After implementing RFID to raise stock accuracy (see Chapter 1) and improving your in-store product availability (see Chapter 2), many retailers choose to embed RFID in their omnichannel strategy.
In this chapter you will learn:
One of the key differentiators stores have over online channels is the ability for shoppers to immerse themselves with each of their five senses in your brand.
It's the music you play, the visual merchandising and store layout you have, and, perhaps the most important thing, the items your shoppers can view, feel, and try on before buying them.
RFID technology can play a significant role in elevating your brand image within your physical stores. RFID can enhance your fitting room experience, enable personalized product recommendations, and speed up checkouts.
It can even enable storytelling with interactive displays, where RFID-tagged products can be placed on interactive screens that react to the product that is placed upon it.
Though there are many use cases for RFID in stores, we will focus in this chapter on the one that will have the most prominent business benefit: using your store's stock in digital sales channels.
Why?
Because unifying your stock has massive benefits in terms of operational efficiency, sustainable operations, and sales.
Shoppers expect their desired items to be available – whether they browse in a brick-and-mortar store or online. With these expectations in mind, retailers implement different omnichannel concepts, such as ship-to-home, ship-to-store, ship-from-store, click-and-collect, and a range of return choices.
Without RFID, retailers are tempted to silo their inventory for each channel. They have one silo for the physical store network, a second silo for e-commerce channels, and maybe even another silo for wholesale, third-party logistics, or other channels.
This siloed approach happens because retail organizations grew over time, where different teams handled different channels and silos.
Supply and demand are often not in sync in these silos, meaning that inventory levels can fluctuate heavily. For example, a pink t-shirt in size S carried in the retail silo might not be replenished within the store network due to a lack of demand. While at the same time, the same pink t-shirt is sold out online.
The problems with this 'siloed stock' approach are obvious.
You might have inventory that meets your customer's needs and timing, but you can't see or access it inventory stays in silos, waiting to be sold. This problem also happens because stock isn't easily shared between these silos.
A pink t-shirt in size S in the retail silo might not be replenished within the store network due to a lack of demand. While at the same time, the same pink t-shirt is sold out online.
Why merge stock silos?
To counter this, retailers carry too much safety stock. Unfortunately, this leads to aggravated customers, giving away margin due to markdowns and an unnecessary environmental impact as much of the unsold inventory are sent to landfill.
Would it be possible to make all the inventory available for every channel?
Many retailers are investing in this new approach, which involves more than RFID. For example, Dutch retailer Scotch and Soda reimaged their warehouse operations to unify all their stock. RFID plays an integral part in this strategy.
A significant first step is making inventory in physical stores also available for online channels. Online channels include webshops, social media apps, shopping apps, search engines, and online marketplaces.
Using your store’s stock for digital channels has multiple benefits.
First of all, when your warehouses and DCs are reaching their capacity limit because of seasonal influences or other reasons, stores can act as small, local distribution hubs.
Utilizing your stores as ‘mini DCs’ lets you fulfill orders closer to the consumer. Instead of fulfilling an order from a DC, it can be picked up by a local courier in the city of your shopper. This approach reduces transport times since items will be sent from the closest store.
Using your stores as mini-DCs can bring a competitive advantage. An extensive omnichannel program, with services like last-mile or same-day delivery, can influence whether a customer buys with you or another online retailer. And it’s not only faster: shipping orders from a place closer to the consumer can also be a more sustainable strategy, which is increasingly important for customers.
As mentioned before, using your store’s stock is a significant first step into unifying your total stock in one big pool. In addition, because you treat your inventory in stores and online channels the same, you create more opportunities for online and offline sales.
This reduces the need for clearance sales and allows retailers to sell more without lost margins.
Especially at the end of the season, where stock is spread thin across DCs and stores, it’s a great feeling to be able to sell for full price because you know the location of each product.
It's true: retailers can already have an omnichannel strategy without RFID.
Many retailers use an Order Management System (OMS) to execute their omnichannel strategy. Retailers use an OMS to streamline and automate their order processing. It can send orders to different fulfillment centers, including DCs and stores.
RFID can bring the necessary item visibility and operational efficiency to these processes based on which omnichannel service a retailer wants to offer. So, what does RFID bring?
RFID brings three benefits to any omnichannel operation:
Let's dive into each benefit.
When a retailer has a 70% inventory accuracy, the order management system could allocate an e-com order to a store to fulfill. But with inaccurate inventory, there is a chance the store doesn't have the entire order, so the store will fulfill some of it, reject the other part of the order, and the system will select the next-best store location to fulfill the rest of the order.
At best, this results in a split shipment, but the order will be canceled in many cases.
Split shipments are not only a bad experience for the shopper who wants to receive their order all at once but also costly for retailers. As parcel rates have doubled in the last few years, split shipments are an unnecessary waste of time and money.
If retailers don't have RFID but still want to use in-store inventory for online channels, they implement a safety buffer.
The reason behind safety thresholds also called safety stock, is to guarantee that a product is available. For example, a safety stock of five means that an OMS can only route an order to a store if there are five or more items in stock. Or, an online shopper can only see and buy an item at a specific store when the retailer knows they have five in stock.
Stores carry a wide product range in low volumes to optimize space and visual merchandising. Consequently, the combination of low stock depth and high safety thresholds has negative effects: most of a store’s inventory won’t be included in online channels, as many stores don’t have that many items of one specific product.
