Introducing new RFID-enabled indicators to evaluate the performance of fashion retailers

The criticality of Out Of Stock (OOS) situations has long been acknowledged in the fashion and apparel sector, where, due to short lifecycles of products and high unpredictability of customers' demand, OOS often become lost sales and reduced revenues. Although the sales floor areas of mass retailers are constantly monitored by salespersons that visually control the OOS or near-OOS Stock Keeping Units (SKUs), and replenish them accordingly, OOS still causes disappointed customers and lost sales. Radio-Frequency Identification (RFID) has proven to be a very successful technology in decreasing OOS, particularly at store and shelf level, and the concept of OOS was often related to sales velocity, i.e. The number of items sold per day at a given granularity level (e.g. SKU, model, class). In this paper, we introduce a new category of Value-Added Indicators, that also considers (i) the average number of items displayed on the sales floor area at a given granularity level, and (ii) the average time that items, at a given granularity level, spend on the sales floor area before sale. These new indicators can be used to understand how quickly items sell, and thus to avoid OOS situations, but also to support the assortment and replenishment process, and thus to maximise the profit achievable for a given space available in the sales floor area. These indicators were implemented and calculated in a store of a major fashion retailer, to assess their advantages and disadvantages from a practical point of view.