From The Editor | May 22, 2007

Remember Wal-Mart?

Wal-Mart's RFID (radio frequency identification) initiative may not be progressing as quickly as predicted, but the retailer is still central to the RFID market.

Integrated Solutions, June 2007

It wasn't that long ago that every article on RFID technology contained at least a passing reference to Wal-Mart and its smart-label initiative. More often than not, the reference was the centerpiece of the article, not just a glancing one. (For the record, I've written many such articles.) If you mentioned RFID, you felt compelled to mention Wal-Mart. The reaction was almost Pavlovian.

Well, things have certainly changed. At the major RFID events, messaging and collateral related to compliance applications is tough to locate. Vendor booths that once screamed "Compliance Solution" are now shouting other themes, such as "Asset Tracking," "Work In Process," or "Environmental Monitoring" — you can take your pick. In face-to-face meetings, executives of these companies rarely mention Wal-Mart, choosing to focus on other applications and markets. It's as if the Wal-Mart initiative has come and gone. It didn't spur the cosmic growth that some had projected, and so now it's treated as if the initiative has come to a halt.

Of course, Wal-Mart — and the U.S. DoD, for that matter — continue to roll out their RFID initiatives. Is the pace of the rollouts as quick as most had predicted and expected? No. Are the penalties for noncompliance as strict as most had predicted and expected? No. Can technology solutions providers turn their backs on this space indefinitely? Absolutely not.

Wal-Mart may be moving at what some industry watchers consider to be a glacial pace. Like glaciers, however, the movement is massive and will reshape the landscape. The pace of the Wal-Mart initiative may not be meeting expectations of technology providers that make their living in this space, but name another organization that has deployed RFID as expansively as the big-box retailer. (Currently, Wal-Mart has RFID-enabled five DCs [distribution centers] and 1,000 retail locations. In 2007, the retailer plans to bring an additional 400 retail locations online.) Regardless of the pace of this deployment, it's tough to question the company's commitment to RFID when you consider the size of the rollout.

It's also interesting to note that Wal-Mart's deployment strategy has changed since its initial intentions were made public in mid-2003. The company originally considered tagging every case and pallet to track the flow of goods into and out of its DCs. With this in mind, the DCs were central to the deployment strategy. However, the retailer discovered that the real benefits of RFID would be found at the store level and not in the DCs. For example, RFID allowed Wal-Mart to reduce out-of-stocks on fast-moving items. Additionally, improving in-store promotions management is another application where RFID has been found to play a key role. Faced with this information, Wal-Mart made prudent decisions regarding how to most effectively deploy RFID.

In a sense, Wal-Mart reacted like all users of RFID technology. It identified the best use for the technology — one with a business case and supporting benefits — and it altered its course to adapt to this reality. It's for this exact reason that the larger end user market has grown interested in RFID for noncompliance applications. In the end, Wal-Mart will remain the key driver and catalyst for the RFID industry. Technology providers may not be invoking Wal-Mart as frequently as they once did, but it would be foolish to forget about the retailer's enormous impact altogether.