Report: 'Follow the Leader' Brings Trouble in Retail RFID

By Evan Schuman  |  Posted 03-25-2005
As the young RFID retail market moves through its experimental stages to eventual full deployment, many retailers "are finding problems and frustrations" because they are trying to emulate cutting-edge market leader Wal-Mart.

"There is no cookie-cutter approach to RFID," said ABI research analyst and report author Sara Shah. "RFID manufacturers—many of them relatively new companies—don't understand retail. And many retailers don't understand how RFID can benefit them."

Shah offered two retailers, Albertsons and Target, as examples. They followed Wal-Mart's RFID strategy closely.

On the one hand, Albertsons' and Target's "mandate was very similar to Wal-Mart's," and "they do have similar supply chains and a lot of the same suppliers." But there are clearly differences and, Shah argues, those differences have not been given the appropriate weight.

"It doesn't necessarily mean that they had to approach RFID in the same way [as Wal-Mart], even though it may very well work for them," Shah said. "We need companies to take a step back and figure out how they do things internally. Today, they are not thinking it through."

This all sits atop the many different kinds of problems retailers are discovering in RFID trials, such as readability errors and backend operation integration. "There are a million [RFID] problems, and every company had a different set of problems."

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What retailers typically have done is hire large consulting firms. But they quickly discover that those integrators tend to be conservative, have little experience with new technology such as RFID and "are often content to let ideas mature before getting involved," Shah said. "They are often less creative and imaginative."

The retailer then gets fed up and switches the project—in midstream—to smaller integrators who have the experience and the flexibility, Shah said. But she warns that those retailers are invariably going to have to return to those initial large integrators in the next couple of years because they are the only ones with the resources to handle the huge, live deployments.

"The larger integrators haven't had the chance to have much experience with RFID yet, but the smaller ones can't necessarily scale for the larger rollouts," she said.

Another key problem is the lack of retail understanding of RFID's potential.

"Beyond supply chain management, nobody knows how many ways RFID can be used," Shah said. "Known applications include security and backdoor theft prevention, contactless payments, advertising and promotions."

Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.

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