Fashion Retail ROI Calculator

Enter your company's actual numbers or estimates in the boxed cells.

Company Information
Name Total items on the floor Total items in the back room Total stock turns Average selling price per item Annual revenue per store Number of stores Total revenue Tax rate Cost of capital Receiving Goods into Inventory Hours spent per store/month Labor cost/hour Receiving cost per store/month Inventory Counts No. of items on the floor No. of items counted per person/store/hour No. of man-hours for complete inventory No. of complete counts per month Total no. of man-hours per store/month Labor cost/hour Total cost per store/month Back-to-Front Replenishment Man-hours per store/month Labor cost/hour Cost per store/month Total labor per store/month Labor savings (cost) XYZ Apparel 10,000 5,000 5 $30 $2,250,000 400 $900,000,000 32% 10% Currently 25 $12 $300 Currently 10,000 200 50.0 30 $12 $360 Currently 25 $12 $300 $960 With Add'l Labor 30 $12 $360 With Add'l Labor 10,000 200 50.0 8 400 $12 $4,800 With Add'l Labor 50 $12 $600 $5,760 ($4,800) With RFID 5 $12 $60 With RFID 10,000 2,000 5.0 8 40.0 $12 $480 With RFID 12.5 $12 $150 $690 $270 With RFID 2% 40% $1,500 10% $150 $72 With Add'l Labor 3% $5,625 0.5% $938 52% $488 $6,600 $1,800 $21,600 Cost Per Unit $0.12 Units 75,000 With RFID 4% $7,500 1% $1,875 52% $975 $8,475 $8,817 $105,804 Total $9,000 $15,000 $8,000 $10,000 $5,000 $4,500 $3,500 $8,000 $21,000 $63,000 7 Three-Year View Depreciation (years) Return on Investment Profit contribution from higher AUR Reduction in shrink Elimination of 2 yearly physical inv. counts Labor savings (cost) attributable to RFID Benefits attributable to RFID Costs Annual cost of tags Software license Software maintenance and support Software integration Professional services Hardware cost (depreciated) Cost of hardware maintenance Corporate overhead (IT and other) Cost of capital Total costs attributable to RFID Per store gross profit Taxes Net profit per store Chain-wide net profit Net present value** 3 Year 1 $101,700 $864 $1,800 $3,240 $107,604 $9,000 $15,000 $0 $8,000 $10,000 $9,660 $2,100 $4,000 $5,376 $63,136 $44,468 ($14,230) $30,238 $12,095,296 Resale Value Year 2 $104,751 $873 $1,800 $3,240 $110,664 $9,090 $3,000 $3,300 Year 3 $107,894 $881 $1,800 $3,240 $113,815 $9,181 $3,000

Reduction in Shrinkage Total shrinkage as a % of sale Internal shrinkage as a % of total shrinkage Internal shrinkage per store/month % reduction due to RFID Value of reduction in shrinkage per store/month Net benefit of shrinkage reduction Sales Increase Currently Sales per month/store $187,500 % revenue increase from higher AUR* Rev. increase per month based on higher AUR % revenue increase from incremental sales Revenue increase from incremental sales Retail margin Profit from incremental sales attributable to RFID Gross incremental profit per store/month Total benefit per store/month Total benefit per store/year Cost for RFID System per Store Incremental cost of RFID hang tags Software Software integration per store Professional services Receiving/tagging station Impact door Point-of-sale Handhelds Total hardware costs Total investment in RFID per store Payback period (months)

$5,000 $4,500 $3,500 $4,000

1 1 1 2

$5,216 $2,100 $4,000 $1,941 $25,347 $85,317 ($27,301) $58,015 $23,206,115

$2,817 $2,100 $4,000 $1,710 $22,808 $91,007 ($29,122) $61,885 $24,754,003 $48,772,380

NOTES: Cells colored light-blue are the estimated benefits from RFID. These values should be updated with the results of real-world pilots. Yellow cells are subtotals and orange cells are totals. If you find an error in this calculator, please send e-mail to editor@rfidjournal.com. *Average unit retail (AUR) is the average selling price realized per item. Since RFID enables a retailer to sell more of its existing inventory, which is already paid for, at or closer to full price, the net effect is to boost retail margins, so all of the additional revenue is treated as profit. For a more detailed explanation, see the "Ladder" worksheet. **Our net present value analysis assumes 100% of the benefits start in Year 1, and the costs are spread over the year. In reality, the benefits should be phased in over the course of the year as the solution is rolled out, but this analysis is provided to offer calculator users a rough estimate of the value of a potential investment in RFID. 2009 RFID Journal, LCC. This calculator cannot be reused or distributed without the expressed written consent of RFID Journal. Any copying or posting online is strictly prohibited.

Why Increased Revenue From Existing Inventory Is Treated as 100% Profit

If items are in the back room instead of on the selling floor at the start of the season or when demand spikes, shoppers leave and purchase them elsewhere. Often the result is the items have to be marked down later. RFID helps retailers improve store execution and therefore sell more items at or closer to full price. The two scenarios below explain why RFID Journal believes a 4 percent increase in revenue from existing inventory can be achieved with RFID.

Scenario 1: Sales of a sweater with a list price of $100 without RFID Number Sold Selling Price 40 $100 20 $70 20 $60 10 $50 10 $40 100 Unit Cost $40 $40 $40 $40 $40 Revenue $4,000 $1,400 $1,200 $500 $400 $7,500 Cost $1,600 $800 $800 $400 $400 $4,000 Profit $2,400 $600 $400 $100 $0 $3,500

Scenario 2: Sales of a sweater with a list price of $100 with improved execution through RFID Number Sold 43 24 22 6 5 100 Selling Price $100 $70 $60 $50 $40 Unit Cost $40 $40 $40 $40 $40 Revenue $4,300 $1,680 $1,320 $300 $200 $7,800 Cost $1,720 $960 $880 $240 $200 $4,000 Profit $2,580 $720 $440 $60 $0 $3,800

Selling just three more items at full price, four more at $70 and two more at $60 leads to an additional $300 in revenue (4%), all of which is reflected in the profits.

ated as 100% Profit

he season or when demand he items have to be marked more items at or closer to percent increase in revenue

ed execution through RFID

at $60 leads to an additional