German supermarket chain Metro is researching how wireless technology can boost retail.
The collection of technology in Metro's Future Store initiative aims to boost store efficiency, enable targeted marketing and cut long queues, among other things. The Future Store is an experimental store, but it is one that involves real customers using real technology in real time. It is run by the fifth largest retailer in the world, with 2,300 stores in 26 countries and sales of €51.5bn in 2002.
Even hardened retail technology executives admit that the prospect of testing and refining multiple technologies in a genuine retail setting is enough to make their hearts pound.
"This is a very unique IT retailing experiment, and we're glad to be a part of it," says Dimitris Nikolatas, product manager of Cisco Systems. Cisco is providing a huge chunk of the hardwired and wireless IP infrastructure, including a content delivery platform that broadcasts audio and video content and data from a central source to any number of delivery points.
Of all the technologies being tested, two stand out: wireless and radio frequency ID (RFID). In one way or the other, the two are linked to just about every new technical gadget being tested in the store.
The entire 4,000 sq ft building is covered by a wireless Lan based on the 802.11b standard. The network links all mobile devices, such as personal shopping assistantsPSAs) and PDAs (personal digital assistants), and some stationary devices, such as electronic shelf labels (ESLs), check-out points and flatscreen displays for product promotion.
The PSA is a mini-computer attached to the shopping trolley and linked directly to the Wlan. Manufactured by Wincor Nixdorf International, the PC includes a touchscreen with integrated scanner that allows shoppers to scan their own purchases for quick payment at the checkout. Purchase data is transmitted over the Wlan to the checkout terminal, where shoppers give the assistant their reference number assigned by the PSA and pay without having to handle any merchandise.
Store employees are equipped with PDAs. The Future Store is testing Hewlett-Packard's iPaq 5450 and 3970 models as well as Symbol Technologies' PDT-8100. The handheld devices run Microsoft's Windows Pocket PC operating system.
Linked to the Wlan the PDAs allow employees to check inventory or reorder goods by directly accessing Metro's merchandise management system at any time and any point in the store.
The next phase of development calls for the PDAs to receive "soft phone" functionality, enabling staff to make calls in addition to sending messages or downloading information. The service will be based on VoIP (voice over Internet Protocol) technology, as are all other hardwired and wireless in-store communication systems.
While ESL technology has been around for almost a decade, its prohibitive cost in the past had prevented widespread use.
Almost all products in the Future Store have electronic labels. These labels receive price information directly from the merchandise management system via the radio network using base stations located in the ceiling.
Price information is transmitted simultaneously to the shelf and checkout to avoid price differences resulting from erroneous labelling. The price labels are equipped with an easily legible digital LCD, battery and radio receiver.
Plasma advertising screens, serving as either a complement to or replacement for classic print advertising, offer multimedia information, including videos, about products. Linked to the Wlan, the displays allow product promotions to be steered quickly and selectively from a central point.
Certainly, one of the most talked about technical novelties of the Future Store is RFID. It is a technology high on the priority list of Metro and other big European retailers, such as Tesco in the UK and Carrefour in France, not to mention the European Central Bank (ECB), which is struggling to stem the flood of counterfeited euro notes.
But RFID is also deeply criticised by privacy advocates such as Consumers Against Supermarket Privacy Invasion and Numbering (Caspian). They worry that such technology could create an Orwellian world where sales assistants or, worse, police officers or security guards, could read the contents of a handbag with the wave of a wand. Consumer concerns about RFID have prompted one of the biggest names in the retail world, Wal-Mart Stores, to scale back its ambitious plans for deploying the smart tag technology.
RFID systems have come a long way from their origins in the World War II when the US government used transponders to distinguish friendly aircraft from enemy aircraft. Today they are being used, albeit in limited numbers because of the cost of manufacturing the chips, for delivering packages, handling luggage and monitoring highway tolls.
A typical RFID tag contains a computer chip and an antenna. Unlike barcodes, which need to be scanned manually and read individually, radio ID tags do not need line-of-sight reading, so hundreds of tags can be read in a second.
Moreover, when stimulated by a radio signal, the chip transmits a unique code to identify whatever product the tag is fixed to. This unique identifier carries not only the product's universal product code (UPC) as barcodes do now, but also gives that particular item its own unique identity. For example, instead of a bar code saying: "This is a box of Brand X detergent", the RFID chip says: "This is box number 12345 of Brand X".
