SECURITY
and shoplifting have certainly helped American Apparel establish some best practices – but not in the traditional
sense.Retail Technology first learned about its experiences earlier this year while interviewing the company’s former chief information officer (CIO) about the journey it began three years ago to develop real-time inventory visibility throughout its supply chain using item-level radio frequency identification (RFID) tracking (Do the benefits of RFID outweigh the costs?,
RetailTechnology.co.uk, 13 January 2014). Perhaps as a consequence of its ethos of vertical
integration, American Apparel has since extended the use of its RFID investment, in combination with the use of analytics, to glean store insights akin to that of e-commerce that it can then use to help tackle shrink. This approach has, to date, helped the retailer reduce inventory loss by over 50% across all of its stores and by as much as 75% in some. In 2009, American Apparel executives wanted
to deepen the chain’s understanding of shopper behaviour in its brick-and-mortar stores. They sought to apply similar methods to those used on the American Apparel website and by its e-commerce peers around the measurement and testing of store activities, with the ultimate goal of increasing sales and improving the customer experience. As of spring 2012, after implementing store
analytics systems from RetailNext in nearly 60% of its stores and creating, among other things, a separate asset protection department, American Apparel had already reduced levels of shrink by 28%. Blue Montez, American Apparel global director of asset protection, explained how RetailNext played a role in that reduction – and he confirmed that performance has improved even further as more stores have implemented the store analytics system. The IT group implemented RetailNext before
Montez joined the company. But he commented: “The need for the system at the time was to implement an all-in-one package to incorporate analytics that could help drive the business from a retail sales perspective by improving conversion, as well as streamlining security aspects too.” He said the RetailNext implementation was
so successful that its loss prevention use case alone could help each store reduce shrink and achieve return on investment (ROI) within four months. According to Montez, the advantage of RFID and store analytics integration was having access to accurate sources of information on stock, transactions and store activity. “The advantages were invaluable,” he said. And, as a result, he added:
22 Autumn 2014
“I can see more of the loss prevention industry getting better integrated with IT. In the past, the loss prevention department would make decisions to solely purchase technology within their budget, such as camera systems, excepting reporting software and systems of that nature. “The shift that’s happening now, because of the
integration of IT, going from analogue to digital and old DVR [digital video recording] systems to enterprise systems, where IT is historically the part of the business responsible for establishing enterprise IT systems.” Montez cited the RFID investments and use of
store analytics as an example of where IT and loss prevention are intersecting at American Apparel for mutual line-of-business advantage. Current state-of-the art store analytics systems
make it possible to accomplish both video-based loss prevention and video-based traffic counting with a single setup. This saves both capital expenses for installation of cameras and ongoing support costs. Montez confirmed this trend. “Typically and traditionally the loss prevention
director reports to the CFO [chief financial officer] of a company. However the shift that is happening currently is that the loss prevention director is reporting to the CIO or IT director instead,” he said. “In the world of loss prevention before you would
have to use different components to produce results. So, for example, typically you would have a DVR and a separate software exception reporting tool. On top of this you would have to run inventory and point- of-sale (PoS) transactions analysis. “Most LP departments sometimes operate three
or maybe four different systems just to gain insight on possible investigations or areas that need to be improved from a shrink standpoint. Coming to American Apparel and finding that the systems were all in one allowed me to create exception reports within the RetailNext system and, at the same time, see side-by-side video of the transaction or a certain incident I was curious about. It’s not only time- saving but you are able to generate instant results.” He continued: “On top of that, the ability to go
into the [analytics] system and run customised PoS reporting and see traffic data, as well as comparing the two together, is a new advantage for the LP industry as in the past we’d never really looked at store traffic as a metric for loss prevention – it’s always been one for store operations. We’re now able to work out what locations we need to schedule loss prevention people into to reduce the external
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