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Another Setback for EPC RFID Adoption

News that Procter & Gamble has ceased tagging promotional displays for Wal-Mart could slow the adoption of Electronic Product Code standards.
By Mark Roberti
Feb 16, 2009Adoption of radio frequency identification based on Electronic Product Code (EPC) standards to track goods moving among trading partners was never bound to be easy. Aligning the benefits for retailers, manufacturers, distributors and logistics providers is an ongoing challenge. Each company has its own interests and goals, and is pursuing the applications that make the most sense for its business. Collaboration toward shared goals is a secondary consideration, which makes moving forward together difficult.

Wal-Mart jump-started adoption in 2003 by requiring its top 100 suppliers to start tagging pallets and cases by January 2005. Procter & Gamble (P&G), one of those top-100 companies, moved beyond the tagging mandate and worked with Wal-Mart to prove that if promotional displays are tagged to ensure they are on the retail floor when a related advertising campaign runs, sell-through can improve by as much as 20 percent.

Now, P&G has decided to stop tagging promotional displays. This is a setback for EPC RFID, as promotions execution was considered the one area in which manufacturers could see significant benefits (see P&G Finds RFID 'Sweet Spot' and Wal-Mart, Suppliers Affirm RFID Benefits).

Procter & Gamble was apparently frustrated that Wal-Mart was not doing more to use the collected EPC RFID data to improve promotions execution (see Procter & Gamble Halts Tagging of Promotional Displays). Although P&G continues to collaborate with Wal-Mart on EPC projects—RFID Journal, in fact, is working with EPCglobal to host a webinar on Feb. 24 with representatives of both companies—other suppliers will likely interpret this as a sign that they should not tag promotional displays.

The P&G news comes on the heels of Sam's Club's announcement that it is lowering its fee to apply EPC RFID labels to pallets from $2 to 12 cents, and delaying its adoption of the technology at the sellable-unit level (see Sam's Club Provides Clarity on EPC RFID Plans and Sam's Club Reduces Tagging Fee). Some suppliers that were planning to begin tagging have dropped those plans, and some that had joined EPCglobal and begun tagging have ceased their efforts.

Sam's Club is moving forward, but probably not fast enough for some vendors. Those smaller providers of EPC RFID hardware and software, already hurting since sales haven't risen as quickly as expected, have lost business and could wind up putting themselves up for sale—or go out of business entirely.

Everything that happens with Wal-Mart is important because of the retailer's size, but it is especially vital in the EPC RFID industry since the only other retailer to adopt the technology in a significant way has been Metro, in Germany. Some CPG companies are frustrated that other retailers have not gotten involved, because if adoption spreads, costs will decline and achievable benefits will increase.

There is a danger that the EPC RFID movement could simply whither if more retailers don't adopt the technology, and if companies fail to overcome the challenges of collaborating and sharing the benefits. I think that would be unfortunate for retailers, manufacturers and consumers alike, because there are great efficiencies to be had if the technology can be implemented. However, it is avoidable.

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