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RFID curbs theft at American Apparel

When American Apparel deployed RFID technology, the goal was all about improved inventory visibility. The technology lived up to its reputation, and the retail chain’s 120 RFID-enabled stores operate at a 99.8 percent inventory accuracy rate, almost unheard of for an apparel chain with so many SKUs.

But RFID had an unexpected side effect. By attaching UHF tags to about one million pieces of apparel a month, American Apparel has reduced shrink by an average of 55 percent. Some locations curtailed theft by as much as 75 percent. RFID has proven to be an enabler for the retailer’s loss prevention team, providing the information needed to zero in on loss situations and identify exactly where shrinkage occurred. By studying fraud detection patterns exposed by RFID, American Apparel has identified dozens of sources of internal theft since implementing RFID. In each case, interrogation led to an admission of guilt by the employee.

“When we started RFID, shrink was not our focus,” says Stacey Shulman, vice president of technology at American Apparel, one of the retail pioneers when it comes to RFID. “Shrink was an unexpected benefit. It takes the ROI issue away.”

Shulman explains that employees are much less likely to shoplift when they know that stores take daily inventory, and that they can pinpoint the exact time an item left the store without being paid for. It’s a much different dynamic, she says, than when inventory was taken once a month, and the company might not know about a stolen item for weeks.

Shulman says that another unexpected benefit from RFID is reduced employee turnover.

“When employees work in an RFID store, they don’t want to go backwards,” says Shulman. “And when you someone in the store using this technology, they feel like it’s a step backwards to go to a store that doesn’t have it. They all love working with RFID.”

Shulman also says that retailers shouldn’t get hung up on tags costs, noting that a fixation on tag costs temporarily derailed deployment at American Apparel.

“If you are hung up on tag costs, look at your handling costs for each garment,” she says. “If you handle a garment multiple times, look at your labor costs for that versus the price of an eight cent tag.”

Shulman also recommends that retailers work closely with suppliers to identify their exact needs and to work toward an economical solution. “By working with our suppliers, we streamlined our processes and our costs came down,” she says. “We were able to cut our costs to implement RFID by 60 to 70 percent. Once we got to that point nobody could argue with it.”

 

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