Local market slow to embrace RFID tracking technology

By carolyn shapiro
The Virginian-Pilot

At Wawa gasoline stations in Chesapeake and Virginia Beach, customers holding a store credit card can simply wave it in front of the pump to pay and continue on their way.

The Wawa brand cards contain radio frequency identification technology, known as RFID, that the store’s payment system can read without direct contact. The transaction requires no swipe, no signature and no numbers punched.

Chase Bank U.S.A. calls its RFID technology “blink” for the cards it issued last fall for Wawa. It has estimated that the contactless cards reduce a customer’s transaction time by 40 percent.

“You just 'blink’ and go,” said Lori Bruce, a Wawa Inc. spokeswoman.

The cards involve one of the more common uses of RFID that consumers see today. The same technology operates the Smart Tag and E-ZPass systems that speed drivers through toll booths up and down the East Coast.

RFID barely has begun to creep into the retail sector, despite the widespread and futuristic uses that its developers envisioned. Supermarket shopping carts would scan products as customers pull them off shelves and tell folks when their frequently purchased items go on sale. Refrigerators would sound an alarm when cartons of milk expire. Display screens at clothing stores would show a shopper a matching skirt as soon as she picked a blouse off the rack.

For some concerned consumers, such scenarios also raised the specter of Big Brother companies or government agencies watching them and their behavior.

Few, if any, of those applications has reached reality – at least not in the United States.

Food Lion, the largest supermarket chain in Hampton Roads, isn’t using RFID. Neither is Farm Fresh, its next-largest grocery competitor. Dollar Tree Stores Inc., based in Chesapeake and the nation’s largest all-for-$1 chain, also has yet to dabble in the system.

Most retailers have backed off plans to implement RFID while keeping a close eye on its development, said Dave Hogan, senior vice president and chief information officer for the National Retail Federation, the largest industry trade group.

Acceptance of the technology will grow in a “very measured” way, he said. “It’s going to take several years until you start seeing mass adoption of it.”

Wal-Mart Stores Inc. led the retail brigade in RFID, starting about two years ago to require some suppliers to tag shipments that the discount giant could scan with wireless readers. Large retailers see the value of the technology to track reams of products and record data more quickly, reducing the time and error involved in human handling.

“It’s still fairly new technology,” said Jeff Lowrance, a spokesman for Food Lion LLC, based in Salisbury, N.C. “The thought is, if it helps operations become more efficient, helping to hold down costs, we might pursue it.”

By some estimates, RFID technology has been around for as long as 60 years. In 1999, the technology became the foundation of an industry initiative to develop the next generation of the UPC, or Universal Product Code, the imprint of black lines that appears on almost every product sold.

The new Electronic Product Code, or EPC, aims to provide similar automated identification of items, only faster and capable of holding more data. This “wireless bar code” gives each product a Social Security-like number, or a license plate, that serves as its unique identifier, explained Jeff Oddo, a spokesman for EPCglobal US. The nonprofit organization is developing industry standards for RFID technology and guidelines for its usage, in partnership with major corporations such as Procter & Gamble Co.

A low-powered, electronic chip about the size of a postage stamp is attached to the product, perhaps to the hang tag of a garment or on packaging, to carry the EPC. A reading device within a few feet of the chip receives its signal over the airwaves and shows every step that product has made – from the assembly line to the store shelf.

In one remote swoop, RFID readers can record each product in a pallet or case as it hits the store’s loading dock. RFID systems can automatically identify if a product is missing or counterfeit.

“Pallets don’t have to be unbundled, scanned and repackaged,” Oddo said. “So it enables a seamless supply chain movement.”

At the store shelf, RFID can send an alert when a product has sold out or a perishable item has passed its expiration date. It can show the location of more stock in the back room or the distribution center.

That helps retailers sell more products earlier in the season without resorting to markdowns and helps customers get the items they want when they want them. Reading devices inside stores, for instance, could show employees when a CD or DVD title has ended up in the wrong location.

The greater degree of efficiency frees store employees from rearranging displays and searching for products and gives them more time to assist customers, said Marshall Kay, a retail strategist and RFID specialist for consulting firm Kurt Salmon Associates. “Without that level of visibility, it becomes difficult for a store to deliver” the best service.

Tags cost about 10 to 20 cents each and have decreased since Wal-Mart began its RFID program in 2004. Companies are likely to pass that cost through to retail prices, Kay said, though a reduction in losses from theft would help offset that cost.

The investment needed in the tags and the equipment to read them is one reason for the slow adoption of RFID, said the retail federation’s Hogan. Grocery retailers particularly, with narrow profit margins and tough competition, cannot afford an additional 20 cents on an item.

“We think it holds a lot of promise,” he said of the technology. “It’s just that right now, the cost of the chips is so high.”

Retailers’ hesitation about RFID hasn’t alleviated the concerns of consumer advocates who see the potential for privacy invasions and security threats. Retailers and manufacturers could hide tags in clothing labels and the soles of shoes, said Katherine Albrecht, founder and director of Consumers Against Supermarket Privacy Invasion and Numbering, or CASPIAN, which opposes widespread and undisclosed use of RFID technology.

Albrecht said she knows of retailers developing shelf technology that triggers a camera to photograph shoppers as they select a particular item, and she has heard about stores that monitor shoppers as they browse bookstore shelves or try on lipstick. She and others fear RFID will allow retailers or marketers to track consumers and their movements once they leave the store.

“So the concern is that these things are easily hidden,” Albrecht said.

But any reader placed close enough to an RFID tag, within a few feet, would capture only a series of numbers representing that product, Oddo said. Someone would need access to the retailer’s or manufacturer’s internal database to see any other information attached to that product, he explained.

Retailers now collect extensive information about customers and their purchases through bar codes, information provided at checkout and frequent-shopper cards. “They have so much information, they don’t know what to do with it,” Kay said.

Stores in Europe or Asia that carry products with the tags have machines at the exits that allow customers to deactivate the tags, Kay said.

When the bar code first went into use in 1974, consumers raised similar concerns, Kay and Oddo said. “Just as the bar code and the Internet have made life better for consumers, so, too, will RFID,” Kay suggested.

Albrecht and other groups have pushed for legislation that would require labeling of products that contain RFID tags. Such disclosure would give consumers the option to choose a product that has no RFID attached.

RFID shouldn’t become ubiquitous in stores, Albrecht said, “before anyone has the opportunity to vote with their shopping dollars.”

Reach Carolyn Shapiro at (757) 446-2270 or carolyn.shapiro@pilotonline.com.