A new showcase "future store" in Germany is the first to use RFID tagging to monitor goods from when they leave the warehouse to the customer's shopping basket
Radio frequency identification tagging has been touted as the next big thing in retail for some years, but developments in Germany indicate the technology is finally ready to move beyond the hype stage.
RFID tags allow goods to be electronically tracked along a supply chain and have the potential to replace barcodes. They are already becoming popular among UK retailers such as Tesco, Woolworths and Marks & Spencer, but their use has been restricted toindividual projects, such as tracking food trays or razor blades.
German firm Metro Group, the world's fifth largest retailer, recently opened a "future store" in Berlin which not only uses RFID in the warehouse but also on the shop floor in an attempt to improve customer service - a landmark move, according to analysts.
"This is not more hype, this is the real deal. It is the closest I have seen anyone come to the promise of the enhanced customer experience that has been discussed for many years," said Pete Abell, an analyst at AMR Research.
Metro's use of RFID is so advanced that its technology partners, such as Philips, SAP and Intel, are using the company's future store as a showcase for what retailers can do with RFID and its related technologies.
"The future store is a clear example that technology can be a driving force behind business," said Peter Zencke, a member of the SAP executive board. "We see this technology as an opportunity to enter a new era of co-operation in the retail and consumer goods industries, an era that is now tangible owing to this unique project."
Metro uses readers at its distribution centre to build a profile of the products on each pallet, with each case on the pallet tagged with UHF chips. This information is then read as the tagged cases and pallets pass through dock doors and at various collection points.
The cases and pallets are scanned at a number of locations to provide accurate shipment, warehouse and shop-floor inventory levels, and this information is then fed into Metro's SAP system.
High-value individual products in the future store, such as CDs, DVDs and videos, are also tagged, along with other products such as razor blades, shampoo and food products, before being put on the "smart" shelves.
Once the goods are on the shelves, an embedded RFID reader sends a message to the back-office system to tell it when stocks are running low.
The reader also traces how quickly stock is being sold, tracks the most popular items and those that are not selling. The product sensors act as anti-theft devices that are shut off at the point of sale, like current security devices.
Checkout delays are reduced because RFID tags in a shopping basket tell the store managers how many baskets have entered and left the store. If the number of baskets in the store increases, additional checkouts are opened.
Metro's future store underlines some of the benefits RFID tagging can bring, such as cutting inventory levels and improving customer service, but companies need to be aware of information management and systems integration issues, Abell said.
"What retailers and other users of this technology need to remember is that tremendous data volumes need to be managed and analysed," he said. "If this data is to be useful, it needs to be consolidated and integrated with the ERP systems that provide purchasing, distribution and logistics."
Take-up of RFID has been relatively slow, with the high cost of tags seen as a major barrier to widespread adoption, but in recent weeks the threat to consumer privacy has been highlighted as another potential drawback.
Last month, fashion retailer Benetton announced it was postponing plans to roll out RFID tags in one of its clothing ranges following protests from privacy groups. There are fears the technology could allow companies to obtain information on customers and track their movements without their knowledge.
In response to this, Royal Philips Electronics, which was due to supply the technology for Benetton, announced it was implementing a new feature into its RFID tags that would disable them at the point-of-sale.
The company also called on standards body Auto-ID Center to make a similar feature part of the Electronic Product Code specification - the key plank of international RFID standards - which is due to be ratified by the end of this year.
However, Auto-ID told Computer Weekly that the "kill" feature had been in its specifications since the beginning.
"It is one of the things that makes our EPC system different, and is also one of the benefits of developing technology in a user-led environment. Our user sponsors have always said they needed it," said Kevin Ashton, executive director at Auto-ID Centre. "We have always been surprised that other technologies have not implemented something similar."
Ashton said most of the fears are unfounded, but that privacy is an issue Auto-ID is focused on.
"It is important to take people's fears seriously, apart from how founded or unfounded they may be - fear is a problem itself. Using RFID to track people in any practical way is difficult to say the least, but that does not mean we should not try to make it impossible."
The reason it is hard to track people using RFID is because lots of pieces of information from different systems need to be connected, Ashton said.
"For example, suppose I read an EPC tag from your shopping bag as you walk past me, and I want to know who you are and where you live. The EPC tells me - maybe - that you just bought a pint of milk. To find out where you bought it from, I need to query the milk company's server and find out who they shipped that bottle to. They would not tell me that, but if they did, I would then need to query the store's system to find out who bought it. Again, I do not have the access privilege.
"But if by some miracle I got that information, all I would get would be a credit card or loyalty card number. I then need to get into the loyalty card or credit card system to get your identity, which again, is confidential."
Privacy fears notwithstanding, increasing numbers of retailers are likely to follow Metro's example and investigate wide-ranging RFID roll-outs, AMR's Abell said.
"The future store is a landmark live pilot with consumer, store and distribution centre systems using the EPC open standard with a variety of system providers," he said. "You can expect more pilots over the next few months as this technology continues to progress throughout the globe and becomes a reality instead of hype."
Projects at the future store
- Personal shopping assistant
- Extra Future Card
- Kiosk systems
Electronic shelf labelling
- Electronic advertising displays
- Intelligent scales
- RFID checkout
- Personal shopping assistant checkout
- Couponing system
- My Metro employee portal
- Personal digital assistants
- In-store communication
- Distribution centre goods issue
- Store goods receipt
- Back-store inventory
- Smart shelves
- RFID goods-flow system
- RFID alert and information portal
- Infrastructure technologies
- Wireless Lan.
This was first published in May 2003