Item-Level RFID Tags Cost More than Expected

Despite the traditional mantra that item-level tagging will make sense when the price drops to a certain point, a major global consulting firm finds prices are much higher.

Despite the traditional mantra that item-level tagging makes sense when the price drops below 5 cents, and preferably below 1 cent, a major global consulting firm, IDTechEx, has found that the average price is 40 cents, compared with an average 18-cent price for pallet and case tags.

The fact that the initial item-level tag prices are so much higher is not so surprising given that initial costs during experimentation phases are typically much higher than during full-scale deployment.

What is surprising is that the average cost is so much more than its pallet/case counterpart.

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The IDTechEx analysis said much of that can be explained by the need for much more robust and larger memory tags for tracking parts and equipment than some of those early testers—such as aviation leaders Rolls-Royce and Lockheed Martin—required.

The analyst firm had already reported much higher than expected market share figures for item-level RFID tagging, but it reported more details on July 11, including the firms projection that item-level tags will account for $11 billion by 2016 out of a worldwide RFID market projected by then to be worth $26 billion.

IDTechEx also identified where it sees RFID sales going in 2006, broken down by segment.

The item-level pricing issue is not so surprising, given the dramatically greater potential efficiencies and supply chain benefits that item-level can deliver, when compared with more traditional RFID applications.

The only thing that was driving the 5-cent and 1-cent price needs was the ability to item-level tag everything in a store, which means that the price of tagging has to be capped out at whatever would work for the lowest-priced item with that retailer.

But theres no reason that retailers cannot realize huge benefits while limiting the item-level tracking to more expensive products, where price sensitivity is much less of an issue.

Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.

Check out eWEEK.coms for the latest news, views and analysis on technologys impact on retail.

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