Item-Level RFID Is Years Away for Retailers

Opinion: Would item-level RFID tags help to stop mattresses from being mismarked as bananas at Wal-Mart? Maybe-but not before 2007.

In a recent shenanigan at a Wal-Mart store, techno-fraudsters printed out fake barcode labels and, in one instance, a $100 mattress rang up at checkout for the price of a bunch of bananas. But what if Wal-Mart had been in the habit of attaching RFID tags rather than barcodes to mattresses and bananas? Would the emerging wireless technology have saved the day?

The answer is "No"—at the moment, anyway. For RFID to work as an antidote to in-store theft and fraud, tagging is needed at the individual item level. And, to be charitable, item-level RFID tagging isnt likely to become much of a reality until the end of this decade—that is, unless were talking about ultra high-end designer clothes (think Prada), or maybe costly pharmaceuticals (think controlled substances such as OxyContin, a drug marketed by Purdue Pharma as an analgesic).

In current trials at Wal-Mart, Target, U.K.-based Tesco and other large retailers, RFID is being deployed almost exclusively at the palette and carton levels. Essentially, thats because item-level RFID continues to face two humongous hurdles: high pricing and mounting privacy concerns.

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Although RFID advocates keep pointing to an idyllic future when RFID tags might cost three to four cents each, even the "passive" variety will still run you more in the neighborhood of 20 to 30 cents today. And in contrast to some of the more costly "active RFID" technology, passive RFID tends to be much more subject to data tampering.

In the low-margin land of mass merchandise stores, itd clearly make no sense at all to apply a 30-cent tag to a $1 bunch of bananas—or even to a $2.50 greeting card or a $10 tube of sun lotion.

On the other hand, its already economically feasible to attach the same sort of tag to a four-figure handbag or a five-figure suit—something Pradas been proving quite well at its RFID-enabled showrooms in New York City.

Meanwhile, midmarket apparel stores such as Benetton have also been toying with the idea of item-level RFID. So, too, have retailers such as Tesco, which sells products across a broad spectrum of prices. But privacy advocates have been working hard to squelch efforts in this direction by mounting pickets and threatening boycotts.

For instance, during the spring of 2003, Benettons previously announced plans to test item-level RFID came to a halt after a U.S.-based group called Caspian (Consumers Against Privacy Invasion and Numbering) threatened a boycott.

Later that year, picketers stood outside a Tesco store in Cambridge, England, protesting the supermarket chains decision to automatically snap photos of shoppers who picked up packets of Gillette Mach 3 razor blades. The packets had been marked with RFID labels as part of a trial with Gillette.

After the razor-blade test ended in June, Tesco proceeded with an item-level RFID trial of DVDs at its store in Sandhurst, England. Still, Caspian kept urging a worldwide boycott of Gillette products around RFID tagging concerns

I predict that when item-level pricing does reach widespread deployment, itll happen initially in pharmaceuticals. And in this context, the wireless technology will first come into play more as an anti-counterfeiting measure than as a theft deterrent.

On November 15, 2004, the FDAs Counterfeit Drug Task Force recommended a multilayered approach that includes RFID to help combat drug counterfeiting.

That same day, Purdue Pharma rolled out a pilot program for integrating passive RFID tags into the labels on 100-tablet bottles of OxyContin—a substance with "an abuse liability similar to morphine," according to its manufacturer. The first shipments of RFID-tagged bottles went out later that week to Wal-Mart and H.D. Smith, a big pharmaceuticals wholesaler.

Backing from a regulatory agency like the FDA might help to curb the privacy protests. It will definitely help to spur R&D in the overall area of item-level RFID tagging. And as some of you may recall from Economics 101, as supply of a product increases, prices will fall—or so the theory goes.

So some time after 2007—the timeframe now targeted by the FDA for RFID compliance—more retailers will probably start turning to item-level RFID to protect against theft of nonpharmaceutical items—even on $1 bunches of bananas, and more certainly, on $100 mattresses. But dont expect to see widespread item-level tagging any sooner than that.

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