American Apparel is accustomed to turning heads. This time, however, it’s not the Los Angeles-based company’s products that are getting the industry’s attention, but its use of RFID tags on thousands upon thousands of items, from basic T-shirts to shiny gold lamé hot shorts.

This item-level RFID effort has boosted accuracy and led to labor savings, says Zander Livingston, who was recruited to direct the company’s RFID efforts by his former prep-school classmate, American Apparel CEO Dov Charney.

American Apparel’s RFID push began with a November pilot program at one of the company’s New York stores. There, every last one of the roughly 40,000 items was tagged.

“We hear about a lot of people saying that they’re waiting for the costs [of RFID] to come down, but I think that’s just a mask,” Livingston says. “It’s not that expensive; I think really it’s about waiting to see if somebody else steps up first.”

American Apparel is not alone in embracing item-level RFID technology, but it is among a select group working publicly at the forefront. As of early this summer, it was in the final phases of rolling out RFID in the remainder of its 16 New York metropolitan-area stores, as well as one in Santa Monica, Calif. The rest of its North American locations are likely to follow, though a precise timetable hasn’t been established.

American Apparel has been using TrueVUE software from Lake Forest, Calif.-based Vue Technology to manage RFID data. The data is collected using Motorola readers and antennae plus tags from Pasadena, Calif.-based Avery Dennison. Representatives of Vue Technology and American Apparel began talking just one month before employees in that New York pilot store started adding the tags. “That’s one of the real value strengths of TrueVUE — its out-of-the-box functionality,” says Gordon Adams, senior vice president of sales for Vue Technology. American Apparel was well positioned to take quick action once RFID was identified as a priority. “First and foremost, we have a CEO who is a visionary,” Livingston says. “And second, we’re able to move this fast because we have a closed-loop system in that we manufacture our goods and sell them.”

Source-level tagging
In the pilot program, tags specifically for RFID were used. They could be removed and recycled, which made sense on a small scale, but American Apparel has now moved toward source-level tagging in California. “In fact, we’re able to not even add a process to our current system to tag the items because the RFID chip will be inside the price tag,” Livingston says.

Known for its “Made in Downtown LA” motto, American Apparel uses a vertically integrated business model, which the company says “minimizes the use of sub-contractors and offshore labor.” Knitting, dyeing, sewing, photography, marketing, distribution and design are done in the company’s facilities in Los Angeles.

Livingston did not disclose the exact price American Apparel is paying for RFID tags. He says Avery Dennison has been a good partner, but adds, “I’m keeping my eyes open. … We would like to get below 10 cents, and I think we can.”

That’s due, in part, to the fact that analysts are watching how American Apparel spends every penny these days. It is now a publicly traded company, having completed a merger with Endeavor Acquisition in December.

During a quarterly investor call in May, Charney referenced RFID and told analysts that he would like to see “a large number” of stores with the RFID capabilities by the end of this year.

“That’s a true way we’re going to really be able to keep an accuracy to the inventory and make sure we know what’s in the back stock, what’s on the floor, what’s in transit, etc.,” he said. “When people come to our stores, they often know what they want. … When they want to come in and buy another pair of black socks? We’ve got them. That’s the main thing. That’s where we have the biggest opportunity to improve store productivity and generate profits.”

American Apparel’s merchandising philosophy — which limits displays to just one item of each style and color — makes RFID a good fit, says Livingston. That might make good use of space and trendy aesthetics, but it’s not without its issues.

Imagine what happens if, on a busy day, one woman buys an XL fuchsia-and-lime cotton spandex jersey halter leotard just hours before a similar-sized woman with a penchant for green and purple walks into the store. With RFID, American Apparel has transitioned to “a continuous replenishment process that ensures on-shelf availability,” Adams says.

In addition to bridging the gap between the sales floor and the stockroom, RFID also is helping with problems of mistaken identity. “We have a lot of styles that look similar,” Livingston says, which, when handled manually, can contribute to inventory accuracy problems.

In the New York store’s pilot program, accuracy rose above 99 percent — a significant improvement, although exact pre-RFID figures were tough to pin down, Livingston says. “We just knew that it was way off.”

RFID’s wow factor For Livingston, the real wow factor is the inventory process. With RFID, that now involves two people using two hand-held readers, who can finish the task in just under five hours. “That’s something that we used to get six to 12 people to work on all day and into the night,” he says. “There’s an amazing time savings there.”

Eventually, RFID may be incorporated into loss prevention in those American Apparel stores where that makes sense, Livingston says, but that is not a focus at this time.

“Right now this is bare bones,” he says. “It’s really just a solution that allows us to manage inventory at the retail level. We will work on and investigate the many other ways this might be used.”

Distribution channels have potential, he says, adding, “it might possibly move further back to track our own fabric [and other materials] used throughout the entire manufacturing process.”

Switching to RFID does involve an adjustment in mindset, Livingston says, but American Apparel employees have embraced the RFID push. “They realize this is an important project and they’re taking it very seriously.”

Adams says there are obvious selling points of RFID where associates are concerned. “Once people get the chance [to use the technology] and see what they’re able to do with it, it becomes a shot in the arm,” he says. “The light bulb goes on and it becomes something that makes their jobs easier to do.”

Livingston says he understands why RFID has been slower to take off than some industry observers had initially predicted. “IT departments are usually very overloaded and overworked and it’s very difficult for them to pick up a new project,” he says, but adds that potential should win out over red tape.

Retailers “are all looking for ROI,” he says, “and it doesn’t take a rocket scientist to figure out, ‘I can really cut down on the amount of time it takes to manage the inventory … and improve accuracy.’”