Fashion Retail Tackles Rising "Shrink" Problem with RFID Technology
Fashion Retail Tackles Rising "Shrink" Problem with RFID Technology
Fashion retail faces a rapidly expanding shrink problem in recent years. According to an analysis in SupplyChainBrain, inventory losses are no longer limited to in-store theft; they have become a systemic issue across the entire supply chain, spanning from production to warehouse, from store backrooms to e-commerce. Data from the National Retail Federation (NRF) reveals that shoplifting cases increased by 93% during 2019–2023, with associated financial losses rising by 90%. Total annual shrink losses are estimated to reach approximately $100 billion USD.
According to a recent survey by Avery Dennison involving 250 retailers, more than 64% of participants identified "inaccurate or incomplete shipping information" as one of the root causes of shrink. Uwe Hennig, senior executive responsible for the company's global retail segment, summarizes the issue as follows:
"If you don't know what's missing, you can't restock it, and that's a double loss."
This approach underscores that shrink represents not just lost product but also missed sales opportunities.
According to Hennig, the nature of shrink has also changed. Losses that were historically driven primarily by in-store individual theft now emerge at manufacturing locations (such as China and Bangladesh) and in the early stages of the supply chain. The statement "On the whole journey, there are a lot of opportunities for product getting lost. It happens everywhere." demonstrates that loss is now an end-to-end problem.
The Core Issue: Lack of Visibility
For fashion retailers, the fundamental problem is identified not as theft but as information gaps. Systems may indicate a product is in the store; however, it may not physically be on the shelf. The product could be:
left forgotten in the store backroom,
transferred to another store but not recorded,
rapidly depleted following an intensive campaign
This situation becomes even more critical for omnichannel retailers, as online customers quickly turn to competing sellers when they cannot find their desired size, color, and style.
Many retailers have sought to improve inventory tracking by providing store employees with mobile devices. However, according to Hennig, manual data entry typically produces incomplete or outdated information in practice, compounding the error.
RFID: An Old Yet Rediscovered Solution
According to Hennig, the solution rests on a technology that has long existed but was late to be adopted in retail: Radio Frequency Identification (RFID). With roots tracing back to World War II, RFID received its first patent 40 years ago, yet its widespread adoption for inventory accuracy has accelerated in recent years.
With traditional barcode systems, retailers typically conduct physical inventory counts once a year; this process is expensive, time-consuming, and produces results that quickly become obsolete. With RFID, brands such as H&M and Adidas can perform inventory counts every two weeks or every 10 days.
"That means you're updating the system with real data," says Hennig.
RFID not only improves stock accuracy but also plays an effective role in antitheft applications. When used alongside cameras and ceiling readers:
products removed from the store without payment,
fraudulent return attempts,
fitting room–checkout discrepancies
can be detected. Hennig notes that machine learning algorithms enable analysis of products entering the fitting room but never reaching checkout, providing valuable insights for both loss prevention and understanding customer behavior.
Cost Versus Loss?
Although RFID tag costs have declined over the years, they remain a significant investment. However, for retailers, the real risk lies in lost sales and customer dissatisfaction. According to Hennig, a five-cent RFID tag may seem unjustifiable for an inexpensive item; however, the cost loses its meaning if it ensures the customer finds what they are looking for.
Today, RFID adoption rates in fashion retail in the US and Europe have reached 70%. Technology originally used solely for inventory management has now become a core component of innovative retail models such as shrink control, self-checkout, and checkout-free stores.
Strategic Conclusion
Rising shrink rates are compelling fashion retailers to place technological solutions at the center of operations. In this context, RFID is positioned not merely as a tracking tool but as a strategic infrastructure element that delivers visibility, speed, security, and data quality.
Key Takeaways:
Shoplifting cases increased by 93% between 2019–2023; annual shrink losses amount to approximately $100 billion USD.
Shrink now originates not just in stores but across the supply chain.
64% of retailers identify incorrect/incomplete shipping information as a primary cause.
With RFID, inventory counts can be conducted every 10–14 days.
RFID plays a critical role in shrink control and checkout-free store models.
RFID adoption rates in fashion retail have reached 70%.
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News Link: https://www.supplychainbrain.com/articles/42884-fighting-retail-fashion-shrink-with-rfid-technology
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Author: SedatOnat.com
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