December 19, 2007
Staples to Expand Reusable RFID Tag Test
Staples Canada may be on the way to overcoming one of the major obstacles to the widespread adoption of radio frequency identification (RFID) technology – the high cost of tags.
According to StorefrontBacktalk.com, the office supply retailer, which has been involved in a test of reusable RFID tags at a single store in Montreal, now plans to expand the pilot project to four other locations.
Joe Soares, director of process engineering for Staples Canada, said the initial test tracked 1,500 SKUs. “The results were so great that we wanted to see if it was replicable throughout the chain,” he said.
Mr. Soares said the use of reusable tags could ultimately lower the cost to eight cents a piece when amortized over a five-year period.
Read rates for the test were 100 percent accurate, according to Mr. Soares who said there was “a 21 percent reduction in out-of-stocks for the items that were counted.” He also reported there was no shrink on tagged items.
Discussion Questions: What do you see as the potential implications of the Staples Canada test? Would solving the tag cost issue effectively remove the biggest obstacle to adoption of RFID technology at retail?
BrainTrust
Recent Discussions
Discussion Questions
Poll
There is not much explanation here of how the tags are recovered and reused, but the implication is that there must be some store labor involvement. That could still make the economics on low price point items unrealistic. In the case of Staples, there are a lot of very expensive items in small packages (think printer cartridges) that might qualify. Only the technology vendors who are subsidizing the hardware know what the real cost would be to the masses of retailers.
The true benefit from RFID depends on a supply chain geared to capturing the serial number data from products as they flow through the various distribution points. This develops the “pedigree” for an item and has the potential to make stolen goods worthless (except for eBay, but let’s not go there). The infrastructure will only be implemented as individual players see the benefit of RFID for themselves.
A great parallel here is with the sub-prime mortgage mess. Everyone is so surprised that giving away mortgage money resulted in inflated house prices. Now we have eBay and the Internet (I know, I said I wasn’t going to go there), which provide an ad hoc market for stolen goods. Several studies have shown this has increased the returns on stolen goods (who needs a local “fence” anymore?). Crime has really begun to pay, and manufacturers and retailers will eventually realize that they need to combine forces with serialized container tracking and appropriate legal support. But this is going to take a very long time and in the meantime, technology vendors will keep searching for new answers.
This is great news. Although the tag cost has been a small obstacle, there have been other major issues. Read rates have been one issue and it seems Staples has solved this problem. It is also refreshing to see the decrease of out of stocks.
There are still issues with process design within the entire supply chain but lots of opportunity prevails.
Anything that drives down the cost of RFID promotes faster adoption.
“Replicable.” We all know what that means, right? And, uh, we’re all familiar with the process of retrieving RFID tags intact, right? Well, not me. I’d appreciate some education on how this is accomplished. According to the StorefrontBacktalk report referenced in George’s comments, the tags are “removed at the point-of-sale.” Like coupons and thrust into a box, bag, or register compartment? Do they stick together? If they are bent, do they still work? Where are they sent and how (and by whom) are they accounted for and processed? Are they so small and sticky that they can adhere to various checkout surfaces (including checker clothing or body parts–don’t get me started) without detection? Or, does a robo-scanner zoom through the store–and at the employee exit–to detect errant tags?
This supposed breakthrough still depends on unproven execution and cannot yet be heralded as a significant advance in RFID cost management. Doesn’t sound very replicable to me.
A lot of really excellent comments here. However, in the end these tags WILL be deployed, it’s just a question of how and when we get there, so every advance helps…and this IS an advance. This will accelerate tracking analytics, too, which is our own space. By the time the tags become ubiquitous, we expect to deliver the analytical/insight engine that will assist with accelerating profits on a continuing basis, where now this is more of an ad hoc capability. (A number of companies are already deploying display level and shelf-tag level passive RFID, but mostly on a pilot basis.)
Sounds like the stores are going to have to insert the RFID tags for every new shipment and remove them with every sale. That’s not a good solution for RFID adoption.
