Where Are All the Retailers?

I've heard some retailers say their operations are more organized than Wal-Mart's, so they don't see the same benefits. That, no doubt, is true. But if other retailers are so super-efficient, why is the industry average 8 percent for out-of-stocks? Clearly, many retailers could use RFID to improve the way they replenish.

Judging by the number of retailers at LIVE! 2006 and the number who are RFID Journal subscribers, there is a lot of interest in RFID among retailers. But they may have other IT projects they believe will deliver more benefits with fewer risks today. They might have problems with their brands that need fixing, or they might be operating on such lean margins that they feel they can't afford to deploy RFID until the benefits are crystal clear.

In the short-term, that's bad news for manufacturers. Even though few of Wal-Mart's suppliers relish the idea of putting a tag on every case for every one of their retailer partners, they understand that it costs money to keep track of which cases have tags and go to Wal-Mart, and which do not. They also know that as more retailers adopt the technology, suppliers will have to purchase more tags and interrogators, which will drive down the cost of the technology. And manufacturers know that the RFID data they get back from retail partners will increase in value as more retailers install the technology at more stores (it's hard to get a very clear picture of your supply chain when you are sending tagged goods to only five or six distribution centers).

There is no magic bullet that's going to make retailers climb on board the RFID bandwagon. But I'll make a prediction: When RFID is contributing to Wal-Mart's bottom line by reducing costs and increasing sales, Wall Street analysts will take notice. They will start asking the CEOs of other major retailers for their RFID strategy. And when those CEOs are caught without a good answer, they will get religion real fast. The big question: Does that happen next year, or in five years? I don't know the answer, but I do know that some manufacturers hope it's sooner rather than later.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.