That new, fancy lingerie you’ve seen advertised might have it. The razors you shave with might have come from packages including it. And one day, you just might be glad the car you were driving before it was stolen was equipped with it.
Love it or hate it, lately RFID, or radio-frequency identification, has been the receiver of a lot of emotionally charged discussion. Proponents swear the technology, sort of a next-generation bar coding for objects and, eventually, living things, makes tracking and product management more efficient. All the while, RFID continues to incite a lot of blood-pressure-raising moments from privacy advocates, who see the wireless tags as a way Big Brother and Big Retailer can track consumers’ every purchase and habit.
RFID is a wireless, battery-powered transmitter similar in size to a grain of salt. Once it’s attached to an object, the small radio can send information specifically about that object to a computer network.
The technology is a no-brainer for national retailers that need to track pallets of goods and is an easy winner over today’s bar code technology, say executives. Where bar codes must be read with a handheld scanner, RFID can send information from a greater distance, probably up to six feet with vendors feverishly trying to increase that. If a multinational retailer receives hundreds of shipments from myriad suppliers, the RFID tagging will supply greater detail about the cargo, such as where it came from, where it’s going, and when it’s going to degrade or expire.
RFID has won fans when it has been implemented in other parts of business operations, too, not just on those pesky pallets in the warehouses. Take a premium grocer, for instance, that must sell expensive and perishable cuisine quickly. Tags attached to food trays on the shelf alert floor managers when an item needs to be replaced, and tells them how quickly the fare is being sold.
For consumers, the message coming from the RFID camp is a promise that better efficiency at the back-end, and less waste on the floor, will mean better efficiency and return for the company, and—presto—better prices and more product selection for the consumer. (Of course, when bar codes were introduced, I’m sure there were trumpeting pledges of no more waiting in lines and better prices, too.)
"Companies will have no choice but to use RFID, just as they have no choice but to use the Internet today."
RFID Gets Drafted
The increased furor around RFID culminated last October when the U.S. government announced its military branches would demand their suppliers use active and passive RFID tags in all equipment shipped to the military by January 2005. Trials using the technology are expected to begin this month, according to reports.
"The military’s RFID mandate will have a huge impact on hundreds of thousands of companies, large and small," says Mark Roberti, editor of RFID Journal, which reported that freight containers sent to Afghanistan and the Persian Gulf have already been required to bear the tags. "Major suppliers such as Boeing, Lockheed, and Northrop Grumman will have to tag items." Roberti adds that anyone who supplies material to the military, or even supplies to a supplier of the military, must embrace RFID. That means uniforms, canteens, and helmets, too.
Adversaries are wary the announcement signals the beginning of potential snowballing momentum for RFID. When the Department of Defense green-lights a technology, that technology often trickles down to civilian commercial applications.
Even though the gray economy would lead one to believe that companies have other expenses more imperative than investigating and investing in RFID, market experts say that investing in the technology now is advisable so costly implementation doesn’t derail a company later. Retailers, consumer packaged goods companies, and consumer electronics are three sectors that should be investing in RFID pilots, advises Mike Dominy, a senior analyst of business applications and commerce at The Yankee Group, a Boston-based research firm.
"Companies will have no choice but to use RFID, just as they have no choice but to use the Internet today," says Roberti.
Still, some companies are learning that the RFID game is too expensive. Daniel Nabarro, chairman of Figleaves.com, an online lingerie company, had been using RFID to track its inventory and ensure proper shipments to customers. The company dropped the technology, at least temporarily say executives, because of price. "We will use [RFID] when five-cent chips are available," Nabarro said.
Analysts debate the magic number for the costs of the chips and equipment, but they all agree on one thing: If RFID takes off as expected, its market size will be huge. Some market watchers put today’s RFID worth, for all software, hardware, and services, at close to $1 billion. If every item on every shelf must have a tag, and each store needs readers for those tags, you can just imagine the money to be made. That’s why companies like IBM and Hewlett-Packard have jumped with both feet into the RFID pool. Layering consulting services atop software solutions will enable the top computer companies to offer a graduated system to retailers who are stuck with making their back-end inventory process work.
Ciao, RFID
If it weren’t for the haunting cries of privacy running afoul, more companies would have tested and launched RFID.
Italian clothier Benetton, caused a ruckus last January when it said its apparel would be fitted with RFID tags. "People will know when I shop! What I bought…what size I wear!" the RFID foes cried. RFID backers tried to point out that this information would only be available if someone was holding a scanner to that tag, which would only work inside a store. Still, given the public outcry, Benetton discontinued the trial.
