A recent report from research firm Deloitte indicates that many Canadian retailers plan on deploying radio frequency identification technology, but several major stores say they aren’t in any hurry to get there yet.
Deloitte Canada’s 2004 RFID study is based on interviews with 30 retail and
consumer product companies in Canada. Half of the respondents said they will implement RFID in the next two years, while 29 per cent planned on three to four years.
The RFID retail revolution will happen in Canada, said Christian Stephan, a partner in Deloitte Canada‘s consumer business group, but that doesn’t mean that Canadian retailers really know what they’re getting into.
According to the study, 73 per cent of companies interviewed are aware of the technology, but only 23 per cent said they were “”very”” familiar with the technology. Another 43 per cent said they are “”somewhat”” familiar with it.
“”It’s more a question of ‘when’ than ‘if.’ In the U.S. . . . they’re doing it. I think everyone else is kind of sitting on the fence,”” said Stephan.
The promise of RFID is real-time tracking of items through the supply chain. Bar codes are able to achieve this to a degree, but are limited by the amount of useful information they can encode. They also require line-of-site scanning, which isn’t an issue with radio frequency technology.
The company that has put RFID squarely in the minds of most retailers and suppliers is Wal-Mart. The retail giant has mandated that its top 100 suppliers become RFID-compliant in 2005 with smaller suppliers to follow in 2006. Wal-Mart has been conducting trials in the Dallas area this year with HP, Johnson & Johnson and Kraft Foods, among others. Wal-Mart Canada did not return calls for comment at press time.
Target, another major American retailer, has already announced plans to go ahead with its own strategy, but many Canadian retailers are hanging back to see how the situation develops.
Caroline Casselman, a spokesperson for Canadian Tire said, “”Our approach is that we’re going to monitor its use in other businesses and if we can pull together a business case that entices us to consider its use, we will pursue that.””
A spokesperson from Future Shop said “”they’ve looked into it,”” but wasn’t aware of any pilot programs in place or solid plans to adopt RFID.
Steve Boily, director of enterprise architecture for Hudson Bay Co., declined to comment on the specifics of his company’s RFID strategy, but indicated that the interest is definitely there.
“”I think a lot of retailers have got a fast follower strategy,”” he said. “”Once the reliability of the readers, once the cost of the technology hits a certain threshold, once they see Wal-Mart and a critical number of suppliers doing it, then they’ll all jump on the bandwagon.””
What may be holding some companies back — both in Canada and the U.S. — is the economics behind RFID. Estimates place the cost of RFID tags anywhere from a quarter to a dollar.
Placing a tag on a whole pallet of goods may make sense, said Stephan, but not on individual lower-cost items. A can of pop, for example, is worth less than an RFID tag. The technology would have to cost a penny or less for it to be feasible.
It’s not only the cost of the tags, said Stephan, but the readers, the software, the middleware and the integration necessary to hook it up to existing retail technology.
“”I think there’s still some things that have to be worked out with RFID,”” said Boily. There are issues around standardization, for example. Class 0 tags are factory programmable, Class 1 tags can be programmed at various stages along the supply chain, and Class 2 tags will be able to hold more data.
“”It’s hard for people to deploy on something that hasn’t been defined yet. Nonetheless, Wal-Mart, Target, IBM and some others have been working on it. I think they’re working out a lot of the issues,”” he said.
There are other concerns around RFID — such as its impact on consumers’ right to privacy — which have yet to be resolved. In theory, the level of information contained on an individual tag could be used to determine a great deal about consumer habits. Stephan dismisses such Big Brother scenarios, saying that RFID tags are more useful to retailers as a way to cut down on in-store theft.
According to Stephan, widespread deployment of RFID is probably at least five years away. Boily points out that bar code technology took more than a dozen years to truly take hold after it was first introduced. But with stakeholders like Wal-Mart taking an active interest, RFID may be on an accelerated path.