Can Item-Level RFID Pay For Itself By Cutting Theft? Well, Sort Of
Written by Frank HayesAccording to American Apparel, item-level RFID can pay for itself by cutting employee theft. The 285-store chain’s VP of Technology, Stacey Shulman, told RFID Journal that in stores using RFID for inventory accuracy, internal shrinkage has dropped by an average of 55 percent. (The chain started by putting RFID in 50 of its stores with the highest shrinkage rates.) As a result, the savings covers the deployment cost. Of course, that’s something of an accounting trick. Deploy any surveillance technology in a store with lots of employee theft and some thieves will get nervous and stop stealing—for a while.
Shrinkage drops, and IT can declare that RFID’s ROI is 100 percent. Then, by the time the thieves start stealing again, it’s hard to argue with item-level RFID’s other benefits in better accuracy and faster replenishment, which is why Macy’s is pushing item-level RFID hard. Besides, the theft rate might never return to its original levels, right? It’s also wise to remember that the only retail people who care about ROI are the people can say “no”: your CFO’s team. And for IT projects, they check ROI once. So if it looks like thefts have been avoided, you get the credit. And given that the team won’t check again in four months, you’ll likely never get dinged if the reductions were short-lived. Short attention spans can be your friends.
-Marc
October 14th, 2011 at 2:05 am
Frank, the article was about the unexpected results of RFID and how reduction of internal shrink was something that American Apperel noticed as a side effect. Their ROI was not based on Shrink reduction but on the other benefits of RFID that include labor reductions, improved sales due to better in-stock percentages and better customer service.
The difference between putting surveillance cameras in stores to reduce theft and putting in an inventory control accountablility system that can track daily discrepancies between actual physical counts and calculated counts in the point of sale system are radically different. The paradigms should not be compared with regards to their long lasting impacts. Cameras are easier to bypass than a system which is able to pinpoint exactly which serialized items left the building without being purchased. But I do agree that cameras and surveillance equipment typically only have a temporary impact on theft.