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German retailer Gerry Weber
leads the way in RFID innovation

05/02/11 | John R. Johnson | email

Gerry Weber has been a driving force behind item level retail tagging. The German retail chain has taken an aggressive stance on RFID and became the first overseas retailer to source-tag all of its products earlier this year when it began tagging all 28 million items that travel through its supply chain.

As both a manufacturer and a retailer of women's fashion items, Gerry Weber has added incentive to tag at the source of manufacture. In a recent interview, CIO Christian von Grone explained that in phase two of its RFID program, Gerry Weber will extend the use of RFID to improve front of store and back store operations.

Gerry Weber is also making its RFID software interface available to all apparel manufacturers, and expects utilize cutting edge RFID systems to provide a near real-time view of inventory and to allow customers to shop with interactive fitting rooms.

Grone says that Gerry Weber is the first company in Germany, and possibly in Europe, to embed RFID tags into the garment care labels that are sewn into apparel items individually. One single label provides fabric care instructions, track and trace, and the electronic product code to manage inventory.

The retailer, which operates more than 400 stores and 2,000 shop-in-shop outlets, decided to tag of all its garments so it could gain greater supply chain visibility, in addition to the store level benefits of RFID.

The company invested about $2.8 million to tag all its products. Grone notes that the tagging represents an 8-9 cent premium above the 4-7 cent (Euro) cost to produce the conventional care label that is affixed to every garment. Gerry Weber recently concluded an additional investment of about $2.7 million Euros to roll out RFID, and expects payback in two years.

"We made the decision to source tag everything so that we can make full use of RFID in our logistics process," says Grone. "Otherwise we would have to split production and split warehousing between owned, retail and wholesale volume, and this would add complexity to our processes. We want to simplify processes with RFID."

Part of the use case for Gerry Weber was the expectation that as tagged goods arrive at retailers, they will begin to use RFID as well. Therefore, Gerry Weber profitability is bound to improve as a result of having more products readily available at retail outlets. Grone says Gerry Weber has already seen several retail pilots develop since it went to 100 percent source tagging early this year.

"We've been 100 percent source tagging since January and in those three months I've had about as many questions about RFID from retailers as within the last year when we were in the press and had big press conferences and presentations," says Grone. "The retailers start to believe that the technology is working when they see the chips in the garments. We're seeing the first pilots with mid-sized retailers. The larger players are undecided."

Grone says that the retail pilots are starting small, with a store using a single handheld reader to start off with. He stresses that it is not important to capture all the benefits of RFID at the outset, but to just gain an understanding about what the technology can achieve.

Although Gerry Weber understands the value that comes from having stock on the store shelves at all times, a major driver for the source tagging program was that electronic article surveillance (EAS) could be incorporated into the RFID tag as well, eliminating the added cost of applying a second tag to the garment.

"The biggest driver is replenishment and out of stock minimization and all those other things that we know about, but it wouldn't have worked without the EAS part," says Grone. "The use case just wouldn't have worked without the EAS component."

Gerry Weber still has inventory carrying the old EAS tags, and will funnel those products through its supply chain until June. At that point, the EAS security gates in stores will be removed, and the chain will rely solely on RFID for the EAS security function. The RFID tag will not be deactivated until the garment is purchased, allowing an alarm to signal if someone leaves the store without paying for an item.

When it comes to phase two of its RFID program, Grone says Gerry Weber will first look at replenishment programs at its larger stores. "If we don't have an item on the shelf but in backroom storage, we have to replenish it as soon as possible, thus enabling further sales," he says. That's no surprise, as replenishment and reducing out-of-stocks is a major driver for every retailer.

Also in the works is a pilot for using intelligent fitting rooms powered by RFID, with touch screen monitors that display information about the item the customer brought into the fitting room. By utilizing the touch screen, customers can signal a store associate to bring another size or color of the item to the fitting room, enabling a better customer shopping experience.

Gerry Weber is currently in the process of establishing the software interface between manufacturers' software and its own hybrid supply chain management tool. So far, two software manufacturers have agreed to implement this in their software. "We expect this to be up and running in June, with more to follow," says Grone. "By the end of the year, I expect about 30 percent coverage with our suppliers," including all of the major ones. That will enable source tagging to spread to other apparel manufacturers at a quicker pace.

Another phase two project includes piloting the Mojix solution at one store, most likely to begin in September. The Mojix STAR system enables organizations to use inexpensive UHF passive RFID tags for real-time location tracking, bringing economic advantages to supply chain management and asset tracking. By using Mojix, Gerry Weber will gain a near-real time view of its inventory, enhanced by location information. Store associates, for example, could generate a list of misplaced items in a store, and link product placement information with sales data to enhance visual merchandising operations. Furthermore, the Mojix system could replace the store's RFID EAS gates.

Gerry Weber will also likely look to enhance EAS functionality with a "tamper-protect" tag, using the new NXP G2xx generation of RFID chips.

"We are very excited about new technology," says Grone. "The interesting part is how do you get the industry to take part on this? Luckily in Europe, we have many fashion companies who have at least 20 percent owned retail as well. Companies like VOS Sports or Oliver that have 10-20 percent volume through their own retail outlets can make RFID pay off in their own retail operations, and also by helping the other 80 percent or so of their volume going to the broad market. Therefore, all retailers benefit."

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