Wal-Mart to begin phased RFID tag rollout next year

US retail giant Wal-Mart is pressing ahead with plans to implement radio frequency identification (RFID) technology across its stores and distribution networks.

The company met with about 120 of its top suppliers last week to discuss a phased roll-out starting in Texas involving three distribution centres and 150 stores during 2004. A further 100 centres and 3,000 shops will be added by the end of 2005.

Wal-Mart's progress will be closely watched by UK retailers such as Tesco and Marks & Spencer looking to extend their existing RFID trials and by other stores contemplating the technology.

The US retailer said in June that it expects its top 100 suppliers to adopt the technology by the end of 2004, with the rest following in 2005.

The cost for suppliers is likely to be heavy: firms will have to spend millions of dollars to ensure that every carton and palette delivered to Wal-Mart carries an RFID tag.

And the retailer is using its enormous purchasing muscle to demand that manufacturers bear the cost of buying the chips and tagging them onto products.

A report from consultancy AT Kearney estimates that a grocery supplier with $5bn (£3bn) in sales could use more than 220 million tags annually, which would cost $33m (£20m) at current prices of around 15 cents each.

The report says major retailers will have to invest $400,000 (£239,000) at each distribution centre and $100,000 (£60,000) per store - roughly equal to what suppliers would have to spend to equip their plants and warehouses.

But GartnerG2 principal analyst John Davison says most studies tend to underestimate the costs by 20 to 30 per cent.

'One of the problems we've found is that firms substantially underestimate the process change costs involved,' he said.

Once Wal-Mart has bedded down the technology in the US, it intends to start rolling the technology out internationally, although a spokesman for the company's UK subsidiary, Asda, says it has no existing plans for RFID.

See also:

Smart tags lead retail revolution

German supermarket giant Metro is the latest retailer to bring in RFID after concept store trial  21 Jan 2004

Radio frequency ID tags

The controversial tracking technology looks set to make a big impression this year, as more retailers prepare to explore its possibilities.  09 Jan 2004

Retailers' IT investment soars 27 per cent

Top 100 retailers will spend £1.8bn on IT this year  29 Oct 2003

Retailers rethink tagging plans

Privacy issues force RFID change of plan  15 Aug 2003

Major retailers accelerate adoption of RFID

Wal-Mart's strategy for its supply chain will increase production of radio frequency identification chips.  25 Jun 2003

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