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Conflicting Messages Regarding Item-Level RFID in Retail
Several recent contradictory developments and reports about item-level RFID use in retail illustrate that activity is not the same as progress. This report summarizes these developments and provides some context.
Feb 03, 2009—This article was originally published by RFID Update.
February 3, 2009—The idea of item-level RFID tracking in retail has plenty of proponents and skeptics. Both groups could feel more confident in their positions based on recent events. Several reports and developments have provided new perspective on the value and practicality of item-level deployments in retail -- but the new perspective has not brought clarity.
The recent letter that Sam's Club sent suppliers is a microcosm of the item-level value dilemma. In the very first sentence Sam's Club reiterated its vision and commitment of having EPC tags on all the goods it sells. But the letter goes on to say its previously communicated timetable for doing so is no longer in effect, with no new target dates established.
In the letter (see Sam's Club Letter Outlines Changes to RFID Requirements), Sam's Club relaxes its pallet-tagging requirements, informs suppliers that previously mandatory case tagging is now optional, and changes a firm sellable-unit (item-level) tagging deadline from October 31, 2010 to an undefined date in the future. The letter also says the warehouse-style retailer "remains committed to 100% EPC labeling on selling units" and that RFID-enabled point-of-sale cash registers are in development.
"The consensus we're hearing from Sam's Club suppliers we've talked to is: 'We're more confused than ever,'" Mike Liard, RFID research director at ABI Research, told RFID Update. "Suppliers may see the changes and delays as a call to action or as a reprieve. The sharp teeth to enforce Sam's Club's original tagging requirements are now baby teeth."
By making case tagging optional and affirming the commitment to sellable-unit tagging, Sam's Club is clearly signaling that it finds value in item-level tracking. However, the ambiguous timetable and development plans leave suppliers and observers to question where the value lies and how great it is.
Industry research and analyst firm VDC Research provided possible answers in Chaos in the Retail Cosmos, a white paper it released around the same time Sam's Club suppliers were receiving their letters. The white paper argues that improved inventory management represents retailers' best opportunity to make meaningful improvements to their efficiency and profitability, and that item-level RFID applications present some of the best opportunities to improve inventory management. The paper reads in part:
"...Applying more order to retail floor inventory management will require at least item-level management, and in some cases, item-level intelligence. And those solutions will require RFID. Until retailers take advantage of the ability to track inventory on an item-level basis, the retail floor will remain shrouded in questions and ambiguity."
The paper does not mention Sam's Club, but says tagging mandate programs have hampered item-level adoption by creating the perception that most value is gained at the retail level, rather than distributed throughout the supply chain. As one Sam's Club supplier told RFID Update: "If most of the value to using RFID is in Sam's Club's distribution centers, maybe that is the best place for the tag to be applied. Sam's Club's new dates for tagging don't change the business proposition for RFID at our company at all."
The VDC Research paper makes a strong case for retailers to pursue item-level tagging, and says the practice is cost justifiable today for items that cost $15 or more.
VDC's message is clear, but it is not universally shared. The 2009 Store Systems Study, an annual survey and report on retailers' IT priorities for the coming year conducted by IHL Group and RIS News, makes no mention of RFID whatsoever. That suggests that despite the Sam's Club's activity, item-level tagging is not a top-of-mind concern among most retailers, who are focused on data security, kiosks, point-of-sale systems and other in-store systems.
"Sometimes I think as an industry we wait too much to see what Wal-Mart and Sam's Club are going to do," said ABI's Liard. "There are several retailers in the fashion and footwear segments with successful item-level tagging systems, and other applications are falling into place. There are other retailers out there -- where's their influence?"
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