Wal-Mart Radio Tags to Track Clothing
By
Manuel Bustillo - Wall Street Journal
July 23, 2010
Wal-Mart Stores Inc. 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 say raises privacy concerns.
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 Wal-Mart's more than 3,750 U.S. stores.
"This ability to wave the wand and have a sense of
all the products that are on the floor or in the back room in
seconds is something that we feel can really transform our
business," said Raul Vazquez, the executive in charge of Wal-Mart
stores in the western U.S.
Before now, retailers including Wal-Mart have
primarily used RFID tags, which store unique numerical
identification codes that can be scanned from a distance, to track
pallets of merchandise traveling through their supply chains.
Wal-Mart's broad adoption would be the largest in
the world, and proponents predict it would lead other retailers to
start using the electronic product codes, which remain costly.
Wal-Mart has climbed to the top of the retailing
world by continuously squeezing costs out of its operations and then
passing on the savings to shoppers at the checkout counter. Its
methods are widely adopted by its suppliers and in turn become
standard practice at other retail chains. But the company's latest
attempt to use its influence—executives call it the start of a
"next-generation Wal-Mart"—has privacy advocates raising questions.
While the tags can be removed from clothing and
packages, they can't be turned off, and they are trackable. Some
privacy advocates hypothesize that unscrupulous marketers or
criminals will be able to drive by consumers' homes and scan their
garbage to discover what they have recently bought.
They also worry that retailers will be able to
scan customers who carry new types of personal ID cards as they walk
through a store, without their knowledge. Several states, including
Washington and New York, have begun issuing enhanced driver's
licenses that contain radio- frequency tags with unique ID numbers,
to make border crossings easier for frequent travelers. Some privacy
advocates contend that retailers could theoretically scan people
with such licenses as they make purchases, combine the info with
their credit card data, and then know the person's identity the next
time they stepped into the store.
"There are two things you really don't want to
tag, clothing and identity documents, and ironically that's where we
are seeing adoption," said Katherine Albrecht, founder of a group
called Consumers Against Supermarket Privacy Invasion and Numbering
and author of a book called "Spychips" that argues against RFID
technology. "The inventory guys may be in the dark about this, but
there are a lot of corporate marketers who are interested in
tracking people as they walk sales floors."
Smart-tag experts dismiss Big Brother concerns as
breathless conjecture, but activists have pressured companies. Ms.
Albrecht and others launched a boycott of Benetton Group SpA last
decade after an RFID maker announced it was planning to supply the
company with 15 million RFID chips.
Benetton later clarified that it was just
evaluating the technology and never embedded a single sensor in
clothing. Wal-Mart is demanding that suppliers add the tags to
removable labels or packaging instead of embedding them in clothes,
to minimize fears that they could be used to track people's
movements. It also is posting signs informing customers about 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."
In Europe some retailers put the smart labels on
hang tags, which are then removed at checkout. That still provides
the inventory-control benefit of RFID, but it takes away other
important potential uses that retailers and suppliers like, such as
being able to track the item all the way back to the point of
manufacture in case of a recall, or making sure it isn't
counterfeit.
Wal-Mart won't say how much it expects to benefit
from the endeavor. But a similar pilot program at American Apparel
Inc. in 2007 found that stores with the technology saw sales rise
14.3% compared to stores without the technology, according to Avery
Dennison Corp., a maker of RFID equipment.
And while the tags wouldn't replace bulkier
shoplifting sensors, Wal-Mart expects they'll cut down on employee
theft because it will be easier to see if something's gone missing
from the back room.
Several other U.S. retailers, including J.C.
Penney and Bloomingdale's, have begun experimenting with smart ID
tags on clothing to better ensure shelves remain stocked with sizes
and colors customers want, and numerous European retailers, notably
Germany's Metro AG, have already embraced the technology.
Robert Carpenter, chief executive of GS1 U.S., a
nonprofit group that helped develop universal product-code standards
four decades ago and is now doing the same for electronic product
codes, said the sensors have dropped to as little as seven to 10
cents from 50 cents just a few years ago. He predicts that
Wal-Mart's "tipping point" will drive prices lower.
"There are definitely costs. Some labels had to be
modified," said Mark Gatehouse, director of replenishment for
Wrangler jeans maker VF Corp., adding that while Wal-Mart is
subsidizing the costs of the actual sensors, suppliers have had to
invest in new equipment. "But we view this as an investment in where
things are going. Everyone is watching closely because no one wants
to be at a competitive disadvantage, and this could really lift
sales."
Wal-Mart won't disclose what it's spending on the
effort, but it confirms that it is subsidizing some of the costs for
suppliers.
Proponents, meanwhile, have high hopes for
expanded use in the future. Beyond more-efficient recalls and loss
prevention, RFID tags could get rid of checkout lines.
"We are going to see contactless checkouts with
mobile phones or kiosks, and we will see new ways to interact, such
as being able to find out whether other sizes and colors are
available while trying something on in a dressing room," said Bill
Hardgrave, head of the RFID Research Center at the University of
Arkansas, which is funded in part by Wal-Mart. "That is where the
magic is going to happen. But that's all years away."
