Analyst: Vendors Not Putting $ Where Their RFID Is

Dec 22, 2004

By George Anderson

An analyst claims the vendors participating in Wal-Mart’s radio frequency identification (RFID) technology program are spending and doing the bare minimum to keep their largest
customer happy.

Kara Romanow, research director for AMR Research, told TechWeb News the program’s “implementation is not going as well as expected.”

“Many of Wal-Mart’s suppliers are more convinced than ever that there is no ROI, and even worse, consider their technology investments to be a throwaway thus far,” she said.

A number of AMR’s clients are vendors to Wal-Mart.

Ms. Romanow said costs associated with RFID implementation are still too high for many companies. Tag prices are still high, running at approximately 35 cents apiece.

Still, suppliers have little option than to try and please Wal-Mart, she said. Ms. Romanow estimates the biggest suppliers involved in the program have spent between $1 million
and $3 million for tags, readers and software. AMR estimates each would need to spend anywhere from $13 million to $23 million to be fully effective.

Moderator’s Comment: Do you believe the concerns raised by Kara Romanow of AMR Research are widely held by suppliers involved in RFID pilot programs
at Wal-Mart and elsewhere? Is there another explanation other than a lack of commitment for why suppliers have invested relatively little to date on RFID efforts?

We cannot speak directly to the relative success of the Wal-Mart program to date. We can, however, relay the following from a source that requested confidentiality.
“We’re just getting started. We may eventually spend that kind of money, especially if we see it works. But, it’s way too early for that.”

George Anderson – Moderator

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