How Soon Will RFID Replace Bar Codes in Retail Stores?

It's unlikely radio frequency identification will replace bar codes in the next 25 years, if ever. The two technologies don't compete—they complement each other. If an RFID tag can't be read, a bar code can provide backup. In cases where RFID will be too expensive for many years to come—tracking a pack of gum, for instance—bar codes will always be preferable.

Tag cost is not the primary obstacle to adoption. The railroad industry adopted RFID a decade ago, when the price of each tag was $50 or more—and it cost $40,000 to install readers out by the tracks (electricity and network connections had to be put in place, and the interrogators had to be protected from weather). However, there was a clear ROI to tracking railway cars, so the railroads did so. If tags cost a penny, but with no discernable ROI, companies still would not deploy.

Tag cost is often cited by retailers as a reason for not adopting RFID, but in many cases, they have not really analyzed the issues and simply don't know what the benefits would be. Thus, they don't know at what price a deployment would make sense. That's starting to change, particularly in retail apparel, where the cost of the items is usually fairly high and the loss of sales from not having goods on the right shelf (or on the shelf at all) when a customer wants to buy them is significant. There is a growing realization that RFID can help solve these problems. More apparel retailers are rolling out the technology, and I think you will see some major announcements before the end of this year.

For mass-merchandise stores, part of the problem is the sheer number of goods on-site, and the relatively low value of each item. Sam's Club has said it will have suppliers tag individual items, likely starting in 2011. Sam's sells in bulk, so that makes sense. If that initiative is successful, it could jumpstart adoption, as customers would no doubt value the convenience of an automated checkout system that greatly reduces checkout times. For Wal-Mart to tag every item, tag cost would probably have to drop to about a penny—which can't happen without such innovations as printing the entire tag, including the integrated circuit. Progress is being made, but a tag small enough to be printed on a pack of gum is still many years away.