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The Wal-Mart Factor

Because of its size, Wal-Mart will have a major effect on how RFID technology is adopted.
By Bob Violino
Mar 16, 2003March 17, 2003 - There are times when everyone who starts a business struggles emotionally. You are investing your savings to build something in the hope that down the road it will earn money. When I first started RFID Journal no one was talking about or writing about RFID. Many people thought I was crazy to launch this venture. I had some moments when I thought that maybe they were right. But whenever I felt those doubts creeping in, I would always remind myself of one thing: Wal-Mart is serious about this technology.

Why was that reassuring? Because no retailer in my lifetime has been better at using technology to its advantage. In my view, Wal-Mart is cautious about its technology investments. It doesn't invest in the latest fad touted by business magazines or technology consultants. While General Electric Chairman Jack Welch was being lauded for trying to turn GE into the world's largest dotcom -- which wasted millions of dollars and produced few benefits for shareholders -- Wal-Mart proceeded slowly with its Internet strategy.

So the fact that Wal-Mart, with its conservative attitude, was investing its time, energy and money in the Auto-ID Center's effort said a lot. And it was clear to me that if Wal-Mart adopted the technology, the world would follow suit. You may think that's an exaggeration, but I don't.

Consider a few facts. Wal-Mart's annual sales are greater than the combined sales of the entire semiconductor industry. Wal-Mart's sales are greater than the gross domestic product of Turkey. Wal-Mart imports more goods from China ($14 billion) than Japan does ($10 billion). And it employs more people than Ford, General Motors, Exxon Mobil and GE combined.

Size gives Wal-Mart clout to make demands on suppliers that many other companies couldn't make. So it's understandable that suppliers are nervous about whether -- or perhaps when -- Wal-Mart will require them to put RFID tags on products. In this week's feature, we answer the question: Will Wal-Mart Order RFID Tagging?

I hear some people say that RFID cuts costs, but what retailers really want is technology that increases sales. What these folks don't seem to understand is that Wal-Mart is gung-ho about RFID because it understands that cutting costs is a great way to increase sales. The company has built its entire retailing empire on this basic philosophy. And RFID may provide the biggest opportunity the company has ever had to cut costs and improve its already super-efficient supply chain.

I've said this before, but the Electronic Product Code technology being developed by the Auto-ID Center will take off when Wal-Mart decides to adopt it. That's the Wal-Mart Factor, and it's now in play. As our feature this week clearly indicates, Wal-Mart is going to set the pace for RFID adoption. The wheels are in motion. Something could derail the effort, no doubt, but if I were a Wal-Mart supplier, I would start boning up on RFID.

I know that there will be many companies that wait, that think its better to first to be second because those who go first make all the mistakes. That might be a good strategy. After all, a lot of the Internet pioneers got burned, and many of those who moved more slowly, like Wal-Mart, did okay.

Just keep in mind that RFID isn't like the Internet. You're not going to be able to go out and hire a fresh-faced kid in shorts and Teva sandals to write some cool Java application to impress the CEO. RFID takes engineers who know more about radio frequency than how to find the best country music station on the dial. It's going to take integration expertise, software engineers, and people who can change the way you do business to take advantage of the data RFID will provide. This is the hard stuff. Wal-Mart's been at it for 12 years. People who think they can catch up in six months or a year are fooling only themselves.

Mark Roberti is the Editor of RFID Journal. If you would like to comment on this article, send e-mail to mroberti@rfidjournal.com.
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