If the difference is subtle, the impact is huge. A retailer could quickly trace and remove a bad lot of canned goods.
Metro is using two types of RFID technology in the store: one operates at the 13.65-MHz high frequency range; the other uses the 900-MHz to 1000-MHz UHF (ultrahigh-frequency) band. The high-frequency RFID technology is used to track individually tagged items within a 1.5m range inside the store. The UHF version tracks pallets and boxes, and can read at a distance of up to 7m. Philips is supplying both systems.
One new system being tested in the Future Store and involving RFID tags is the "smart shelf". Tagged items are located on shelves with embedded readers that communicate with the merchandise management system via the Wlan. The shelves automatically recognise when tagged goods are removed or replaced, and report the movement of goods to the system. A big advantage of the system is that shelves automatically trigger requests for fresh supplies.
In addition to tracking goods, RFID technology allows shoppers in the entertainment section to swipe tagged music CDs on a system that plays a music sample from the disc.
Another RFID application under testing is delivery. Pallets and boxes are tagged at Metro's distribution centre in Essen and recorded as they pass through a gate in the Future Store. The system is designed to provide real-time information on warehouse shipments and shop-floor inventory levels.
Gerd Wolfram, project manager of the Metro Future Store admits that a huge challenge, admits is managing the data generated from the movement of tagged products from delivery and stocking to selection and payment. SAP is testing an RFID inventory control system aimed at connecting every piece of RFID technology to the enterprise. Technology to crunch these numbers is being provided by Intel which, together with SAP, is a principal technology partner behind the Metro pilot.
If and when RFID tags replace barcodes, Metro foresees PSAs and checkouts being equipped with tag readers. Readers integrated in the PSAs would automatically register what shoppers have in their carts. For those shoppers preferring not to use the PSA, purchases would be automatically recorded by checkout gates equipped with readers.
Of the Future Store's 40,000 products, only around 30 carry individual tags, including razor blades from Gillette, cheese from Kraft, shampoo from Procter & Gamble and some CDs.
The day when radio ID tags push barcodes completely to the sidelines, however, could be several years away, warns Wolfram. "The current chips cost between 30 [euro] cents and 60 cents," says Wolfram. "For us to deploy RFID chips economically, the price will have to come down to around two cents."
Chips based on plastic rather than silicon could be the answer, says Joachim Pinhammer, director of marketing of retail systems at Wincor Nixdorf. "Polymer could certainly help drive down the prices, but the use of this material for miniature chips still requires some research."
Infineon Technologies is one of several chip makers conducting research on plastic chips. Last year researchers at the company succeeded in integrating plastic electronic circuits on commercially available packaging film.
"This technology could certainly be an alternative, but one of the big challenges will be to develop equipment that can print chips economically on packaging materials," says Günter Schmid, a research director at Infineon.
"The problem is, printing companies don't know a whole lot about circuits and chip makers aren't familiar with printing. But I'm pretty confident that we'll find a solution on this front."
If the price of manufacturing RFID chips is a concern now, the issue of privacy could prove a potential drawback in the long term. In April, fashion retailer Benetton Group postponed plans to roll out RFID tags in one of its clothing outlets, following protests from privacy groups. Philips has responded to these growing fears by implementing a new feature into its tags that disables them at point of sale.
Earlier this summer, Wal-Mart caved to protests and pulled radio-tagged items out of the store piloting them, saying that it will now focus its RFID efforts on the supply chain. In response to consumer complaints, Gillette is also saying that its use of RFID tags is to improve SCM efficiency, claiming its focus is on tracking pallets and cases and not customers.
Metro is aware of the privacy concerns linked to RFID, says Future Store guru Wolfram, and will do what is necessary to ensure that consumer's privacy rights are not violated. But the company, he is quick to add, recognises the huge benefits of this technology - for consumers and retailers alike - in terms of service and cost.
So far, Metro's Future Store has generated far more favourable buzz than negative. It helps, of course, when a group of industry heavyweights throws its support behind such a store and, perhaps even more, when German model Claudia Schiffer, a native of Rheinberg, stops by to shop.
John Blau writes for IDG News Service
This was first published in September 2003