The Wall Street Journal had an article two weeks ago on Wal-Mart’s plan to start using sophisticated electronic ID tags to track individual items such as pairs of jeans and underwear (“Wal-Mart Radio Tags to Track Clothing“):
Starting next month, the retailer will place removable “smart tags” on individual garments that can be read by a hand-held scanner. Wal-Mart workers will be able to quickly learn, for instance, which size of Wrangler jeans is missing, with the aim of ensuring shelves are optimally stocked and inventory tightly watched. If successful, the radio-frequency ID tags will be rolled out on other products at Wal-Mart’s more than 3,750 U.S. stores. “
While the article admits such a system will bring benefits in terms of better inventory control, most of the discussion focuses on privacy implications:
There are two things you really don’t want to tag, clothing and identity documents, and ironically that’s where we are seeing adoption,” said Katherine Albrecht, founder of a group called Consumers Against Supermarket Privacy Invasion and Numbering and author of a book called “Spychips” that argues against RFID technology. “The inventory guys may be in the dark about this, but there are a lot of corporate marketers who are interested in tracking people as they walk sales floors.”
I think it’s important to discuss a bit the positive side of such improvements to the inventory accuracy issues retails face. While the article writes primarily about theft as something such tags will prevent, the problem is more general. Inventory record accuracy, which is the discrepancy between the recorded inventory quantity and the actual inventory physically available on the shelf, is a substantial problem in the retail world. Retailers rely on these records to make operational and sales-related decisions such as decisions to replenish shelves, plan the right product assortment, but also forecast product demand. Clearly, when these records are inaccurate, these decisions result in mismatch between demand and supply, which is manifested in either excess inventory or stockouts. There are many studies in the retail operations field that show that small inaccuracies can lead to significant lost sales. For example Nicole Dehoratius and Anath Raman show that lost sales due to misplaced inventory may decrease profits by 25%. Given such numbers the value of such tags cannot be disregarded.
Regarding the privacy issues: while I believe these issues will have to be regulated, there are also interesting opportunities here, which are still years away from implementation. One such example is improving checkout lines. In this blog we have discussed numerous times check-out lines; and smart IDs can completely alter the we shop and check-out:
We are going to see contactless checkouts with mobile phones or kiosks, and we will see new ways to interact, such as being able to find out whether other sizes and colors are available while trying something on in a dressing room”.