January 03, 2005, 10:51 AM — An aggressive push by Wal-Mart to implement RFID tags as a critical part of its supply-chain management strategy, and the drive to replace the ubiquitous bar code standard with the new Electronic Product Code (EPC) - carried by RFID tags embedded in merchandise packaging - made radio-frequency identification one the major technology stories of 2004.
In fact, the market for RFID-related services was projected by research firm IDC to grow 47 percent last year (see "IDC study shows RFID deployments accelerating in 2005").
With Wal-Mart on track to launch its RFID pilot this month (see "Wal-Mart bends, but doesn't break, under the weight of its January 2005 pilot"), in which 137 of its top suppliers will begin tagging 65 percent of their merchandise shipped to three Wal-Mart distribution centers, 2005 will be another big year for RFID deployments, as more companies follow the retail giant's lead. RFID services growth will continue steadily over the next three years, reaching $2 billion by 2008, IDC notes.
Considered by IDC to be a "disruptive technology," the use of RFID technologies in the consumer pipeline has stirred a debate over whether the tags pose privacy risks. Because the tags can be read by a wide variety devices, and it isn't yet clear whether they will be removable from clothing and other merchandise, many privacy advocates say consumers are at risk of being tracked without their knowledge. The tags can be - and have been - implanted in animals and humans as a means of deliberate tracking (see "The inside story on RFID tags").
But the Yankee Group says such concerns with regard to retail merchandise are hogwash, asserting that the EPC and RFID tags alone "provide no consumer-specific data."
"RFID is about product data and inventory management - the data is not tied to consumers," writes Michael Dominy, a Yankee Group analyst (see "Privacy concerns surround the RFID plans of Wal-Mart and other retailers"). "The only way retailers or manufacturers could link consumers to a product with an RFID tag is if consumers purchase the product using a credit card."
The Yankee Group believes that, rather than limiting the usage of the technology, emerging laws and regulations surrounding RFID "should focus on keeping customer data secure - with specific rules defining how and when manufacturers and retailers may tie together customer data and the product."