It hearkens back to the early days of bar-coding when everything was done at store level. It was only after widespread adoption of source marking that UPC took off.
If reusable RFID tags are going to work, all of the tagging needs to occur somewhere in the supply chain. And somehow, the tags must be removed at POS with very easy swift, idiot-proof technique.
Staples’s efforts are to be commended and by pairing the more sophisticated active tag with the economy of being reusable, they may have sidestepped many of the RFID issues.
More importantly, though, there are some footnotes to this that bear consideration. It wasn’t clear the nature of the mechanism to make sure that the removal that is so easy for an associate staffing the POS is so difficult for a shoplifter. To the extent that this is being seen as a way to fight shrinkage, that needs to be a focus. Those shoplifters can be mighty creative and resourceful, especially with the higher-value items.
The initial test–and the ones slated to start in February–are only tagging a very small percentage of items at the store. That makes perfect sense for these trials, but it’s still an open question whether these benefits would continue if expanded to all SKUs. That said, if this is used as a very focused niche application, that might never be necessary (or desirable).
I was quite impressed with the eight cent claim, but there are unanswered questions about that. As one reader anonymously asked: “Does that include the cost of tagging the item and entering the data into a database server? Active tags require maintenance, battery failure, physical damage, shrinkage, etc. Are these costs accounted for?”
Still, this is clearly a clever move in the right direction.
I think reusable tags address another important concern: that of consumers about how the tags are disposed of. When the cashier removes the tag right in front of your eyes, they also remove a lot of the objections that consumer privacy groups have about the tags.
The problem is, that works great for products that have the margin dollars to take on the additional handling costs of reusable tags. Is this solution going to work for, say, laundry soap at a grocer? That’s still doubtful….
It would be interesting to understand the labor expense (handling, etc.) involved in reusable RFID tags and how it affects their true amortized costs. Like any early-adoption technology, RFID costs can be expected to come down as its use widens. (It’s the same reason that $5000 flat-screen TVs now cost $899.) A cost/benefit analysis of RFID tagging would surely point toward its wider use by retailers and vendors.
It’s Catch 22. In the supply chain RFID needs the performance characteristics that come with Active RFID. But Active RFID tags are too expensive, which is why Passive RFID was selected by Wal-Mart and others in the first place. Passive RFID just does not work that much better than serialized barcode.
More Discussions
Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?OpenAI Names the Infrastructure Standard for Agentic Commerce
Will OpenAI or Google (or another entity) set the gold standard for agentic commerce?Is Five Below Poised For Even Greater Growth?
Five Below is hitting serious growth numbers. Can this trend continue?
There is not much explanation here of how the tags are recovered and reused, but the implication is that there must be some store labor involvement. That could still make the economics on low price point items unrealistic. In the case of Staples, there are a lot of very expensive items in small packages (think printer cartridges) that might qualify. Only the technology vendors who are subsidizing the hardware know what the real cost would be to the masses of retailers.
The true benefit from RFID depends on a supply chain geared to capturing the serial number data from products as they flow through the various distribution points. This develops the “pedigree” for an item and has the potential to make stolen goods worthless (except for eBay, but let’s not go there). The infrastructure will only be implemented as individual players see the benefit of RFID for themselves.
A great parallel here is with the sub-prime mortgage mess. Everyone is so surprised that giving away mortgage money resulted in inflated house prices. Now we have eBay and the Internet (I know, I said I wasn’t going to go there), which provide an ad hoc market for stolen goods. Several studies have shown this has increased the returns on stolen goods (who needs a local “fence” anymore?). Crime has really begun to pay, and manufacturers and retailers will eventually realize that they need to combine forces with serialized container tracking and appropriate legal support. But this is going to take a very long time and in the meantime, technology vendors will keep searching for new answers.
This is great news. Although the tag cost has been a small obstacle, there have been other major issues. Read rates have been one issue and it seems Staples has solved this problem. It is also refreshing to see the decrease of out of stocks.
