Here is why your brand should know more about Digital IDs and how they can benefit your business.
For years retailers have been wrestling with doing good and driving profit—often in conflict with one another. Consumer demands and government pressures to reduce carbon footprints, eliminate waste and maintain social compliance sent the industry into a whirlwind of textile sourcing, sustainable scorecards, marketing campaigns and even resale operations. With over $150 billion items of clothing produced annually worldwide, the amount of product destruction, water contamination and emissions made the industry one of the earth’s top polluters. So, the pivot to become more sustainable was not only timely, but urgent. Eco-friendly programs, however, took a hit out of margins and became, ironically, unsustainable.
Early successes did include plastic reduction, packaging elimination, and the emergence of resale markets and marketplaces to repurpose everything from luxury handbags to hiking gear. Retailers pushed agendas to strive toward zero waste and partially succeeded to shift manufacturing to more responsible factories. Brick and mortar brands even implemented standards to minimise energy consumed by stores through lighting, recycled heating/cooling systems, solar panels and other initiatives. As progress was being made, retailers had to return to business basics to scale their intentions. Legacy systems and insufficient, inconsistent data practices soon created obstacles. Which, in turn created inefficiencies, wasted resources and increased costs across departments and commerce channels. Now enter global legislation to hold every manufacturer/retailer/brand accountable for the environmental impact of every product they made/sold and businesses are back at square one on how to both comply with new mandates and still reduce costs and drive profit without pricing themselves out of the market altogether.
Until recently, advances in product tracking and data management were among the two key areas that retailers often struggled with having visibility and the ability to properly establish KPIs/measurements. New technology, however, has emerged and is enabling brands to better leverage digital IDs to capture, store and track item level information throughout the lifecycle. What exactly is a digital ID? In short, it is a digital twin of physical products that connect the physical and digital worlds. Digital IDs are also called digital product passports (DPP) and now exist at the item level. They contain all the information and events associated with a product from creation forward (EON, 2024).
This span of data requires multiple stakeholders to align from suppliers/sourcing partners to buyers, marketers, store personnel, IT departments, financial teams and more. Each is required to be governed by the same data practices. Overwhelming as it may seem, in relation to DPP there have been 97 data points identified in proper data protocol (according to Trace4Value), however at the Cirpass Consortium Final Event in March 2024, the EU Director General assured key stakeholders this would be reviewed and likely fall into 9 manageable keys areas:
- Brand information
- Product information
- Digital identifier
- Circularity information
- Supply chain information
- Material information
- Care information
- Compliance information
- Sustainability information
All of this data availability, however, is contingent on having the proper data inputs and having quality, clean, organized and consistently governed data practices throughout an organization and its partners. Typical data inputs that fuel digital ID platforms come from PLM, PIM, Supply Chain Management feeds, ERP and CRM systems. This data is connected to a centralized digital ID platform through APIs and then can allow for data outputs to be used for product labeling, website integration, store system integration, scorecards and digital IDs such as QR (quick response) codes, NFC (near field communication) and RFID (radio frequency identification).
Knowing the road head, retailers may be hesitant to embark on a path forward. Costs, resources, lack of experienced talent and no proven blueprint or roadmap are all concerns elevated by retailers. And while they may be motivated by pending legislation and the cultural demands to improve, they can also find business value in DPP investments. Digital IDs have proven to deliver enhanced customer experience, better inventory management, more accurate stock control and stronger loss prevention performance in addition to the core benefits of managing traceability and driving circularity efforts.
When and where should you start?
Every retailer needs to start on their digital product roadmaps now. While Europe is ahead of the Western world with regard to ESPR (ecodesign for sustainable product regulations), the vast amount of current pending legislation in the EU alone, coupled with the growing demand for global cooperation is driving a worldwide effort to be responsible and accountable from source to shelf and beyond. It is often advised, especially by leading consultants with expertise in this space like Columbus Consulting, to focus on data first. Data quality, consistency and governance is the critical first step in long-term sustainable practices. Retailers need to first understand what data they have, how it is generated, where it is stored, and how it is being used and by whom. Then they can make strides in building a centralized data platform and creating data standards for ongoing acquisition and decision making.
