Wal-Mart’s Item-Level Strategy: Better That Tags Should Be Thrown Out Than Dealt With

Written by Evan Schuman
July 29th, 2010

When Wal-Mart this week confirmed it has been quietly testing item-level RFID in two Arkansas stores for several months—along with plans to “incrementally roll out [item-level RFID] throughout the chain”—it raised quite a few eyebrows because of the way it’s being done. The company is initially only tagging denim jeans, socks and underwear (let’s try and ignore the fact that a radio transmitter inside a guy’s boxers is nothing shy of creepy), and it’s leaving the tags active until customers opt to throw them away.

The reality is that Wal-Mart’s gradual deployment makes a lot of sense. The media-repeated cries of privacy invasion are simply silly, based on ludicrously unrealistic assumptions of how easy this data would be to access, assuming anyone had any reason to even try. The most interesting part of the rollout, though, is the tag disposal.

The way Wal-Mart has set up its item-level RFID EPC system, the tags will be attached (not integrated inside, but attached) by the manufacturers. The chain will track the tags throughout its supply chain, all the way to the shelf and the cart. But it won’t be scanning for them at the POS, so the path ends somewhere shy of checkout.

That’s where things get interesting. The tags are supposed to be easily removable by consumers. (Please don’t get me started on things that are supposed to be easily removable by consumers. And, yes, I’m looking at you, Costco. When someone can make a living selling devices to let consumers access products they’ve already paid for, it’s time for you to consider whether you’ve perhaps overdone your packaging a bit. But I digress. Back to Wal-Mart item-level.)

So why not simply have the Wal-Mart associates remove the tags at POS and then throw the used tags in a box so they can be reused later? Staples made quite a case study a few years ago with its reusable active RFID tags.

This approach would theoretically accomplish lots of good things: It would save the consumer the bother of removing the tags; eliminate these baseless privacy attacks that envision cyberthieves scanning people’s garbage cans to learn about their jeans; and save a few dollars because the tags could indeed be wiped and reused.

Even if the tags are being purchased for a penny or two, at Wal-Mart volume levels, that has to add up. Besides, they are literally going to be thrown away. These are sophisticated pieces of electronics that the chain needs anyway. Why let that happen?

There is a practical reason for letting the tags leave the store. If Wal-Mart’s volume purchases do indeed get the price down to one cent per tag–which is far from out of the question–you have a simple ROI issue. How long will it take an associate to remove each tag and place it in a receptacle? How many of the tags will be damaged by that act of removal? How much will it slow down checkout lanes? If a brand-new tag can be purchased for a penny, it wouldn’t take especially large answers to any of those three questions to make it not worthwhile.

Let’s take a quick look, though, at that privacy issue. Like everything else, it’s a lot more complex and nuanced than we want it to be.


One Comment | Read Wal-Mart’s Item-Level Strategy: Better That Tags Should Be Thrown Out Than Dealt With

  1. Bill Bittner Says:

    There are a lot of things to take away from Walmart’s new approach to RFID, but I don’t think one of them is that they started on the wrong foot.

    Everyone talks about using RFID at the item level to eliminate out of stock at the shelf and they seem to assume a zero lead time for getting the reserve inventory. The fact is that if the stock is not in the backroom or on the next delivery, you’re going to remain out of stock. RFID at the container and pallet levels goes a long way to eliminating miss-selects, lost backroom inventory, etc. The result should be fewer out of stocks at the shelf. The infrastructure necessary to implement container level RFID and the processes necessary to handle emptied containers etc. serve as a good training tool for the challenges of item level RFID. The thing that made this whole thing a challenge was both the cost and immaturity of the technology. Costs did not come down as quickly as expected and read rates have not yet approached the level of bar codes. This has meant accuracy requirements of applications that relied on 100% read rates could never be met.

    I like the new Walmart approach for a lot of the reasons already mentioned. Customer privacy has been made a non-issue by making the tags detachable. Shelf inventory management only needs to be “close” in order to be a lot better than it is today. By seeking win-win situations with manufacturers in difficult categories RFID will be more accepted, after all the retailer still records a sale when an OOS causes the consumer to choose a rival manufacturer. System and infrastructure designers have a lesson here, they must design solutions that can handle a phase in approach to RFID enabling retailers to gain benefits as new items come with RFID’s attached.

    As far as the privacy issue, although Walmart has eliminated it as an issue at this point I am starting to believe some of the privacy advocates may have a valid point. Let’s say you walk through a doorway with an RFID reader. Your credit cards, passport, drivers license, jeans, and sneakers all have RFID tags. Taken individually, none of these numbers are a concern but when you combine them you have the ability to create a detailed record of who, what, where, and when ……..


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