There are still issues with process design within the entire supply chain but lots of opportunity prevails.
Anything that drives down the cost of RFID promotes faster adoption.
“Replicable.” We all know what that means, right? And, uh, we’re all familiar with the process of retrieving RFID tags intact, right? Well, not me. I’d appreciate some education on how this is accomplished. According to the StorefrontBacktalk report referenced in George’s comments, the tags are “removed at the point-of-sale.” Like coupons and thrust into a box, bag, or register compartment? Do they stick together? If they are bent, do they still work? Where are they sent and how (and by whom) are they accounted for and processed? Are they so small and sticky that they can adhere to various checkout surfaces (including checker clothing or body parts–don’t get me started) without detection? Or, does a robo-scanner zoom through the store–and at the employee exit–to detect errant tags?
This supposed breakthrough still depends on unproven execution and cannot yet be heralded as a significant advance in RFID cost management. Doesn’t sound very replicable to me.
A lot of really excellent comments here. However, in the end these tags WILL be deployed, it’s just a question of how and when we get there, so every advance helps…and this IS an advance. This will accelerate tracking analytics, too, which is our own space. By the time the tags become ubiquitous, we expect to deliver the analytical/insight engine that will assist with accelerating profits on a continuing basis, where now this is more of an ad hoc capability. (A number of companies are already deploying display level and shelf-tag level passive RFID, but mostly on a pilot basis.)
Sounds like the stores are going to have to insert the RFID tags for every new shipment and remove them with every sale. That’s not a good solution for RFID adoption.
It hearkens back to the early days of bar-coding when everything was done at store level. It was only after widespread adoption of source marking that UPC took off.
If reusable RFID tags are going to work, all of the tagging needs to occur somewhere in the supply chain. And somehow, the tags must be removed at POS with very easy swift, idiot-proof technique.
Staples’s efforts are to be commended and by pairing the more sophisticated active tag with the economy of being reusable, they may have sidestepped many of the RFID issues.
More importantly, though, there are some footnotes to this that bear consideration. It wasn’t clear the nature of the mechanism to make sure that the removal that is so easy for an associate staffing the POS is so difficult for a shoplifter. To the extent that this is being seen as a way to fight shrinkage, that needs to be a focus. Those shoplifters can be mighty creative and resourceful, especially with the higher-value items.
The initial test–and the ones slated to start in February–are only tagging a very small percentage of items at the store. That makes perfect sense for these trials, but it’s still an open question whether these benefits would continue if expanded to all SKUs. That said, if this is used as a very focused niche application, that might never be necessary (or desirable).
I was quite impressed with the eight cent claim, but there are unanswered questions about that. As one reader anonymously asked: “Does that include the cost of tagging the item and entering the data into a database server? Active tags require maintenance, battery failure, physical damage, shrinkage, etc. Are these costs accounted for?”
Still, this is clearly a clever move in the right direction.
I think reusable tags address another important concern: that of consumers about how the tags are disposed of. When the cashier removes the tag right in front of your eyes, they also remove a lot of the objections that consumer privacy groups have about the tags.
The problem is, that works great for products that have the margin dollars to take on the additional handling costs of reusable tags. Is this solution going to work for, say, laundry soap at a grocer? That’s still doubtful….
It would be interesting to understand the labor expense (handling, etc.) involved in reusable RFID tags and how it affects their true amortized costs. Like any early-adoption technology, RFID costs can be expected to come down as its use widens. (It’s the same reason that $5000 flat-screen TVs now cost $899.) A cost/benefit analysis of RFID tagging would surely point toward its wider use by retailers and vendors.
It’s Catch 22. In the supply chain RFID needs the performance characteristics that come with Active RFID. But Active RFID tags are too expensive, which is why Passive RFID was selected by Wal-Mart and others in the first place. Passive RFID just does not work that much better than serialized barcode.