Modeling the effectiveness of radio frequency identification (RFID) technologies in improving sales performance in fashion retail outlets

The application of item- level radio frequency identifi cation (RFID) technology in retail supply chains is benefi cial in terms of cost savings and increased revenue. However, the economic effects of improved store operations, labor utilization and increased sales have yet to be fully explored. This chapter uses system dynamics (SD) as a means of carrying out structural modeling and simulation, to be integrated with conventional evaluations of return on investment (ROI). Building on previous research into RFID technology in retail supply chains, a model is developed on the basis of a case study of a leading Italian apparel retailer. Simulations show that RFID implementations are profi table whenever they contribute to increasing sales, especially when a fashion retailer is focused on clerk- assisted sales strategies. RFID technology allows better inventory control and faster inventory turnover; moreover, as a result of these more effi cient backroom operations, store personnel have more time to assist consumers, leading to a growth in sales.