The security week that was: 07/23/10 (RFID & Wal-Mart)

RFID hits the tipping point

I have always wondered when a few technology markets would hit "the tipping point", a concept promoted by the book of the same name that Malcolm Gladwell published 10 years ago. Biometrics has been one of those question marks; so has video analytics. But RFID (radio frequency identification) asset tracking can be moved off the question mark list; it has "tipped".

Wal-Mart was the instigator. It had a mandate in January 2005 that suppliers needed to tag pallets so it could use RFID in the supply chain. Now, some five years later, the retailer is adopting RFID tags onto clothing in its stores. The technology allows associates to scan shelves to find out current inventories. That affects not only getting the right merchandise on the shelves, but it means thefts of merchandise can be detected more quickly.

Curtis Baillie, CSC, a retail security consultant, author of the Security2LP blog, and former security & LP director in the grocery business, said that recent drops in the cost per RFID tag have encouraged adoption of this technology, and the synergies of inventory and loss prevention drive the business case for RFID.

"It's all part of loss prevention," Baillie said. "Keeping track of inventory levels has a direct relationship to loss prevention methods for retailers. The two go hand-in-hand."

Baillie agrees that Wal-Mart's adoption of RFID at the item level in its clothing sales is probably the tipping point in this technology. "If Wal-Mart is doing this, you're going to see other retailers fall in line."

But there are skeptics and critics. Scan the Internet and you'll find communities of people who decry this technology as "spying" and as "big brother" impinging on their privacy. But Baillie says that is really unfounded.

"Some people look at it as a big brother type of issue, but tracking customers' buying habits is already done by other means," he said. "It could complement what they're already doing [for customer habit tracking], but it wouldn't be the primary reason for adopting these chips. The primary reason is for tracking inventory."

The other side of criticism might come from suppliers and manufacturers themselves. When Wal-Mart first mandated supply chain tagging in 2005, it faced challenges from suppliers who were hit with covering the costs of the tags, and it also faced technology glitches. Five years later, Baillie says that feet-dragging isn't likely to happen.

"Wal-Mart is too big to give push-back to [from suppliers]. Most of the EAS tagging used today is done right at the vendors, and there was huge push-back on EAS from the vendors for many years. We experienced push-back on EAS when I was in the grocery business. But now, the vast majority of that is done with vendor tagging." EAS (electronic article surveillance), like RFID, uses tags, although EAS is only a loss prevention technology, and isn't applied for inventory management. RFID tags add in product information which EAS tags don't include.

And with RFID item tagging coming from Wal-Mart's clothing suppliers, we're back at the tipping point concept. To be fair, Wal-Mart hasn't been the only adopter. Major retailers like Tessco and Metro (these are European retailers) have been using RFID already. But with Wal-Mart's suppliers turning to RFID, it prepares the entire vendor, manufacturing and supply chain industry to use tags, and that could mean we'll see Wal-Marts competitors and the retail industry as a whole jump on this bandwagon.

There might be another tipping point coming. While "tipping points" are usually thought of as when a trend explodes and becomes dominant and prevalent, it can also occur when a trend tips in a negative direction, and in that sense, there could be a negative tipping point for EAS. With RFID tagging being applicable to both inventory and loss prevention, it's not hard to picture a day in the near future when retailers stop buying EAS tags and instead spend their money on RFID exclusively. There still would be technology changes needed so that RFID tags could be read at further distances (like at the door exits of retailers), but when that happens, Baillie said, "this could replace today's existing EAS systems."