Nonretail Businesses Take Lead With Item-Level RFIDNonretail Businesses Take Lead With Item-Level RFID

Still, some businesses are making headway. U.K. retailer Marks & Spencer this year expanded to 43 stores an RFID trial in which clothing sold in complex sizes is being individually tagged. The tags contain a number unique to each garment and have been integrated with existing paper bar code labels, which detail the size and cost of an item. This system makes it easier for the retailer to consolidate all identification information into one label.

Marks & Spencer is using passive tags that don't emit a signal and only release their unique ID number when a scanner is passed near them during stock checking. Scanned data is transmitted to a central stock database, where an automatic comparison with the stock profile for the store triggers a replenishment order. A similar trial is taking place at Levi Strauss, which is tagging men's jeans sold in one U.S. store and pants in two stores in Mexico. Like Marks & Spencer, Levi hopes RFID will help it restock products faster.

A few other retailers are testing or planning to test item-level RFID, but none has made a large-scale deployment. Best Buy in January began requiring suppliers to ship tagged cases and pallets to two of its distribution centers that serve 700 stores. The retailer plans for item-level tagging, particularly for electronics and home theater systems. RFID tags could help customers easily locate an item in a store and understand how the components fit together. Best Buy could start tagging products at the item level early this year, the retailer's EPC RFID program director, Paul Freeman, has said. However, Best Buy wouldn't provide the names of its suppliers.

Wal-Mart has 300 suppliers that track products at the case and pallet level using RFID technology. More than 500 of its stores handle more than 3 million RFID-tagged cases and pallets a week. RFID helped Wal-Mart reduce out-of-stock merchandise in its stores by 30% last fall compared with a year earlier, says Simon Langford, Wal-Mart's director of RFID strategy.

"RFID is having a positive effect on our customers because we have the products they want on the shelf when they come in," Langford says, "and that benefits us because it drives sales and benefits our suppliers by protecting their brand loyalty." Wal-Mart will install RFID readers at receiving docks and on sales floors at 500 more stores this year.

Economic Sense

Item-level RFID holds a lot of promise, but it still hasn't reached an economically viable threshold outside of high-value items, expensive equipment, and popular drugs, says Matthew Growney, managing director of Motorola Ventures, a venture capital arm of Motorola.

Item-level tracking also has a potential consumer market. Applications could let consumers keep inventory in their homes. For ex- ample, a refrigerator with an embedded RFID reader would know when certain groceries are running low. Smaller RFID readers and anti-collision technology that lets more tags go through a reader simultaneously without a substantial error rate also will be of interest to investors, Growney says. Companies to watch for RFID innovation include GenuOne, Oat Systems, MIT startup TagSense, and ThingMagic. "Large companies like IBM and Accenture will be interested in either acquiring or supporting them by reselling their value-added applications," Growney says.

While Wal-Mart doesn't have any item-level tagging trials going on yet, Langford says it's "absolutely part of the plan" as soon as the economics begin to make sense. "Item-level tagging will bring untold benefits," Langford says. He cites being able to take inventory in minutes instead of hours and having more accurate data to replenish shelves with the correct inventory. Item-level tagging also can help prevent shoplifting of high-theft products, such as video games and electronics. Stores could reduce the amount of plastic packaging needed for those products, benefiting the environment as well, Langford says.

It's unclear if Wal-Mart will mandate item-level tagging the way it does at the case and pallet level. But retail already has strong advocates of the technology who are looking beyond current challenges toward the technology's future benefits, and Wal-Mart is chief among them.

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