Decathlon’s net profit margin is so low, why can it afford RFID?

Behind the high cost performance is Decathlon's extreme control over costs. Decathlon focuses on standardization and modularization in the product design stage. By using standardized parts and modular design, it can reduce the need for customization and special parts, thereby improving production. efficiency and reduce production costs; in addition, Decathlon controls costs from the source, optimizes procurement links, selects suppliers with cost advantages and establishes long-term cooperative relationships with them.At the same time, procurement costs are reduced through centralized procurement and bulk procurement. Decathlon adopts a heavy-asset operation model and maintains its own production factories, logistics bases and design and R&D teams. This full-chain asset self-control model is conducive to reducing costs in each link and improving overall efficiency. Compared with other brands, Decathlon adopts a strict inventory control strategy and adopts a real-time inventory management model to accurately track the sales of each product to avoid inventory backlog and waste. Reduce inventory costs through reasonable inventory planning and control.

It is worth mentioning that Decathlon also strictly controls advertising expenses. We have almost never seen any advertising by Decathlon. This is because Decathlon has strict regulations that annual publicity expenses cannot exceed 1% of turnover.

Through these methods, Decathlon has reduced the cost of goods. Not only that, they have also adopted a pricing strategy that is conducive to consumers. According to Decathlon's financial report disclosed in 2022, their net profit margin in 2022 is only 6.5%, which is far lower than other peers.

It is such a stingy company that actually started using RFID to manage their products ten years ago. You must know that the price of Rfid Tags ten years ago was more than twice the current price. Many merchants complained that the cost of using RFID was too high. , but why is Decathlon, the most cost-conscious, still used on a large scale?

To judge whether the cost of using RFID is expensive, it depends on whether it is worth it.

Let’s take some of the main roles RFID plays in Decathlon as examples to see why RFID is worth it.

1. Reduce labor costs

The high efficiency of RFID cloth tag can help companies save labor costs in two aspects. The first is in the warehousing link, whether it is in transit warehousing or inventory inventory in store warehouses. Without Rfid Cloth Tag, a lot of manpower will be consumed, and it is also easy to make mistakes, but after using RFID cloth tag, only a small number of people are needed to achieve quick inventory.

According to Bernard MAUGEIN, Vice President of Decathlon China and Director of Retail Operations, in the past, Decathlon needed to spend more than 140,000 hours on manual inventory every year, with an average accuracy rate between 86% and 90%. But now for a 4,000 square meter In a shopping mall in China, it only takes 1.5 hours to complete the inventory using an RFID inventory robot, with an accuracy of 99.2%.

The second link is the checkout link. In traditional stores, each store requires a separate person to check at the checkout counter. The number of people varies according to the size of the store and the number of customers. After using RFID clothing labels, consumers can realize self-service checkout.

2. Speed up supply chain turnover efficiency and reduce product loss

Decathlon's supply chain is spread all over the world, and it is a fast-moving consumer goods with high consumption. The use of RFID clothing labels can help companies visualize the supply chain and speed up the efficiency of warehousing and inventory. Not only that, according to Bernard MAUGEIN, Vice President of Retail Operations of Decathlon China, RFID has helped Decathlon reduce its merchandise loss rate by 9%.

3. Quickly obtain consumers’ shopping feedback and expand the profits of a single hot-selling category

RFID linen tags can realize the visualization of sales data, allow manufacturers to make quick decisions based on market preferences, invest more resources in producing products that consumers love, allow manufacturers to achieve flexible production, and through the Internet of clothes, they can provide consumers with Recommend products that readers like or better match, further stimulating consumer demand.

In fact, part of Decathlon's sales come from replacing other brands. For example, if a brand releases a hot-selling jacket, but consumers feel that the price is too high, they will turn to Decathlon to look for the same type. Decathlon will immediately arrange the production and transportation of the product based on the feedback received to ensure that the product will not be sold out. In this way, the profits of a single hot-selling category can be expanded. Decathlon China Vice President Retail Operations Director said that RFID helped Decathlon achieve a 5% sales growth.

Write at the end

According to the latest report of the AIoT Star Map Research Institute, the usage of RFID in the global shoe and clothing retail field in 2022 has reached a staggering 27.6 billion, which is the downstream field with the largest proportion of RFID tag usage. Countless merchants have proven RFID through practical actions. Use value in the retail sector. RFID is not only inexpensive, but can also help retail companies reduce costs, increase efficiency, and optimize management. Moreover, the current cost of RFID use continues to decrease. I believe that all industries will be able to afford it and use it well in the future.