Walmart and RFID, It's Deja Vu All Over Again

The year was 2004 and RFID had the hype surrounding it that mobile commerce does today. Linda Dillman, then CIO of Walmart, gave a keynote address at the Retail Systems Conference in Chicago. In the keynote she announced that Walmart was going to implement widespread adoption of RFID technology at the case and pallet level to better manage inventory and their supply chain. Just as importantly, she announced that all Walmart suppliers were mandated to implement RFID technology as well.

The initiative and its subsequent supplier mandate caused a firestorm for Walmart and some say it cost Dillman her job. Fast forward to 2010 and last week's announcement that Walmart plans to roll out sophisticated electronic ID tags to track individual pairs of jeans and underwear, the first step in a system that advocates say better controls inventory but some critics (probably the same people from 2004) say raises privacy concerns.

According to The Wall Street Journal, "starting next month, the retailer will place removable "smart tags" on individual garments that can be read by a hand-held scanner. Wal-Mart workers will be able to quickly learn, for instance, which size of Wrangler jeans is missing, with the aim of ensuring shelves are optimally stocked and inventory tightly watched. If successful, the radio-frequency ID tags will be rolled out on other products at Walmart's more than 3,750 U.S. stores."

Since 2004, RFID's benefits and disadvantages haven't changed much. The technology still promises better visibility into inventory and the ability to reduce shrink. It also still raises concerns about privacy and costs. However, Walmart's broad adoption would be the largest item-level RFID initiative in the world, and proponents predict it will lead other retailers to start using similar technology. Since Walmart's methods are widely adopted by suppliers, they typically become standard practice at other retail chains.

The WSJ article states that privacy experts are concerned that since the tags cannot be turned off, they are trackable, so unscrupulous marketers or criminals will be able to drive by consumers' homes and scan their garbage to discover what they have recently bought or use trackers to follow shopper movements. As a result Walmart is demanding that suppliers add the tags to removable labels or packaging instead of embedding them in clothes. It also is posting signs informing customers about the presence of the tags.

"Concerns about privacy are valid, but in this instance, the benefits far outweigh any concerns," says Sanjay Sarma, a professor at the Massachusetts Institute of Technology. "The tags don't have any personal information. They are essentially barcodes with serial numbers attached. And you can easily remove them."

2004 seems like a lifetime ago and mobile technology has long since replaced RFID as the next big thing. However, with Walmart's latest foray into item-level RFID perhaps it will finally realize its long promised potential.
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