Study Finds Value for RFID in Visual Merchandising
April 13, 2018
Courtesy of RFID Journal
With radio frequency identification deployments tracking retailer inventory and out-of-stocks on display shelves, some in the RFID industry are wondering where the next level of benefit for the technology may come from in retail. The RFID Lab at the University of Parma has released the results of a 12-month study that investigated the impact RFID technology could have on store sales by providing visibility into how well merchandise performs at specific store display locations.
With the technology, university researchers and an Italian men’s clothing retailer tracked what was displayed in each area of a store, and then compared the net profit of the sale of each piece of merchandise against the cost of displaying that item. The retailer has asked to remain unnamed.
The study, led by the university’s RFID Lab, examined how RFID tag reads, as well as the data culled from those read events, could enable stores to optimize their merchandising in the store, map out floor performance and boost sales as a result. In fact, the test-site stores, using the RFID data to better manage their displays, saw about a 3 percent increase in sales over expected sales, says Antonio Rizzi, a University of Parma supply chain management full professor, and one of the study’s co-authors.
Not all parts of a store are created equal, Rizzi says, and understanding how that space should be used can make a large difference in a store’s sales numbers. He notes that retailers can view the sales floor as a valuable space being rented by the merchandise on display. Every item needs to generate sufficient revenue to pay for the cost of the space it occupies, while still providing a profit. “RFID is an enabler,” Rizzi states, “to give the visibility to understand what is worth displaying in a specific location and what is not.”
Visual merchandising is an important science, according to the study’s authors, since it can directly determine the rate of sales. They note that impulse buying in apparel and fashion is based on an attractive product display. Stores cannot always easily measure the effectiveness of their display, however. Simple sales results do not enable the breaking down of each display’s effectiveness.
The study was conducted at three stores: two in Rome and another in Milan. The technology, deployed in the spring and summer seasons in 2016, is still live in those three stores. About a half-million tags have been tracked since the system was taken live at those three sites.
At each store, products were tagged with Lab ID EPC UHF RFD hang tags. Store associates were provided with Zebra Technologies handheld readers. Researchers also installed Impinj fixed readers at the point of sale, with MTI near-field antennas.
The University of Parma chose not to deploy overhead readers to capture tag zonal location in real time, in part because the stores’ architecture did not allow easy installation or reliable reads in all locations. The study aimed to determine whether RFID could go beyond helping retailers understand what is in the store, or if it is on display, as well as where in the store it is being displayed, and the resulting sales rates.
Researchers broke each store into between three and seven zones, including the front window, the entrance area and the open floor. Each day (and, in some cases, twice a day) sales associates used the handheld reader, running cloud-based RFID middleware provided by Id-Solutions, to manage the data, in order to indicate the zone in which they were counting inventory. They then began reading tags within that area. When necessary, the software automatically adjusted the power level to ensure that it only interrogated tags within that zone. The system data was then compared against point-of-sale data coming from tag reads as products were sold.
Based on the resulting software analysis, merchandise (based on product model and color) was broken into three categories, according to the ratio between their display location and sales rates: money makers, indifferent and money losers. Each category was identified based on a ratio of rate of sales against the cost to display a particular item. Those items in the indifferent or money-losing category could then be moved to another display area or be removed entirely. In fact, Rizzi says, only merchandise that provides to be money makers is worth displaying—and the longer items are displayed, the more important this is.
Once a week, store managers reviewed the sales data, which was compared to other factors, such as the number of people visiting the stores, adjusted to factors such as weather or a national holiday. The managers then used the data to strategize the rearranging of displays to further increase sales. The testing took place throughout 2016, and the researchers studied the results in 2017 before publishing them this year in the International Journal of Technology.
Several interesting data points resulted, Rizzi reports. For instance, they found that 86 percent of sales were generated from displays on the sales floor, while only 14 percent of sales came from products stored in the back-room area. That, he says, indicated that even in retail stores with high sales assistance, the sales associates were not generating many sales by recommending products that customers were not already viewing on the sales floor. “Before this,” Rizzi states, “it was assumed store associates could trigger sales” at fairly high rates, but the evidence appears that visually seeing a product is key to a sale.
When it came to sales of individual product lines, two of the three stores focused on knitwear, which was initially a money loser. They found that the knitwear was being displayed in slow-moving areas, however, and after rearranging their displays, sales of the products moved into the money-maker category with an increase in sales of 2.3 percent at one store, and 3.8 percent at the other.
At a Rome store, managers moved some of the money-maker products displayed in the front to a slower-moving sales area further from the entrance, in order to entice customers to walk through the whole store to reach popular items, thereby increasing sales of some of the merchandise that was on the route to the high-sales items moved to the back. Those items moved to the back did not lose sales, the system found. The data collected from the RFID-enabled stores was shared with the additional stores owned by the menswear retailer, in order to boost sales across all store locations.
Since the pilot, the company has been equipping 25 more of its stores with RFID technology. The visual merchandising model for RFID may be best for small-sized fashion retail and luxury outlets, Rizzi says, where display space is limited and potentially costly for the retailer. He refers to visual merchandising as the potential third wave of RFID use cases, following the capture of data regarding goods moving from back room to the store front, and then of a full inventory count at a store to enable omnichannel sales and prevent out-of-stocks.
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