Wheres Wal-Mart? Making the Plea for RFID

RFID, a lightweight and inexpensive wireless technology used for lost pet identification, may revolutionize retail if Wal-Mart has its way. Wireless Supersite Editor Ross Rubin assesses the behemoth's battle beyond the barcode.

Wi-Fi warriors may tout the benefit of local wireless technology as key to the future of pervasive computing. But another technology may lead the simplest devices into a world of effortless communication in the next few years. That technology is RFID, an extremely low-cost, fairly short-range and low-speed technology that can be embedded in tags that are read by scanners.

RFID chips from companies such as Avid and Schering-Plough, which sells them under the HomeAgain brand, have been used for years in helping to identify the owners of lost pets. Extending the concept to humans requires something a bit more proactive, but nevertheless last year a family gained notoriety by seeking to be implanted with an RFID product from VeriChip.

The near-term volume application for RFID, though, lies not in tracking people or pets, but products. Last week, at Wal-Marts annual vendor-whipping, the worlds largest retailer reportedly issued the edict that suppliers would have to support RFID by 2005. Speculation quickly spread that other retailers would quickly follow suit.

After all, Wal-Mart, along with a handful of other retailers, turned barcodes from a carton curiosity to the primary way that retail goods are electronically tracked. Wal-Marts announcement predictably had technology vendors such as Philips, Texas Instruments and Microsoft falling over each other to position for leadership in this nascent category, the better to curry favor with the king of the rural Rollback.

Not all reaction was positive. Skeptics wonder if even Wal-Marts will can reduce the technologys cost, which can be as high as 50 cents per tag, to the five-cent mark that would make them economically viable for a broad spectrum of goods. Those in the competitive consumer-packaged-goods industry say the cost may even need to get down to one cent per tag for it to make sense.

But the stakes are high. RFID promises to revolutionize tracking inventory by allowing en masse scanning and allowing far more information about products to be tracked with the product. Future applications could include the kind of seamless automatic checkout popularized in an IBM commercial; an apparent shoplifter is stopped as hes exiting the store by the guard, only to be thanked for shopping at the store. Indeed, another benefit of RFID is to prevent what retailers call "shrinkage," the disappearance of goods assumed lost or pilfered.

Perhaps the most exciting application for consumers would be the ability to capture expiration data for perishables such as beef and dairy goods at the supermarket. The hunk of meat at your local supermarket may become smarter than that on your average reality TV dating show.

While theres significant doubt that a 10x cost reduction can take place in little over a year, theres no doubt that Wal-Marts distribution power and volume can help bring RFID into the limelight. The retailer certainly has the cash reserves to invest in the technology even if it doesnt get it down to a profitable price point by its self-imposed deadline. If suppliers want to stay in Wal-Marts good graces and on its shelves, theyll do everything they can to comply.

Does the worlds largest retailer have the power to move a new wireless technology into the mainstream, or will it have to roll back its own plans—not just prices? E-mail me.

Wireless Supersite Editor Ross Rubin is a senior analyst at eMarketer. He has researched wireless communications since 1994 and has been covering technology since 1989.

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