Decathlon's net profit margin is so low that it can afford to use RFID

In today's consumption downgrade, it is not only Pinduoduo that is popular, but also Decathlon. People no longer only pursue the halo that celebrity endorsements bring to Sports brands, but pay more attention to the cost-effectiveness of branded products, and are willing to spontaneously advertise brands on social platforms after experiencing high-cost-effective products.

Behind the high cost-effectiveness is Decathlon's extreme control of costs. Decathlon focuses on standardization and modularization in the product design stage. By using standardized parts and modular design, the demand for customization and special parts can be reduced, thereby improving production efficiency and reducing 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, through centralized procurement and bulk procurement, procurement costs are reduced. Decathlon adopts a heavy Asset MANAGEMENT model, self-owned and self-operated production factories, logistics bases and design and development 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 backlogs and waste. Reduce inventory costs through reasonable inventory planning and control.

It is worth mentioning that Decathlon also strictly controls advertising costs. We have hardly seen any advertising from Decathlon. This is because Decathlon has strict regulations that annual advertising costs cannot exceed one percent of turnover.

Through these methods, Decathlon has reduced the cost of goods. Not only that, they also adopt a pricing strategy that benefits consumers. According to Decathlon’s 2022 financial report, their net profit margin in 2022 was only 6.5%, far lower than other peers.

It is such a "stingy" company that actually started using RFID to manage their products as early as 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 did Decathlon, which pays the most attention to cost, still use it on a large scale?

To judge whether the cost of using RFID is expensive or not, it depends on whether it is worth it.

Let’s take the main roles of RFID in Decathlon as an example to see why RFID is worth it.

1. Reduce labor costs

The high efficiency of UHF tags can help companies save labor costs in two links. The first is in the warehousing link. Whether it is in the transit warehousing or the inventory of the Store warehouse, if there is no RFID tag, it will consume a lot of manpower and is prone to errors. After adopting UHF RFID tags, only a small number of people are needed to achieve rapid inventory.

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

The second link is the cashier link. In traditional stores, each store needs someone to stay at the cashier alone to settle the bill. The number of people varies according to the size of the store and the flow of customers. After adopting UHF RFID, consumers can achieve Library-self-service-borrowing-and-returning-machine-source-manufacturer-UHF-touch-screen-borrowing-and-returning-machine.html target='_blank'>self-service checkout.

2. Accelerate 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 product with high consumption. The use of UHF RFID tags can help companies realize the visualization of the supply chain and accelerate the efficiency of warehouse inventory. Not only that, according to Bernard MAUGEIN, vice president and retail operations director of Decathlon China, RFID has helped Decathlon reduce the loss rate of goods by 9%.

3. Quickly obtain consumer shopping feedback and expand the profit of a single hot-selling category

RFID tags can realize the visualization of sales data, allowing manufacturers to make decisions quickly according to market preferences, invest more resources to produce products that consumers like, and enable manufacturers to achieve flexible production. Through the networking of clothes, they can recommend products that consumers like or are more compatible, further stimulating consumer demand.

In fact, part of Decathlon's sales come from substituting other brands. For example, a brand has a hot-selling jacket, but consumers think the price is too high, so they will turn to Decathlon to find the same type. Decathlon will immediately arrange the production and transportation of the goods based on the feedback received, so that the goods will not be sold out. In this way, the profits of a single hot-selling category can be expanded. The vice president and retail operations director of Decathlon China said that RFID helped Decathlon achieve a 5% sales increase.