Opinion: Two huge global retailersWal-Mart and Metro Grouppledge to only support Gen 2 systems from now on, in a move that one RFID analyst says is intended to do damage control because of an RFID "pullback" from another glo
Two huge global retailersWal-Mart and Germany-based The Metro Grouppledged Sept. 12 to only support Gen 2 systems from now on, in a move that one RFID analyst said is intended to do some damage control because of an RFID "pullback" from another global retailer, U.K.-based Tesco.
Wal-Mart opened the day by issuing a statement from CIO Rollin Ford promising that "all Wal-Mart installations moving forward [will] only read Gen 2 tags. As the remaining pallets and cases with Gen 1 tags make their way through the distribution network, Wal-Mart will convert all of its systems to only read Gen 2 tags."
Ford said his chain will add 500 stores and clubs to its RFID program by the end of this fiscal year, bringing the total number of its locations using RFID to "more than 1,000," which would be about one-fourth the chains "more than 3,900 locations."
"Recent internal analysis of our ongoing efforts, along with the launch of EPCglobal Generation 2 tags, reinforces the value of this technology for Wal-Mart, our suppliers and ultimately our customers," Ford said. "Were aggressively moving forward with the expansion of RFID-enabled facilities."
Other parts of the Wal-Mart statement were more puzzling, such as citing a "2005 study by the University of Arkansas" to support its claim that the benefits of RFID, especially with regard to reducing out-of-stocks, as well as reducing excess inventory, "have been documented." A 1-year-old (and perhaps older, depending on the month the studys research was last conducted) study from a smaller university is the best Wal-Mart could come up with?
The other unusual part of the statement was the CIOs comments about suppliers. He opened with a reasonable enough promise that Wal-Mart will continue "to work with its next 300 largest suppliers, which are expected to begin shipping test cases in October. These suppliers will go live with their shipments in January 2007, bringing to more than 600 the number of supplier companies using RFID technology in concert with Wal-Mart."
But then the statement went on to say: "We continue to work with suppliers to help them see the vast potential of RFID." As the Retail Systems Alert Groups Paula Rosenblum said so well: "One would think if there were real benefits to suppliers, they would be obvious by now." Its sort of like a guy saying that hes launching a campaign to convince his wife of 10 years that hes really a terrific husband.
Convincing suppliers of the value is indeed a challenge, as many suppliers have complained that the only RFID value is generally to the retailer, not the supplier. Fords statementwhere he said, "Were already fully convinced of its value and are ready to step up the pace, since we know we are only touching the tip of the iceberg when it comes to the benefits of this technology"isnt likely to help. If Wal-Mart wants suppliers to more enthusiastically buy in, the chain needs to provide them with substantial and tangible benefits, above and beyond the implicit threat of "comply with our mandates or youre history."
The same day that Wal-Mart announced its RFID commitment, The Metro Groups chief technology officerGerd Wolframpledged, "We are only accepting Gen 2 deliveries, the same as Wal-Mart." Wolframs comments were made in an interview with the retail technology news blog StorefrontBacktalk.com.
The Metro Group is separating where groceries get scanned and where customers make their payments. Click here to read more.
The comments from Wal-Mart and Metro prompted Pete Abellprogram director for RFID at IDCs Manufacturing Insightsto suggest that EPCglobal was working behind the scenes because of some RFID hesitation from powerful British retail chain Tesco.
"EPCglobal is coordinating. The Tesco pullback was very troubling. This is good news for the hardware vendors that have won contracts from Wal-Mart to deploy the infrastructure as this is one of the very few if not only large-scale implementation of Gen 2," Abell said. "The research is showing that most manufacturers that are being asked to provide Gen 2 cases and pallets are doing so very reluctantly and with minimal capital cost as they are not able to develop an ROI for themselves."
Greg Buzek, president of retail consulting firm IHL, saw another reason for Wal-Marts move. "This looks like they are getting some pushback from suppliers and need other retailers to react and get involved so that more of the suppliers can get an appropriate return on investment," he said. "There is no other reason for them to put out a press release on their own about this."
The Retail Systems Alert Groups Rosenblum said she is baffled by Wal-Marts statement. "I remain befuddled. By my count, Wal-Mart is currently running four different major initiatives. Most of these initiatives seem targeted to reduce out of stocks while keeping inventory levels low," she said. "At the same time, the company seeks to change its overall merchandise mix and create more targeted demographic assortments. I dont believe that even a company as large as Wal-Mart can run that many initiatives successfully at one time."
Evan Schuman is retail editor for Ziff Davis Internets Enterprise Edit group. He has tracked high-tech issues since 1987, has been opinionated long before that and doesnt plan to stop anytime soon. He can be reached at Evan_Schuman@ziffdavis.com.
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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.