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Why Isn't Wal-Mart Killing the Tags?
6 CommentsA member of my staff told me it didn't makes sense for Wal-Mart Stores to tag clothing and not take advantage of the kill command that would permanently disable the EPC RIFID tag, or to utilize some of the privacy features built into the new chips from Impinj and NXP Semiconductors. But actually, it makes good business sense. Here's why:
Wal-Mart is currently tracking men's jeans and basics, plus some cases of consumer packaged goods (see Wal-Mart Relaunches EPC RFID Effort, Starting With Men's Jeans and Basics, Wal-Mart Takes a New Approach to RFID and Privacy Nonsense Sweeps the Internet). I would guess that less than 1 percent of the items the retailer will sell this year will have an EPC RFID transponder on it. In order to kill those tags, Wal-Mart would need to install readers at every checkout counter.
Many stores have 40 or more checkout counters. Let's examine the cost, using round numbers and some rough estimates. If you multiply 4,000 stores by 40 checkout stands, Wal-Mart would need roughly 160,000 readers to kill the tags. At $3,000 apiece, that would amount to $480,000,000. Clearly, it doesn't make sense to spend half a billion dollars to kill tags on such a small percentage of products.
That doesn't mean Wal-Mart isn't concerned about privacy. Whatever you might think of the world's largest retailer, it clearly doesn't want to lose customers over privacy issues related to RFID. So it has asked its apparel suppliers to place an EPC RFID transponder in each hangtag, label or exterior packaging, which will then be discarded before the consumer dons the item.
What's more, since it doesn't have readers at the point of sale, Wal-Mart cannot associate a specific item with a particular individual. Therefore, there is no danger that the retailer could, for instance, track me in the store just because I'm wearing jeans it sold me.
Wal-Mart has not revealed to me its long-term plans, but I do believe it has thought a lot about the privacy implications of employing EPC RFID technology in its stores. Clearly, the retailer intends to tag more products over time, and there will come a point at which installing readers at the point of sale will make sense. After all, if every item were tagged, RFID could automate checkout and reduce long lines, which consumers would love.
At that point, I believe Wal-Mart will likely take advantage of the new features in the Impinj and NXP chips. It won't kill the tag, but rather mask the Electronic Product Code (EPC) with zeros or a random number, and it will limit the read range. That will protect consumers, while enabling Wal-Mart to restore the EPC if the item is returned. By that time, consumers—and, one hopes, the media—will be more knowledgeable about RFID, and people will be comfortable with the fact that their privacy is being protected.
Mark Roberti is the founder and editor ofRFID Journal . If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or the Editor's Note archive.
Wal-Mart is currently tracking men's jeans and basics, plus some cases of consumer packaged goods (see Wal-Mart Relaunches EPC RFID Effort, Starting With Men's Jeans and Basics, Wal-Mart Takes a New Approach to RFID and Privacy Nonsense Sweeps the Internet). I would guess that less than 1 percent of the items the retailer will sell this year will have an EPC RFID transponder on it. In order to kill those tags, Wal-Mart would need to install readers at every checkout counter.
Many stores have 40 or more checkout counters. Let's examine the cost, using round numbers and some rough estimates. If you multiply 4,000 stores by 40 checkout stands, Wal-Mart would need roughly 160,000 readers to kill the tags. At $3,000 apiece, that would amount to $480,000,000. Clearly, it doesn't make sense to spend half a billion dollars to kill tags on such a small percentage of products.
That doesn't mean Wal-Mart isn't concerned about privacy. Whatever you might think of the world's largest retailer, it clearly doesn't want to lose customers over privacy issues related to RFID. So it has asked its apparel suppliers to place an EPC RFID transponder in each hangtag, label or exterior packaging, which will then be discarded before the consumer dons the item.
What's more, since it doesn't have readers at the point of sale, Wal-Mart cannot associate a specific item with a particular individual. Therefore, there is no danger that the retailer could, for instance, track me in the store just because I'm wearing jeans it sold me.