A second or parallel path forward should be the creation of internal KPIs and supplier scorecards. Having cross functional alignment on your current baselines and targets for incremental improvements will drive the roadmap. Brands need to ask if they have the right retail systems in place and they need to assess if they have the right talent in the right places. Establishing both ethical and financial cases for moving forward will also be critical to build internal alignment, help with change management and build confidence with investors and customers.
Some proof statements for digital IDs and related investments include:
FINANCIAL BENEFITS
✔️ RFID can unlock up to 5% top-line growth from better stock out management and shrinkage reduction
✔️ Inventory related labor hours can be reduced by as much as 10-15%
✔️ RFID can provide up to 99% inventory accuracy for apparel brands
CUSTOMER BENEFITS
✔️ Over 90% of fashion shoppers want technology-based solutions to improve their retail experience—and thus increase loyalty, shopper frequency and lifetime consumer value
✔️ The use of QR codes increase customer engagement and are a leading source of social followers and brand advocates
TEAM AND BRAND BENEFITS
✔️ DPP allows for real time information to be acquired and shared across departments and partners
✔️ Data accuracy is greatly improved—which benefits the entire organization at every level
✔️ Decision making will become more accurate and faster
✔️ Brands will have greater control over counterfeiters via digital IDs and authentication
SUSTAINABILITY BENEFITS
✔️ DPP enables retailers to be ready to comply with pending legislation
✔️ Products can be more effectively managed for resale and recycling, supporting the circular economy
✔️ Less waste can be generated, carbon emissions reduced and supply chains better managed for reduced sourcing distances (less transportation/energy)
Now what?
Just start. Every retailer is at a different point in their transformation. The key insight to maintain is that businesses now have the ability and proof statements to invest in responsible practices that not only improve their profits, but directly benefit the earth. The roadmap should be comprised of four key pillars:
- Assess—assess your current state and, specifically, what tickets you want to address first (QR/RFID) and review your data sources, quality, use and output
- Audit and select—review your current processes, procedures, talent and hardware/software and select enhancements or restructures –including suppliers and 3rd party partners
- Define and implement— define and establish KPIs and benchmarks along with supplier scorecards to use throughout the product lifecycle and implement technology enhancements and related initiatives
- Test and Scale—Roll out a defined segment of the business to validate earlier assumptions and refine for improved efficiencies, then scale over time
Remember, no transformation in any area of the business is linear. So, after completing step 4, return to step 1 and repeat.
Columbus Consulting can help your brand with a digital passport preparation health check. Contact us to review your needs: https://www.columbusconsulting.com/contact-us/
MORE ABOUT COLUMBUS CONSULTING
Columbus Consulting delivers solutions that drive true value and have been transforming the retail and CPG industries for over two decades. We are a retail consulting company of industry experts. Our approach is simple, if you do it, we do it. We are more than consultants; we are experienced practitioners who actually sat in our clients’ seats. We understand the challenges, know what questions to ask and deliver the right solutions. Columbus offers a unique, consumer-centric approach with an end-to-end perspective that bridges functional & organization silos from strategy to execution. Our specialties include: unified commerce, merchandising & category management, planning & inventory management, sourcing & supply chain, data & analytics, accounting, finance & operations, people & organization and information technology. Let us know how we can help you. To learn more, visit COLUMBUSCONSULTING.COM.
ABOUT CHARLOTTE HAYNES
Charlotte Haynes is an Associate Partner at Columbus Consulting. She is a multichannel retail buying & merchandising specialist with 13 years of experience working with retail, wholesale and manufacturing companies focused on improving corporate performance through better planning, execution & analysis. Charlotte is a consultant lead, helping retailers address their sustainability goals, preparing brands for the forthcoming legislation and establishing digital IDs across their assortments. She has a unique mix of buying and merchandising expertise, along with extensive supply chain and supplier knowledge. Charlotte is a Winner of Consulting Magazine’s ‘Ones to Watch for Excellence in Retail’ 2022.
