The Law of Supply and Demand Falls Silent for RFID Pricing

 
 
By Evan Schuman  |  Posted 2006-08-24 Email Print this article Print
 
 
 
 
 
 
 

In RFID these days, evidence is mounting that pricing consistency has yet to happen. In a report, European RFID analyst firm IDTechEx concludes that pricing logic has failed to visit many RFID facilities.

There is a comforting premise taught in all business schools that market forces will cause all identical products to be priced in the same range. The typical marketing way to address this is by branding them differently, so a high-end branded watch or car can get far more than its almost-identical lower-cost cousin. But in RFID these days, evidence is mounting that such consistency has yet to happen. No greater case for buyer beware—and buyer negotiate—might exist today. In a report released Aug. 23, European RFID analyst firm IDTechEx concluded that pricing logic has failed to visit many RFID facilities.
An Aberdeen Group report says there are major RFID hurdles ahead. Click here to read more.
"Lately, some RFID tags have been sold at high profit and others literally given away. Yet more have been sold at a considerable loss by operations of doubtful viability, and all this conspires to make it seem that there is no obvious price-volume sensitivity curve for RFID tags," the report said. One "reason for a spread of price-volume curves lies in the fact that legislation, mandates and pressure from organizations such as the Food and Drug Administration encourage adoption before the tipping point of price in certain applicational sectors. Excessive competition in certain sectors also distorts the situation." IDTechEx Chairman Peter Harrop argues that pricing is so flexible because many companies desperately—and profitably—need RFID on a large scale, while others are merely using RFID to comply with a partners mandate. He cites Marks & Spencers item-level apparel-tagging efforts in the U.K.—where "all apparel is tagged in 52 stores, way ahead of anything in America"—Hollands largest bookstore chain (Selexyz) and various chains in Japan. "This has caused prices to come tumbling down, and its not particularly because of the Wal-Marts of the world," he said. In the United States, Harrop cites Lockheed Martin as an example of a company that is doing its own thing with RFID. Because of military contracts—which tend to be much less price-sensitive than Wal-Mart deals—Lockheed Martin decided to simply buy out its RFID provider, Savi Technology.
"RFID is no different from any other industry today," Harrop said. "Theres just a lot of funny trading at the moment, and you need to ignore that." The report also cites differences by product segment. "Mainstream postal items and low-priced consumer goods have the lowest price trajectories. By contrast, there may be around 3 billion drug packages shipped in 2011 with RFID labels at around seven cents," the report said. "Given the compelling paybacks already demonstrated by the British and Japanese, there may be as many as 10 billion high-priced retail goods, such as apparel, tagged in 2011 but only if work in China and elsewhere gets the label price down to around 3.4 cents. However, the uncertainties are such that many of these numbers could be halved but the price doubled." 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.
 
 
 
 
Evan Schuman is the editor of CIOInsight.com's Retail industry center. He has covered retail technology issues since 1988 for Ziff-Davis, CMP Media, IDG, Penton, Lebhar-Friedman, VNU, BusinessWeek, Business 2.0 and United Press International, among others. He can be reached by e-mail at Evan.Schuman@ziffdavisenterprise.com.
 
 
 
 
 
 
 

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