This week’s announcement that prestigious fashion retailer Zara is in the midst of a chainwide rollout of RFID to nearly 2,000 stores is major news for several reasons.
For starters, the deployment has been in the works for four years, with 700 stores already deployed and consuming hundreds of millions of tags annually. Inditex Group, Zara’s parent, expects to have 1,000 stores up and running by the end of the year.
Inditex, which operates more than 6,000 retail outlets under several brand names, plans to roll out 500 stores a year, with full deployment occurring in 2016. Zara has seen dramatic results from stores already deployed.
“Implementation of this next-generation technology is one of the most significant changes ever in how the Group’s stores operate,” says Pablo Isla, Inditex president.
Zara stores are fully deployed in Spain, the United Kingdom, Ireland, Portugal, Switzerland, Austria, Sweden and Finland. Only a handful of the 75 Zara stores in North America have been outfitted with RFID.
The real-time inventory visibility allowed by RFID supports Inditex’s strategic omni-channel objectives, ensuring that the right products are in the right place at the right time. At its enabled stores, Inditex is achieving operational efficiencies through improved inventory processes and better controls for reducing shrink. The retailer is optimizing its inventory investment and maximizing sales and margins.
Aside from the size and success of the deployment to date, the other important takeaway is the chain’s desire to go beyond inventory accuracy, pursuing both consumer engagement and loss prevention.
Inditex is utilizing Tyco’s Sensormatic dual technology RFID/Acousto-Magnetic (RFID/AM) hard tags and detachers at the point-of-sale. Tyco is also managing Inditex’s tag recirculation program and distributing tags to the point of manufacture to be sent back into the supply chain.
The solution allows Inditex to take advantage of the benefits of RFID-based inventory visibility while controlling shrinkage with anti-shoplifting AM technology.
“Loss prevention is one of the big second generation use cases for RFID,” says Randy Dunn, director of global sales and professional services at Tyco. “There is no better way to justify getting started with RFID than inventory accuracy because it’s so crucial for all retail functions. Planning, allocation, forecasting and replenishment all get better when you have better information.
“But there are a number of second generation use cases once you have a population of tag inventory, and the data from RFID is helping retailers to be smarter about where shrink is occurring and how to put in prevention plans.”
In addition, the Zara rollout solidifies the use case for RFID among high fashion retailers. Some retailers in that category have questioned the need to deploy RFID because they are not dealing with high replenishment items.
“In the U.S. at least, we have the thought that this all starts with replenishable basics (like jeans), and some fashion retailers have said ‘I don’t replenish, so does it really work’ for fashion,” says Dunn. “They ship items to the store, move them, and then ship more items. So they don’t get the value equation at first.
“But what we are hearing from the president of this giant and highly successful fashion retailing firm (Inditex Group) is that there are benefits and they are significant, and most of them are around improving the customer experience.”
All tags in the Zara RFID program are applied at the source. However, Zara has an interesting supply chain model in that it does its own coding when items arrive at one of Inditex’s distribution centers.
When an item is sold, the tags are removed and sent to a Tyco re-circulation center where data is removed from the tags. Tyco then tests the tags to ensure that tag functionality is still intact and ships them for reuse.
When the Zara deployment is complete in two years, Inditex will begin a gradual rollout across its other chains, which include Massimo Dutti, Bershka and Pull&Bear.