To illustrate the potential financial benefits of RFID, this white paper introduces a hypothetical apparel retail chain, Hypothetical Fashions Ltd. (HFL). HFL is a healthy, $2 billion chain with about 500 stores that plans to tag about 60 percent of its inventory, or 24 million items.
The paper, produced by Tyco Retail Solutions and Chainlink Research, dissects the various financial benefits of implementing RFID and estimates the impact on HFL’s financial numbers. For example, HFL should expect to see $60 million in incremental annual revenue and about $30 million in incremental gross margin by simply avoiding out-of-stocks.
By implementing bi-weekly RFID inventory counts, HFL planners are able to fine-tune markdowns and replenish from holdback inventory, boosting gross margin on these categories by about 5 percent and producing an additional $10 million in gross margin. Additionally, shrink across the 60 percent of tagged items was reduced from 1.8 percent to 1.4 percent of revenue, a savings of about $4.8 million per year that falls directly to profit.