnichannel, driven by the speed of e-commerce, made it essential that retailers and distributors gain an ongoing view of what’s on hand. Online shoppers are quick to abandon a cart or seller if they can’t find the exact size, color and style they desire.

While the price of RFID tags has come down over the years, the technology still represents a significant expense. But Hennig insists that retailers are more concerned about the prospect of lost business than cost. On its face, applying a five-cent RFID tag to something as cheap as a candy bar doesn’t make economic sense. But if it means pleasing the shopper at checkout, the cost is worth it, Hennig says.

RFID is also central to innovative retail setups like self-checkout in physical stores, Hennig says. He sees increased adoption of the retail model pioneered by Amazon at some of its brick-and-mortar outlets, whereby shoppers are charged for items the moment they’re placed in the cart, and the checkout counter is eliminated.

What’s more, that level of monitoring can serve to curb theft, Hennig says, when combined with cameras and ceiling readers placed throughout the store. Attempts by thieves to “return” items that were never paid for in the first place can be thwarted.

The technology can also generate data that pinpoints in real time what consumers are actually buying.

“You can run machine-learning algorithms to identify the top 10 items that are going to fitting rooms but never to checkout,” - Uwe Hennig

Over the years, RFID has made big strides in acceptance by apparel retailers, reaching 70% adoption levels in the U.S. and Europe, Hennig says. Until recently, much of the technology has been geared toward basic inventory management, but it’s increasingly being deployed for antitheft and shrink control. “We see the adoption coming,” he says.

Source: Supply Chain Brain

Image source: Shutterstock