Killing RFID Tags, Wal-Mart and RFID Economics
Posted by Bret Kinsella on Wed, Jul 28, 2010
In keeping with this week’s Wal-Mart theme (Wal-Mart RFID Announcement), I thought I would comment on a good post by Mark Roberti of RFID Journal (Why Isn’t Wal-Mart Killing the Tags) that goes beyond Wal-Mart and speaks to general RFID economics. He outlines a sound explanation why Wal-Mart’s in-store item-level RFID tracking for apparel isn’t killing RFID tags. It’s all about RFID economics.
Issuing a kill command to a tag makes it inoperable. The capability is standards based and is widely available as a way to proactively address consumer privacy concerns. Eventually Wal-Mart may decide to enable this feature when it achieves scale in its in-store tagging. Roberti’s commentary suggests the economics would not justify the investment today.
Calculating RFID Cost
In order for Wal-Mart to kill every tag, it would need to do this at the time of purchase. This means in the check-out lane. Consider 4,000+ Wal-Mart stores and an average of 25 (Mark estimates 40), that is over 100,000 lanes. Placing an RFID reader at each lane at a cost of $800 (Mark estimates $3,000) gives you a hardware cost of $80 million before installation, testing, maintenance and repair costs are included. Mark’s calculations come to $480 million. Either way, it is a large number.
Without the check-out lane readers, there will be no killing the tags at check-out – for now anyway. The current trajectory suggests Wal-Mart is only a couple of years away from just this type of investment. As a greater percentage of its floor stock is tagged, there would be more usefulness of leveraging RFID to streamline check-out. You can imagine how this event will usher in another economic phenomenon – a change in total retail operational costs.
Why Wal-Mart’s RFID Adoption Helps You – It's RFID Economics
If you aren’t in retail or an RFID supplier it may not be obvious how this Wal-Mart hullabaloo helps you. It’s simple RFID economics. When Wal-Mart began its initiative several years ago a lot of investment poured into the RFID industry. That investment in turn yielded better performing tags and readers at lower price points. RFID software has also changed dramatically from RFID 1.0. This in turn helped open up a lot of new RFID application categories and more favorable business cases for a wide range of industries.
RFID in healthcare, aerospace, financial services, government, energy, hospitality and others benefit from this every day. As Wal-Mart ramps up its adoption and purchases 5,000 handheld readers, the unit cost of those readers comes down and the savings can be passed along to other customers. As Wal-Mart suppliers purchase another 40-100 million RFID tags to meet the Wal-Mart requirement, increased RFID tag volumes allow for lower total costs for everyone. When Wal-Mart moves, it drives large volume on its own. Large volume drives down costs. Those cost reductions benefit every RFID end user.
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