January 8, 2003 10:38 AM PST

Major retailers to test 'smart shelves'

Read more about tagging technology and those using it
Two major retailers and a consumer products giant are teaming up to test a new "smart shelf" technology that allows for real-time tracking of inventory levels.

Gillette, Wal-Mart and the U.K.-based supermarket chain Tesco plan to install specially designed shelves that can read radio frequency waves emitted by microchips embedded in millions of shavers and related products.

The shelves can scan the contents of the shelves and, via computer, alert store employees when supplies are running low or when theft is detected, said Gillette spokesman Paul Fox.

Wal-Mart plans to test the Gillette shelf initially in a store located in Brockton, Mass., said Wal-Mart spokesman Bill Wertz.

The world's largest retailer is planning to run a similar field test with Procter & Gamble involving cosmetic products, such as lipstick, said Wertz. The companies haven't determined exactly when or at which Wal-Mart stores they would conduct that test.

A Tesco spokesman confirmed that the company is testing Gillette's smart shelf, but declined to discuss details until next week.

While the technology has appeared in other applications, such as cattle tracking, the tests appear to be the first by major retailers on such a large scale. If they prove successful at cutting costs, the trials could spur further adoption of the fledging technology, which has raised privacy concerns.

Wal-Mart plans to carefully examine the technology's potential to help it become more efficient while keeping shelves well-stocked.

"This could help us lower our costs--something Wal-Mart is always looking for," said Wertz.

In a related development, Gillette announced Monday that it agreed to purchase 500 million so-called radio frequency identification (RFID) tags, which contain the special microchips that can communicate wirelessly with computers when in the presence of a scanning device-- all without any human intervention.

The smaller tags are packaged so that they are hardly noticeable. With a user-programmable 64-bit code, they can record much more information than the standard bar code, including a unique identification code, where the item was manufactured, and where it was sold.

Bean counters for cans of beans?
Consumer goods companies, such as Gillette and Procter & Gamble, say they are interested in smart shelves as a tool to help increase sales by ensuring that store shelves are always stocked with their products. With stock levels being continuously monitored by computers receiving wireless signals from the products themselves, retailers would no longer have to rely on employees to monitor their shelves.

In one scenario envisioned by retailers and manufacturers, computers sensing that stock is running low could automatically place an order for more--either by informing an employee to retrieve more products from a storage room or by notifying the manufacturer that another shipment is needed.


News.Commentary
RFID tags--you're it?
The consumer goods industry is at the
start of a long, complex adoption curve.


Gillette and others also have experimented with attaching the tags to shipping containers and pallets in an effort to more efficiently locate and route merchandise in its journey from factory to store shelf.

"If we can increase the availability of our products on shelves, it's a win-win for everybody--the manufacturer, the retailer and the consumer," said Gillette's Fox. "Control over inventory and stock is a major factor in profitability."

Retailers and consumer products companies lose an average of 6 percent of their total sales each year due to so-called stock-outs, according to Kevin Ashton, a Procter & Gamble executive and executive director of the Auto-ID Center, an RFID research program at the Massachusetts Institute of Technology.

The Auto-ID Center, founded in 1999 within the MIT Department of Engineering, has been developing and field-testing RFID systems for more than a year.

Using radio frequency to communicate with computers has a limited application today, Ashton said. Automakers employ radio frequency in car keys, which emit signals enabling a particular car to start. It's also used in ranching to tag cattle and in quick-pay lanes of highway tollbooths. Credit card companies are also embedding radio frequency microchips in their cards as an alternative to magnetic stripes.

Until now, the Auto-ID Center's tests have involved identifying and tracking the location of shipping containers in warehouses, said Ashton. The tests starting this month at Wal-Mart and Tesco will be among the first major trials of the technology developed with the Auto-ID Center to track individual items on store shelves.

"It's the last Russian doll," said Ashton. "It's the hardest thing, and it's what we've been working toward...being able to find and locate anything regardless of how many of them there are and how little they cost."

A major barrier to the broad adoption of smart-shelf technology in the thin-margin businesses of mass-market retail and consumer commodities has been the high cost of the equipment. For the tags alone, manufacturers can expect to pay 30 cents per tag at a minimum, according to one developer, Alien Technology in Morgan Hill, Calif., which is supplying Gillette with its tags.

At that price, it's unfeasible to embed the tags on, say, a 50-cent bar of soap. That's why Alien Technology and others are working to lower the cost of tags to 5 cents to 10 cents over the next several of years.

Even so, Ashton said widespread adoption of RFID could take until 2010--if it ever does occur.

Privacy worries
Another potential roadblock, said Ashton, is consumer concern about privacy invasion. Privacy advocates are worried about the ramifications of embedding tiny chips in all kinds of personal items. Corporations could use in the technology, they say, to keep consumer belongings under surveillance not only in stores, but also in their homes and on the street.

Imagine, for instance, walking down the sidewalk and having a high-tech billboard flash an ad for ketchup at you because it recognized the package of hotdogs in your bag. Ashton acknowledges that such a scenario--not unlike a scene out of the last year's sci-fi film "Minority Report"--is technically feasible.

Gillette and the Auto-ID Center said they're taking precautions to protect consumer privacy. For instance, the Auto-ID Center's technical specifications call for retailers to be able to disable the tags after purchase at checkout counters. In its upcoming test, Wal-Mart could decide to disable the microchips in Gillette products before they leave the store, said Wertz.

And Gillette is embedding its tags in packaging rather than in the products themselves, said Fox. Once consumers discard the packaging, they also dispose of the chip.

In addition, the range of the signals emitted by the tags is just 5 feet, and they can't be read through walls or floors, making it difficult for objects in someone's home to be read by people outside, or from passing vehicles or satellites, said Ashton.

"(Privacy) is something we take very seriously," said Ashton. "I don't want to be involved with anything that does harm or fails because people perceive it to do harm."

 

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