Consumers are expected to spend $602 billion during this year’s holiday shopping season. Retailers with real-time inventory visibility stand to gain a sizable portion of that pie.
Macy’s and American Apparel are already seeing improved inventory accuracy and financial results from having RFID installed across a wide portion of their stores. Both retailers stand to be big winners on Black Friday.
Now, a new study by Capgemini confirms what retailers already know — that nearly three quarters of consumers will walk away from a retail store if a product is not on the store shelf when they are shopping. The research further demonstrates the danger that out-of-stocks represent to retailers, and the value of RFID when it comes to keeping products in stock.
“Our research raises concerns about the ability for large, global businesses to effectively adapt their supply chain processes to anticipate and manage the stress of major shopping seasons like the upcoming holidays, including the critical need to maintain the right items in stock and deliver products on time,” says Paul Cole, senior vice president and head of consumer products and retail for Capgemini’s Business Process Outsourcing Division.
The Capgemini report also says that 9 out of 10 shoppers are likely to shop with another retailer if items are delivered late, a strong message for retailers looking to deploy omnichannel strategies.
By deploying RFID technology at the item level, retailers can track products throughout the supply chain, to the distribution center and to the store shelf. Retailers like Macy’s and American Apparel rely heavily on RFID to improve inventory accuracy and reduce out-of-stocks. Strong inventory visibility at the store level helps retailers like Macy’s to use brick and mortar stores as fulfillment centers for online orders, enabling faster delivery. Macy’s is already fulfilling online and mobile orders at 500 of its stores.
In its third quarter earnings report, Macy’s credited its Omnichannel retailing strategy as part of the reason for comparable store sales growth of 3.5 percent.
Terry J. Lundgren, Macy’s chairman, president and chief executive officer, emphasized the role of Omnichannel in the earnings report: “Our success in the fourth quarter will be driven by a wide selection of exclusive products from the most-wanted brands and designers. We will bring them to our customers, whether they shop in our stores, online, via mobile – or all three.”
The Capgemini study states that only 21 percent of the 150 supply chain executives polled believe that their systems do an excellent job of providing accurate and real-time insights into supply chain performance. However, 86 percent say their main challenge is having the right processes in place to respond in real-time to to volatile consumer demands, while 83 percent site the task of adequately planning for supply chain capacity to address peak demand needs during the holiday season.
“As supply chains become more complex and consumers grow ever more demanding, business executives and supply chain managers are increasingly feeling the pressure to improve their operational visibility and responsiveness to market demand,” says Cole.
American Apparel’s RFID-enabled stores operate at a 99.8 percent inventory accuracy rate, almost unheard of for an apparel chain with such varied SKUs. Last year, American Apparel credited RFID as contributing to very strong sales gains during the holiday shopping season.
American Apparel has significantly improved inventory accuracy and on-shelf availability with a fully automated Senitron inventory visibility solution powered by Impinj. The wide-area RFID system brings immediate benefits to American Apparel’s operations by improving in-store visibility and security and by eliminating manual cycle counting, which will empower in-store staff to dedicate more time to customer service and sales-related activities.
“The Senitron solution delivers on the dream of hands-free, full-time inventory visibility,” said Stacey Shulman, CTO of American Apparel. “We get accuracy levels that meet or exceed handheld readers, in real-time and with less work. We’ve been amazed at the effortless accuracy of the Senitron system to not only deliver counts but also item locations. This enables a wealth of possibilities in our roadmap towards a robust omni-channel shopping experience for our customers.”
Cole, who authored the Capgemini report, says that although enabling technologies like RFID were not covered in the report, many retailers are forming a competitive advantage from deploying them.
“Clearly, RFID and the ability to track through the entire supply chain is an enabler of getting the right product to the right place at the right time,” he says. “Consumer loyalty is getting ever more fragile because there are some pacesetters out there who are applying world class thinking to their operations around logistics.
“The last impression you have of what somebody can do to get you a product precisely when you want it and where you want it is what sets the standard. So the companies that can really get the visibility across the supply chain and bring that supply and demand closer together will be the winners”