Studies by Nedap’s data analytics team found that the average store only carries one item for over fifty percent of their SKUs.
This means that applying a safety threshold of just one – for the sellable stock in the OMS – excludes over fifty percent of the store’s product-size range!
Further research, including the inventory in DCs, gave similar results.
If just DC stock is used for online channels, retailers use only 50% of their total inventory levels. Therefore, applying a safety threshold of two already increases the product availability for online channels from 50% to 63%.
Using a safety threshold of just one increases product availability by another 10% - from 63% to 73%!
The business case of combining DC stock and store stock is becoming more and more apparent.
If you walk into a store and see a pink top, size S, all by itself, you expect a discount. But if you have that same top in 200 stores, you suddenly have enough stock to fulfill demand at full price. RFID enables you to have perfect inventory visibility, which allows you to sell merchandise at a higher margin.
Lastly, with all these new processes happening, the role of the store is also changing. Luckily, RFID has many features that smooth all these new omnichannel operations. Using RFID as store staff, it's possible to quickly:
Remember that embedding these new tasks in stores is not a chore that can be done on the side. For larger stores, which typically qualify as omnichannel frontrunners, this is a full-time job.
Let's dive deeper into these three use cases that happen the most when retailers use their stores for omnichannel operations.
All RFID handheld readers can provide haptic feedback, which means they can vibrate and make a sound. Store staff can use this function to search for a specific product. The closer you are to the product you are searching for, the harder it will vibrate, and the faster it will beep.
This feature is a massive benefit in daily store operations. For example, it makes it easier for staff to search for a particular size for a shopper or to search for items from a list, such as products that need to be returned after the season ends.
For omnichannel operations, finding items in the stock room for online orders makes picking and packing orders much faster and easier. And it's incredibly wonderful to find that item you thought you didn't have for an online order!
Watch the video below to see how you can search for items in the iD Cloud app:
With RFID, it's possible to assign statuses to unique items.
Item statuses indicate that something 'special' is happening with that product. For example, an item might be damaged. Or it's displayed on a mannequin or lent to a third party.
Around 90% of the items in a store don't have anything 'special' going on and are ready to be sold. But for a customer-centric shopping experience, you must consider the other 10% of items requiring more attention. In addition to knowing which items are present on the store's sales floor or in the stock room, an item's status gives even more context.
Let's explain status management with two main use cases for omnichannel operations:
1. Click and collect orders. Click-and-collect orders are special types of products: they are in the store but are not sellable, and often they've already been paid for. Especially if these items are present during an inventory, you wish to leave them out of your (financial) inventory. Assigning a status (like 'held') to these items can inform the RFID system that these items shouldn't be included in the inventory count.
And when click-and-collect orders are sent from the DC to the store, it's possible to assign these statuses in the DC in bulk.
2. Excluding products from your stock pool. Because a product might be in the store, that doesn't necessarily mean it's ready to be sold. For example, items that are on display, such as on a mannequin or in a vitrine, are typically not directly accessible to be sold. With a status such as 'On display,' you can exclude all the products with this status from your sellable stock.
In conclusion, statuses enrich real-time inventory data with more context, giving you all the context you need to open up your whole inventory to e-commerce.
In addition to knowing which items are present on the store's sales floor or in the stock room, an item's status gives even more context.
About status management
Buy online, return in store (BORIS) is vital for retailers because it allows customers to return online purchases in a physical store, saving customers time and effort and reducing the number of returns that need to be processed through the mail.
With RFID, retailers can quickly and easily identify the item being returned, verify that it was purchased from their store, and ensure that it is still in good condition. This eliminates the need for manual scanning and sorting of items, which can be time-consuming and error-prone.
RFID makes the returns process in-store more efficient in two ways:
RFID prevents return fraud by providing retailers with detailed information about each item in their inventory, including its unique identification number, purchase date, and location history.
This information can be used to track the movement of items from the point of purchase to the end of return. So, for example, if someone returns items that were never purchased, retailers can flag these transactions and take steps to prevent future fraud.
With RFID, updating stock levels after a return is more manageable, allowing you to restock returned items quickly.
This ties back to the topic mentioned at the beginning of this article: breaking up the inventory silos. If you have real-time inventory visibility, it doesn't matter where the returned product was sold; it could be in another store, online, or even third parties.
Although retailers can pursue an omnichannel strategy without RFID, the business benefits of RFID in an omnichannel strategy are paramount.
An item might still be available in the store network while sold out online. Merging the store's stock and the stock in the DC (and eventually other silos) lets you sell more.
Instead of locking stock up in a store as a 'safety buffer' for e-commerce channels, where it only collects dust, products can be made available to sell online. It sells at higher margins, leading to less dead stock and less waste.
Using your stores as mini DCs takes the pressure away from your DCs, enabling faster transport times and can make your fulfillment more sustainable.
RFID brings the necessary stock accuracy to trust inventory data again. This means no more splitting, rerouting, or canceling orders.
RFID optimizes a lot of in-store processes. First, it makes inventory counts faster and makes processes like finding items and replenishing items more efficient. With advanced capabilities like status management, you can exclude items from your stock pool and really up your omnichannel game. And finally, using RFID at the Point of Sale increases the speed of checkout and return handling.
Finally, RFID leads to increased online sales, as more products are available through digital channels than before.
The business case of RFID in fashion retail start with inventory accuracy, which leads to better product availability, which guarantees an increase in sales. Find out how this works in the chapters below.
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