American Apparel Case Study

American Apparel Case Study Image

American Apparel introduce RFID into their stores

Initial Push For Rfid

The whole concept of RFID was introduced to the company by leadership. There was a challenge to have the right items on the shop floor.

The actual RFID project started with in-store replenishment processes – transferring items from the backroom to the front of the store.”

This is a contrast to many other retailers who choose RFID to achieve visibility on item-level, all the way from manufacturing or DC’s (distribution center) to the shop floor.

The Challenge

Before RFID, American Apparel had the information that the products were in the store, but not whether they were physically on the sales floor or not. American Apparel usually displays one of each size and colour of a certain style, but without the right technology, keeping up with that promise was impossible. If a black S-size T-shirt got sold, it would probably take some time before a new one would emerge on the sales floor, and until then, that T-shirt is unsold in the backroom.

The stores were forced to use a so called “perfect fill process”, which meant matching and comparing items to what should be on the sales floor, 2-3 times a week after opening hours.. These processes took 4-5 hours with 4-6 employees. Another problem was stock accuracy. The shrinkage couldn’t be monitored, people often count wrong and similar items got mixed up causing inaccuracies in the stock. New business processes got developed but it soon became evident that what was needed was technology that insured that the right items were found on the sales floor. Some people have a knack to seeing instantly what is missing on the sales floor, but that is just something you cannot train people to do. American Apparel needed to solve the issue on how to replenish quickly and efficiently. The items missing on the shop floor would not get sold.

From The Point Of View Of A Retailer: What’s The Excitement Of Rfid?

RFID not only solves technical issues, it also enables improved personnel management. It allows you to distribute talent to all your stores. The right amount of staff members in the right places doing more pleasant and challenging work tasks. Also, when the tedious counting and other repetitive tasks are off the menu, the workers on the sales floor can concentrate on sales and less backroom workers are needed to care for stock accuracy.

Kris also mentioned that he feels that no person can accurately manage the inventory without RFID. Even with barcode applications it is only best guessing, not to mention with the pen-and-paper method. RFID provides information for the in-store store manager, stock manager or anyone in charge of managing inventory and the stock accuracy and movement of items from in- and out of stores.

RFID is a tool for drilling down to the fine level information in order to reach better event stock accuracy percentages that ensure the right items are on the right place in the right shop at the right time, leading to increased sales. Kris tells about an Inventory Manager (stock manager) in the UK that was amazed of the fine level information he got with RFID and understood how to use it for his advantage. Trying to manage your stock without RFID is just pushing your product around without sales results.

Impact On Operations

Store Inventory

The high nineties accuracy is reality today but before RFID at American Apparel, the accuracy used to be “as good as possible” without any real knowledge of the exact numeric values of the items. Kris claims that for any retailer not using RFID, the actual stock accuracy figures are just best guesses. RFID also prevents items from being in locations where they shouldn’t be or are not needed; now they are exactly where they get sold the fastest. This can mean replacements in-store or between stores.

Replenishment Process

With RFID decisions, on the basis of the inventory, to perform DC/manufacturer replenishments are educated and in the stores everything that should be on the shop floor, is there.


Inter-store logistics is more efficient and there are no more lost items.

Customer Service

• RFID reduces repetitive tasks and frees up staff to do sales.
• Misplaced items aren’t a big problem anymore.
• Out-of-stock situations are greatly diminished.
These together ensure improved customer services.

Online Sales

• RFID enables omni-channel sales.
• RFID offers the retailer the ability to sell items from online and to pick these items from store level if not on warehouses.
• RFID gives visibility to the full estate of inventory spread across every single store. This information is trustworthy, not just guesses.

Changes In Processes And Equipment – Before And After Rfid

American Apparel used to have more manual processes, mainly in counting, and of course some barcode operations. A barcode system was used for receiving boxes and for POS (Point of Sales) operations. There was no individual scanning of the items on the sales floor.

RFID scanning of each unique item is fast and requires only a little manual labor and therefore it got introduced to the store front to be done 2 – 3 times a week. The biggest change, equipment wise, was the replacement of the POS system. For the store front and the backroom the hardware changes were more about adding readers and changing the processes in instead of changing the system.

How Does Staff React To New Equipment?

It makes no difference whether you’ve been working in-store for long or just started, the learning curve for RFID is the same. It is due to the new business processes. When you hand your staff a reader and ask them to trust that it reads correctly, it will be hard for some staff members. They will rise up to block this, even when they’ve been proven wrong. And therefore, you are bound to lose some staff.

You will, on the other hand, witness some amazing changes in your staff’s attitude as well. E.g. staff members who have been blockers against RFID for years and done nothing but point out problems and refuse to use RFID properly. Suddenly, they have turned into the biggest RFID supporters. Resistance towards change and problems in adapting to new ways to work and new processes is just human nature and you have to deal with it patiently and with a plan. You will need an approach to manage change.

Resolving The Issues

To ensure as smooth a project adoption as possible, you have to make sure of a few things.
• Engage the employees as early as possible in the project
• Open dialog, give the employees a voice in the process
• Give the employees a feedback possibility
• Ensure that venting their issues and needs is possible for the staff
• Be adaptive to problems and challenges along the project

To Go Rfid Or Not? What Advice Would You Give To All Who Consider Rfid In The Fashion Industry?

Kris says that he cannot imagine anyone in this industry, who depends on keeping track of items, choosing not to use RFID. Objectively, there just is no other way to have a real sense of trust in the fact that you truly have a certain item or not. If it is important for your business to keep track of your items, go live.

Kris feels that the price of the tag is no longer an issue. It is just nothing to care about. We have already addressed this same topic in an earlier blog post, “The magic 5 cents per tag” and came to the same conclusion; the tag price is no longer an issue for the apparel fashion industry.

The technology is ready and the standards exist. In the beginning of the project some store staff members felt that RFID was failing all the time, which clearly were an early adopter problem and not a valid argument against RFID anymore. RFID helps spot mistakes sooner and they can be fixed in time; this is not the case with manual labor.The data losses can be fixed easily and fast simply with a new quick scan.

As a conclusion Kris Doane states:”Even a bad RFID implementation will still give you such great benefits compared to not having it. You will not be making decisions based on GUESSES anymore”. And Kris stands behind this claim.