Merchandise visibility: the future for the apparel industry

This article is brought to you by Retail Technology Review: Merchandise visibility: the future for the apparel industry.

By Neil Matthews, Vice President Northern, Central and Eastern Europe, Checkpoint Systems
 
The apparel market has undergone dramatic transformations over the last four decades, both in terms of the size and scope of its manufacturing base and in the technologies used to move the industry forward. Yet even more profound changes have occurred in the expectations of the consumers who sustain this massive and ever-expanding industry.
 
Flashback to 1969. Consumers were highly selective in their buying habits, choosing one or two outfits for special occasions and preferring to repair before replacing. Distribution channels catered to the whole family and most clothes were manufactured locally. In short, consumers purchased less often but spent a larger overall proportion of their income on clothing. Back in 1969, the first mass-market brands were still to appear on the scene, volumes were much smaller and lead times significantly longer.
 
Forty years later, the consumer demands unlimited choice and rapid product turnover and the effects of this shift in their expectations have been considerable. Today, the apparel industry has become one of the main drivers of a new global reality, with intercontinental supply chains, tremendous product variety and short product life cycles. In 2009, apparel retailers are facing harsh competition while the current global economic crisis is providing new challenges for them in their efforts to fight for the dwindling consumer dollar. The consumer of today demands the right product at the right time and at the right price. Anything less than that will lead to a dissatisfied customer and a lost sale.
 
Much more than a simple label
The global nature of the apparel supply chain, with the vast majority of manufacturing in Asia and widespread distribution in markets in Europe and America, provides enormous logistical challenges to apparel manufacturers. In response to these new complexities, the labels attached to products have evolved into much more than the simple price information ticket or brand tag of the past: Apparel labels now contain the information that helps to move millions of garments daily across the world and have become a single source for branding, identification and protection. Attaching these advanced labels at point of manufacture is the only way to ensure consistent branding and ticketing informationincluding price and other necessary product-related informationworldwide and in several languages and currencies.
 
Todays labels also provide the answer to another aspect of great concern to apparel retailers: shrink caused by theft. The growth of the Internet has opened up new avenues for resale, causing concerns about the impact that Organized Retail Crime (ORC) is having across a long and vulnerable supply chain. Meanwhile, the explosion in consumer choice for attractive branded goods is encouraging a growth in opportunistic theft in stores. The most recent Global Retail Theft Barometer, produced by the Centre for Retail Research, indicated that the cost of shrink from theft for the apparel industry represented 1.84% of retail sales. According to the report, fashion accessories were particularly at risk from theft, followed by womens dresses, shirts and lingerie. The incorporation of effective Electronic Article Surveillance (EAS) circuits within labels to protect products in store continues to be an essential means of managing shrink in a complex retail environment.
 
But what of the future? Now, the apparel industry is looking to a new generation of labels to tackle this issue in another way: through the vastly improved control of merchandise provided by RFID.
 
Prioritizing the consumer
Technological innovations have helped apparel manufacturers and retailers to make the shift towards a new global reality where customer choice and service are not just priorities, they are the difference between success and failure in a highly competitive market. Today, the apparel industry continues to change, faster than ever. The job of todays solutions providers to the global apparel industry is to keep innovating to provide the tools, ideas and services that will continue to ensure that their clients can keep responding to these new challenges and opportunities, helping them to drive growth over the next forty years.
 
Facing up to a new economic climate
The current economic climate has been particularly harsh for apparel retailers, who now find themselves fighting over a shrinking consumer base. With shoppers cutting back on their expenses, retailers must have the merchandise that customers want when they come in to the shop. Every sales opportunity is vital. Added to that, the tightening of the credit markets means that retailers are facing higher inventory costs: they must sell what is on the shelves and can no longer afford to be complacent about over-stocking.  Aside from these in-store challenges, the complex global supply chain is providing another potential hurdle for apparel retailers. Increasing outsourcing leads to more potential packing and shipping errors and poor visibility across the supply chain and a lack of clear inventory data in store means that retailers are often unsure if they are ready to adequately respond to the demands of todays discerning consumer. One word sums up the solution to the fundamental challenges of outsourced manufacturing, supply chain complexity, and in-store operations: visibility.
 
Merchandise visibility represents a step change for apparel retailers: A comprehensive supply chain and in-store solution now exists that enables retailers to improve operations, sales and margins. Retailers can now gain unprecedented real-time merchandise visibility, from source to store.
 
Merchandise visibility offers an end-to-end solution for closed-loop apparel retailers. Using RFID technology and software, retailers can know the exact inventory situation in their stores, see what articles are on the shelf and what needs to be re-stocked, while responding instantly to the needs of consumers so that they will never miss another sales opportunity again. Retailers can now guarantee that popular lines are always in stock, anticipating and adapting to demand to ensure, for example, that consumers find the right color and size at the precise moment they need it.

 
Checkpoints merchandise visibility solution
The key words are efficiency and sales. Studies of a merchandise visibility pilot project carried out by Checkpoint Systems with a major European retailer demonstrated that replenishment of out-of-stock items was improved by up to 37%, shipping errors were virtually eliminated and, overall, sales improved by up to 7.6%. It is not surprising that every closed-loop apparel manufacturer has taken note and started to think about what the merchandise visibility-enabled store of the future will look like.
 
As Checkpoint celebrates 40 years serving retailers, this is a useful moment to reflect upon how we want to support our customers now, and in the future. At Checkpoint, we understand the synergies that exist between effective loss prevention, better merchandising and enhanced consumer satisfaction. Every point of this golden triangle of benefits needs to be in place for retailers to grow their businesses, by being able to expand their range of merchandise, improve their in-store marketing strategies and keep winning new consumers by constantly working to provide a better service, and a more open and friendly shopping environment.
 
As new technologies like RFID become commonplace, apparel retailers have the opportunity to enter into a new age of digital retailing, where every product can be tracked and traced along the supply chain and the store environment is revolutionized by real-time data technology giving them remarkable insights into the behavior of their consumers and the state of their businesses. Forty years on from its birth, Checkpoint is ready to join retailers and their CPG partners at the forefront of this new era in retail technology.