Retail’s Anthrax Syndrome

By Mark Roberti

Just as the American people have become complacent about another anthrax attack, retailers have become complacent about Wal-Mart using technology to crush them.

June 10, 2002 - As I was flying back from Florida after seeing SAP's demonstration of smart agents that act on real-time information from RFID tags, I kept wondering why more retailers aren't doing everything in their power to learn about this technology. After all, it's clear SAP is developing the agents for Wal-Mart. SAP and Wal-Mart won't confirm that, but it's pretty obvious. And Wal-Mart is the most powerful retailer on earth.

If I were doing battle and knew my enemy was developing a potent new weapon, I'd be trying to learn as much as I could about that weapon. So why aren't more retailers banging on SAP's door? Why aren't more joining the Auto-ID Center? The only answer I could come up with is that they suffer from the Anthrax Syndrome.

I don't mean to make light of the deaths that resulted from anthrax, but I think the comparison is valid. It has been about eight months since the last envelope with anthrax was discovered. The media has pretty much dropped the story. And people and politicians aren't clamoring for the killer to be caught. Why?

I think its human nature to expect that things will always be the way they are. The killer could be planning to flood the mail with anthrax tomorrow, but we assume, because there have been no attacks in eight months, that the there will be no more attacks. Of course, there is no way to be sure.

And it's the same with Wal-Mart. A decade ago, the retailer teamed up with Procter & Gamble and pioneered the use of technology to allow P&G to manage inventory in Wal-Mart stores. The savings Wal-Mart achieved helped propel sales. At the start of the decade, Kmart and Wal-Mart were almost equal in annual sales. Now, Wal-Mart is the largest retailer on earth, and Kmart is fighting for its survival.

Retailers have tried to copy Wal-Mart as best they can, and they've come to accept the status quo. Wal-Mart hasn't put us out of business today, they say, so they probably won't put us out of business tomorrow, or the day after that or the day after that . . . But there is no way to be sure.

Wal-Mart and P&G are at it again, developing RFID-powered systems, with SAP's help and technology from the Auto-ID Center, that will likely result in huge savings. Wal-Mart is clearly convinced that RFID is the future. Its competitors, with the notable exception of Target and Metro AG, appear to believe they can hang back and wait until the technology is proven.

Makes sense, right? Once Wal-Mart drives the price for RFID tags and readers down, the other retailers figure they can jump in and install the very same technology. Which means they can quickly catch up. If you believe that, I have some Enron stock I'd like to sell you.

You can buy the same software Cisco uses to run its business over the Internet. How many companies are as efficient as Cisco? Any company can sell on the Internet. Why hasn't anyone come close to approaching Amazon's sales? And how many companies have been able to replicate the Dell model?

Perhaps retailers will be able to compress the learning curve and figure out in a couple of months what Wal-Mart and P&G have learned over the past year. But I doubt it. If you aren't learning how to run a supply chain based on real-time demand signals from RFID chips today, you're already way behind.

The United States government can't afford to be complacent about anthrax attacks. Can you afford to be complacent about Wal-Mart's RFID efforts?