Several leading companies we interviewed in Japan recently did not expect retailers in Japan to impose western style mandates on their suppliers to use RFID. There are several reasons for this.

 

First is payback. Many here conceive that a key payback Wal-Mart intends to receive is a reduction in theft. However, they argue that in Japan that theft is not a big problem for them so retailers need to ensure that the other paybacks will be sufficient. When questioned about the improvement in inventory and item management, we are told that some retailers are still grappling with installing barcode systems, and do not see much advantage yet of being first - they want to see how successful it is for others.

 

However, perhaps the strongest reason for this stance is that in Japan the power of the retailers is very different than in Europe or the US. There are no retailers with a very strong majority share - local stores are very popular. This means that the product brands are in a more powerful position and would not easily accept an increase in costs (through buying associated tags and readers) without passing that onto the retailers.

 

However, this does not mean that retail will not be a big market for RFID in Japan, indeed, companies see the advantages of RFID for stock management at warehouses and distribution centers. RFID suppliers to the Japanese market see supply chain management a key application.

So which are the biggest emerging markets in Japan and who is driving them? METI (the Ministry of Economy, Trade and Industry) are actively pursuing the use of RFID and have invested $30 million in seven application areas this year - books, apparel, CD/DVDs, pharmaceutical, consumer electronics, logistics (e.g. freight) and construction equipment. A further $31 million will be invested in 2005. On top of this, the ministry of agriculture, the ministry of land transportation and the ministry of telecoms and post are investing in RFID pilots for these sectors.

 

For more information, read a full article of the developments of RFID in Japan in this month's FREE Smart Labels Analyst.