Profitability Strains

Profitability Strains

RFID can address shrinking inventories

  • By Michael Guiher
  • Apr 01, 2017

A number of recommendations to address retail shrink came out of the 2016 Retail Holiday Season Global Forecast, including the following:

  • Maintain operational execution standards, while being vigilant regarding financial performance expectations.
  • Update planning and financials to properly account for advanced deliveries of seasonal products, since the seasonal build starts earlier now than in the past. Enhance oversight to seasonal/holiday merchandise to ensure financial goals are achieved while cost center controls are contained.
  • Properly train seasonal help to manage the increasing complexities of the season.
  • Employ technology to stabilize inventory loss and ensure on-shelf availability while enhancing product protection countermeasures.

This last point is where RFID can play a critical role.

For most retailers, wholesalers and distributors, the space to store inventory is the largest, yet single cost of doing business. From purely a cost viewpoint, fewer inventories mean lower costs. At the same time, unproductive or “dead” inventory as well as insufficient inventory leads to out of stocks, lost sales and unhappy customers. So balancing these two factors is critical to profitability and growth, particularly in an omni-channel environment.

Additionally, retailers are increasingly leveraging RFID for its loss prevention (LP) benefits. They are investigating RFID for numerous reasons, including design considerations, store expansion plans, understanding and addressing patterns of theft and increasing the value of RFID inventory management initiatives.

Consider the following RFID LP applications.

Open Entrances

Mall stores often have open entrances, with merchandising close to the exit door. For example, it is not uncommon to see mall stores and luxury stores with open-entrance LP solutions seamlessly integrated into the store design to enhance the shopping environment. RFIDbased EAS provides format and usage flexibility.

Additional Insights and Analytics

Beyond informing retailers that a theft event may have occurred, RFID can provide important information about quantity, value and description of the inventory, enabling restocking to ensure shelf availability and additional countermeasures to prevent future loss.

Consolidating Technologies

RFID-based EAS can serve as a “future proof” technology that can accommodate new formats and information sharing down the road. This lowers the incremental cost of RFID while expanding its benefits to include LP.

Organized Retail Crime

RFID is a new tool in the fight against ORC, providing differentiated alarms for high volumes of merchandise and high-value items leaving the exit door, as well as analysis to help prevent future incidents.

Inventory Management

When a retailer uses RFID for both inventory management and LP, the same tags can be used for both, delivering significant cost savings and labor savings for the organization.

For shoplifting and ORC, using RFID-based detection and prevention can provide the following benefits:

  • Item-level detail on what was stolen, enabling re-stocking to improve on-shelf availability.
  • Differentiated alarms – by quantity, value of items stolen.
  • Protection for multiple merchandising formats including mall stores and luxury stores.
  • Automated, chain-wide alerts for ORC.
  • Ability to analyze patterns of theft over time and respond.

Internal Theft

In addition to shoplifting, RFID is well suited to address internal theft: It extends EAS to the dressing room, back room and other “pre-POS” areas of the store. The technology can be used to improve inventory visibility throughout the store. And it offers the ability to analyze patterns of theft over time, enabling retailers to respond accordingly. Paired with effective training and operational procedures, RFID is a proven piece of the overall puzzle in fighting retail shrink.

This article originally appeared in the April 2017 issue of Security Today.

About the Author

Michael Guiher is the senior director of Global Product Management for Checkpoint Systems.

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