At that point, I believe Wal-Mart will likely take advantage of the new features in the Impinj and NXP chips. It won't kill the tag, but rather mask the Electronic Product Code (EPC) with zeros or a random number, and it will limit the read range. That will protect consumers, while enabling Wal-Mart to restore the EPC if the item is returned. By that time, consumers—and, one hopes, the media—will be more knowledgeable about RFID, and people will be comfortable with the fact that their privacy is being protected.
Mark Roberti is the founder and editor of
READERS' COMMENTS
RFID Economics
Great post Mark. It is such a common mistake to ignore simple economics when looking for rationale behind business decisions. I have extended this conversation on ODIN's blog to discuss Wal-Mart's economics and how Wal-Mart's initiative helps companies in other industries. Check it out: http://bit.ly/b5y5X6
Posted By: Bret Kinsella 7/29/10 at 5:55 AM
CTO
I don't believe Wal Mart have to pay $3000 for a reader if the volume is 160 000.
Posted By: Lars Johansson 7/29/10 at 3:49 PM
How about a pair of scissors?
Wouldn't a less technological solution, such as cutting the tags at checkout, address both the cost issue and the privacy issue? More importantly, removing at the tags at the checkout will provide business intelligence as to what product actually has left the store “legally”. This important since Walmart is not actually scanning the actual RFID tags at the exit. In fact, Bill Hardgrave's study of Dillard's RFID deployment (see: http://www.rfidjournal.com/article/view/4881/2) cutting the tags at checkout was one of the internal controls the company used to track the inventory th made it to the check out (i.e. instead of being lost to shrinkage. Dillard's also used the scanners at the exits, but as you rightfully point out Mark – the cost of this outweighs the benefits.
Posted By: Malik Datardina 8/1/10 at 3:33 PM
The Cost of Scissors and Readers
Lars, I didn't meant to suggest that Walmart would have to pay $3,000 per reader. It would likely pay under $1,000 per reader, for the kind of volumes required. But readers must also be installed. There might be cables and additional antennas required. There is integration work at the back-end that needs to be done. All of these have costs associated with them. Perhaps $3,000 is to high, but even if a reader fully installed is $1,500 or $1,000, the cost is still too high to kill the tag on so few items. As for the scissors, I think its a reasonable idea. But I see several downsides. One is that it potentially slows down the checkout process. Two, it almost suggests that the tags are dangerous and need to be removed, when they are not. And three, the tags can't be used for returns if they are removed at the point of sale. I don't know how Dillard's did their pilot, but I believe the RFID label was an extra label put on the clothing. If you put the transponder in the hangtag or on exterior packaging, you don't want to remove this at the point of sale because you need it if you want to return the item.
Posted By: Mark Roberti 8/2/10 at 7:52 AM
EPC Tags & Returns
Mark, correct me if I'm wrong, but what I've read of the Wal-Mart Item level tagging initiative is that the jeans are not scanned at the checkout. The stated reason is to ensure that the tag is not associated with personally identifiable information. So would they still be able to use the tags for returns? If so, that would be a good reason to encourage returns. Also, it would make it unnecessary to cut the tag from an inventory control perspective, as Wal-Mart would know what was sold. However, I don't agree with you about cutting the tags. I do recognize it would slow things down, but from public opinion perspective it will dispel any paranoia that's out there - remember the campaign launched by privacy conscious people against Benetton (the web site is still up: www.boycottbenetton.com). So I see this as more of a "marketing cost". Perhaps they could at least offer customers the choice.
Posted By: Malik Datardina 8/7/10 at 10:23 AM
Cutting the Tags
Malik, You are correct. Walmart is not reading the tags at checkout. They cannot use the tags for returns, if you mean crediting back a specific person for a specific pair of jeans. However, they can use the tags to confirm the jeans were bought at a specific Walmart store and use the tag to track the jeans back through the supply chain. I don't believe that most people are paranoid about RFID, so I don't think there is a need to cut off the tags. I'm sure if consumers were to push back, Walmart would address their concerns. But there is no example anywhere of people objecting to tags used for inventory control.
Posted By: Mark Roberti 8/16/10 at 7:32 AM