How American Apparel improved sales and inventory management with RFID

    How American Apparel improved sales and inventory management with RFID

    US fashion retailer American Apparel is using the Internet of Things (IoT) to improve in-store inventory accuracy, store design and customer sales. And yet the company insists that this is just the start of its digital revolution.

    Since forming in Los Angeles in 1989, clothing manufacturer, designer, distributor, marketer and retailer American Apparel has been a mainstay of US retail, a trusted and respected brand in the mall.

    However, in more recent times, the retailer has emerged as something of a digital and innovation leader, thanks to its increased focus on mobile technology.

    Two years ago, the company started rolling-out the first of millions of RFID chips, complete with accompanying scanners, so to have a better view of in-store inventory and customer sales.

    Brian McHale, the firm’s Chief Information Officer, told Internet of Business that the company has already seen numerous benefits from the programme, which has since become a multi-million-pound project.

    “Our inventory accuracy is now 98 percent, close to 99 percent, which is incredibly impressive,” said McHale, highlighting the use of RFID tags.

    “We’ve got approximately 240 stores worldwide fully deployed with RFID tags, and around 15 million tags in total. We’re starting to roll-out the scanners so that each store is outfitted with RFID scanners.”

    These scanners are typically installed in store ceilings, with the tags on the items of clothing so that store managers can see what stock comes and leaves the store, which items are sold, and what brand positioning works best to improve sales. Using RFID, American Apparel can also ensure the store is laid out in accordance with floor plans.

    “It gives us a virtual view into the store in terms of we know how it’s designed, how it’s performing, what’s selling, what’s not selling, to identify shrinkage and to get a much tighter hold on our inventory. It also gives our planning and forecasting groups much better visibility,” said McHale.

    “The value for us is the data…looking at the data and seeing what merchandise we have in stores, and to understand what we need to do in terms of positioning.”

    American Apparel took the leap with IoT two years ago when RFID tag prices started to fall, although McHale is keen to stress that getting board support was a crucial first step along the way.

    “This is really strategic investment for company. I think being an early adopter has given us a competitive advantage.”

    Changing staff roles

    As well as increased efficiency, American Apparel has also been able to reduce man-hours on stock management, and even change the job roles of certain members of staff – something the CIO describes as a ‘game changer’ for improving sales.

    “A lot of their time was spent on inventory, positioning, checking back stock and ensuring items were where they were supposed to be. That’s the benefit [of IoT] – now they can take their hours spent on the inventory process and dedicate it to more sales-orientated roles in store, or fulfilling online orders.

    “It just takes that burden away from them. We’d really rather they were selling…and this is an opportunity for them to do that.”

    McHale will detail the numbers of hours and costs saved, as well as the expected sales uplift, at The Internet of Retail, which takes place in London in February 2016.

    The future

    McHale, who expects the average payback on RFID investment to be less than five months per store, has big plans for American Apparel in the future too.

    He says that the retailer is looking into deploying a “multi-platform solution” incorporating video, store traffic data and Beacons – whilst analyzing all of this data in one place. The retailer is also considering the use of NFC and Bluetooth on mobile phones.

    “We want to have the ability to look at sales, what’s happening in stores in data on merchandise, also want to take a look at combine this with traffic data.”

    Part of this forward-thinking approach will see look at how many times an item has been tried on, returned, or when a customer has left the store without purchasing. McHale also believes that the RFID tag could be incorporated in the garment itself, although for now the firm is looking to simply reduce its size.