May 17, 2004, 12:00 AM

Most retail industry players spending little on RFID this year, study says

Despite the lead of Wal-Mart Stores Inc. in moving toward an RFID-driven supply chain system, most retailers, distributors, and CPG and apparel manufacturers will spend less than $500,000 each on RFID technology this year, a study released today says.

Despite the lead of Wal-Mart Stores Inc. moving toward an RFID-driven supply chain system, most retailers, distributors, CPG and apparel manufacturers will spend less than $500,000 each on RFID this year, says a new study released today by consultants Deloitte Touche Tohmatsu, ePC Group and Retail Systems Alert Group.

"Though RFID has the clear potential to transform the retail supply chain through real-time product tracking and identification and elimination of human error, the industry is slow to embrace the new possibilities it offers," the authors of the study said. The study, which was based on surveys of 90 retail industry companies, including merchants, distributors and manufacturers, notes that nearly 72% of retail industry companies with $5 billion or more in annual revenue, as well as a majority of smaller companies, will spend less than $500,000 on RFID this year. RFID, or radio frequency identification, uses a system of radio frequency tags and readers to track product shipments and share data over the Internet among retailers and their suppliers.

But the study also notes that 25% of companies with $5 billion-plus sales will spend from $500,000 to $10 million on RFID adoption this year. Not surprisingly, the largest companies also expect a more significant ROI from RFID adoption in the first five years of implementation than do smaller companies, the study says, adding that 30% of all respondents had low expectations of increased revenue from RFID in the first five years.

Nonetheless, the study’s authors project that RFID and its ability to streamline supply chains will eventually win over all retail industry players. "Though the general industry expectation of increased revenues in the first five years of RFID implementation is low, it is only a matter of time before all industry participants realize its overarching benefit of supply chain visibility and improved business processes, which ultimately leads to an enhanced customer experience," said Ajit Kambil, global director of Deloitte Research, a part of Deloitte Touche Tohmatsu’s Deloitte Services LP.

"Widespread interest in RFID shows its potential as a catalyst for change in the retail industry," added Peter Abell, president of ePC Group. "However, members of the retail and CPG industries have only begun to get their feet wet – and they don’t want to jump into the pool too quickly."


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