Until 2003, the retail sector - even including its suppliers and supply chains - was a tiny part of the RFID business. There always was the dream of tagging everything in the supermarket and even replacing all barcodes - perhaps five to ten trillion yearly (no one knows the exact figure). However, standards were not in place and they were vital for such open systems ie ones where many service providers would interrogate the tags and interpret and use the data in agreed ways. Tag costs were too high because here we are usually talking about disposable tags with unprecedentedly large numbers of tags per interrogator. Interrogator and other infrastructure costs were too high. The systems were unproven in the hostile retail environment with its water, metal and discarded tags. Paybacks were not proven: trials were few.
All this is now changing and the retailers in particular are convinced that large cost savings are possible and some increases in sales will also occur with item level RFID. Indeed, they start with driving a move to pallet and case tagging just for cost reduction and some improvement in service. Here the term pallet tagging can mean a tag on the packaging of a whole pallet load and the cases referred to are often disposable too. This means that the potential is much larger than it first seems to be and Procter & Gamble and others put it at around 40 billion yearly, that output being expected before 2010.
Even a few billion sold yearly gets the tag cost (often 50% of the whole and therefore very important) down far more sharply than redesign or production automation can achieve. This gives a double benefit - it makes the full potential in conveyances more realistic and it makes a lot of item level tagging realistic all at about 5 cents achieved per tag. This view is held from Japan to America and the race is on to create the production capacity and respond to mandates from Wal-Mart and many other retailers in Europe and the USA. The suppliers benefit less so they vary from the enthusiastic to the reluctantly dragooned. However, some retailers await the full finalisation of the standards before moving ahead and some do not.
The effect of conveyance and item level tagging in retail and its supply chain will be to strengthen the large retailers because they are more likely to invest in the future. It may also strengthen the larger suppliers for the same reason but at item level there are over 100 possible forms of payback and consumer benefit so here there is scope for those with imagination to pull ahead whatever their size.
Expect surprises and discard the popularly held view that item level tagging will follow conveyance tagging. It is happening right now, as many of these case studies testify, starting with high value and high shrinkage items where today's 10-20 cent tag price in volume is just fine for a rapid payback. That means drugs, apparel, shoes and so on. Indeed, Wal-Mart has mandated it for certain drugs, to save money and improve security, and the FDA has strongly recommended it for all drugs to combat counterfeiting. The result is that Retail will leap to become the largest application of RFID in 2005 by volume of tags used, by spend on infrastructure and by numbers of active users. Already, the IDTechEx Knowledgebase has been transformed by the addition of Wal-Mart's top 200 suppliers to represent those mandated by Wal-Mart and others to tag pallets and cases by 2006 or earlier and the many retail and consumer goods companies now trialling or rolling out RFID in various forms and for various reasons.