Prada, the upscale, very expensive clothing boutique got into the RFID act—at least at one store. It announced its flagship store in Manhattan would experiment with RFID at that location. Shoppers could choose a blouse, for example, which, once brought into the dressing room, the RFID tag would trigger a fashion show displayed on a plasma screen that showed the potential buyer exactly what other items matched that blouse, and what that blouse looked like on the runway on a model. Even mainstream wardrobe purveyor the Gap tested RFID in one of its Atlanta stores. Texas Instruments, the vendor behind the Gap’s pilot, said although the Gap saw a 15% increase in sales at the RFID-equipped store, it postponed the launch.
But it was really the massive retailer Wal-Mart, which embraced RFID, that pushed the technology to the forefront. Wal-Mart had been using RFID, but only in a warehouse capacity. Then, the company announced in early 2003 that its top 100 suppliers would have to use RFID on pallets and cases within two years. It was later announced that the national chain store would be conducting trials of RFID-equipped Gillette razors at a shelf-level, meaning that rather than just having the products tagged with RFID while they sat on the pallets in the warehouses, each Gillette item would include the tag. Privacy advocates considered this to mean Wal-Mart would know, for example, that a particular customer bought several razors, as well as a lot of nail fungus and wart remover products, and that the customer paid with a credit card each time. Could that information possibly make its way into the wrong hands? It wasn’t long before Wal-Mart backpeddled on the trial. Wal-Mart met with suppliers in early November to detail its RFID requirements. The retailer’s ambitious RFID plans might have slammed into the realities of implementation. The New York Times reported that while Wal-Mart is still gung-ho for its suppliers to embrace RFID within two years, it quantified its hefty RFID rollout plans by earmarking three distribution centers and 150 stores for the technology initially.
Benetton’s and Wal-Mart’s decisions to temporarily shirk off the RFID-at-consumer-level burden doesn’t alleviate the privacy concerns of RFID. In fact, those companies’ decisions make these concerns more ominous. Analysts predict that while four or five years will pass before consumers are directly affected by RFID, privacy will be a major problem if it isn’t addressed up-front.
With industry not grabbing the privacy bull by the horns, privacy champions, like CASPIAN (consumers against supermarket privacy invasion and numbers) have voiced their concerns, protesting at RFID marketing events, like the Electronic Product Code Symposium, held in Chicago last September. Such privacy-rights anxiety has led to talk of mechanisms, as there should be, to turn the RFID communication off, should a consumer choose to. "Make the tag removable or killable," suggest some. "Don’t let retailers be able to record or market information of who bought what when," say others.
"Privacy advocates have very legitimate concerns. There must be ways to prevent both retailers and others from reading tags in items against a person’s will," says Roberti. "The industry is working through the solutions, but in my mind, it should be possible to protect the privacy of individuals while letting companies and consumers benefit from RFID technology."
If RFID is to succeed, public relations efforts must play an offensive role. When I first started food shopping at Stop & Shop, my grocer of choice, I gladly provided my name and address information in exchange for a frequent-flier card, which entitles me to discounts on goods that non-card holders don’t receive. Every time I get my receipt, imprinted with something like "Meg, you saved $17.56 on this trip!" I think the trade-off was worthwhile. However, if those tags take some information from me, and I’m not informed and rewarded for that retrieval, I would be wary of shopping in stores that used those tags. It is the retailer’s responsibility to make the consumer see the tags as advantageous rather than intrusive. Will I get a discount on merchandise? (Or better yet, a "cut-to-the-head-of-the-line" pass?)
Stores must determine how to make customers desire RFID in their lives—and that might be the biggest challenge of all.
So while the techies figure out how to increase the range of RFID signals and cut back on the interference issues, the solutions providers figure out how new RFID equipment can work with customers’ existing business practices, and standards bodies unravel how to make RFID an open technology, stores must determine how to make customers desire RFID in their lives—and that might be the biggest challenge of all.
If after reading my column this far, the thought of having these tags branded onto your cereal boxes still gives you the willies, I advise skipping this last section.
Experts on RFID promise there will be futuristic applications that could further obliterate the rules of privacy. Not just on your prescriptions. Not just on your refrigerator. Tracking your wandering pet Chihuahua. Better yet, tracking adulterous spouses. Or perfidious employees. It will be easy to catch a culprit who is unknowingly wearing an RFID tag.
And maybe the day will come when more people are tagged than are being sought. But that starts getting a little too complicated for me.
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