Retailers see RFID ahead

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January 26, 2004 (Computerworld) -- Retail executives are now saying "when," not "if," as they consider the use of radio frequency identification tags to track goods through their supply chains and ultimately in their stores.

That's a marked change from a year ago, when many expressed guarded sentiments about RFID's prospects and demonstrated far less knowledge about how the technology works. But as the new year begins, the executives are expressing great interest now that Wal-Mart Stores Inc. has directed its top 100 suppliers to put RFID tags on pallets and cases they ship to the retailer's three Texas distribution centers by next January.

"I'm sure Wal-Mart will help the industry by basically driving the requirement and driving the price points to make it more affordable," said Alan Lacy, CEO of Sears, Roebuck and Co. He said Sears will adopt RFID "as it makes economic sense," since it expects to see benefits in the areas of inventory tracking and theft protection.

Creating Momentum

"For every new technology, there tends to be somebody who creates the momentum, whether it be bar codes or EDI," said Phillip Maxwell, CIO at The Neiman Marcus Group Inc. in Dallas. "I think that's what happened here."

Maxwell said the high value and uniqueness of his company's products will make them good candidates for RFID tags. But he expects it to be at least three years before Neiman Marcus uses RFID, because the company will require item-level tags. The first phase of RFID will be at the pallet and case levels, he said.

But several retailers said they're anxious to get to item-level tagging. Brian Devine, CEO of Petco Animal Supplies Inc. in San Diego, said he can envision the day when a customer will be able to simply push a shopping cart through an RFID-enabled arch and swipe a credit card to pay for his purchases, with no individual scanning necessary. He said another arch could disengage the tags for privacy-conscious customers.

But while Devine can foresee pallet-level tagging within the next three years, he expects that it will take much longer for item-level tagging because of the costs, not only of the tags but also of the infrastructure that goes with it.

Some retail analysts predicted that it could take more than a decade for item-level tagging to gain wide usage among mass retailers. Christine Overby, an analyst at Forrester Research Inc. in Cambridge, Mass., estimated that it will take five to seven years for the rollout of RFID in the supply chain and two decades for item-level tagging on the consumer end because of privacy implications and "sheer costs."

Early adopters are also cautious in their predictions for item-level tagging. Wal-Mart isn't even doing it yet. Metro Group, a German retailer, is piloting item-level tagging, but CEO Hans-Joachim Körber said it will take 10 to 15 years to gain universal acceptance (see story).

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Retailers see RFID ahead

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