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Metro pilots combined RFID/EAS tag; Multi-use tag likely two years away

10/19/09 | John R. Johnson | email

There is a lot of excitement around the use of RFID-based electronic article surveillance (EAS) technology, especially following the guidelines published last week by GS1 EPCglobal. And there is great potential for retailers to leverage the benefits of a combined RFID and EAS tag, which is why Metro Group – a pioneer in the RFID space – announced a pilot last week to test the technology.

However, it’s a good bet that the industry is at least a year – more likely two years – from a commercially viable product that combines the item-level security benefits of EAS technology with the supply chain visibility that item-level RFID tagging provides. For now, EAS is still a cheaper and more effective way to prevent theft at retail establishments, so there will likely be dual-tag solutions for the near term.

“This is an expected area of convergence,” says Drew Nathanson, director of research operations at VDC Research. “Everybody wants this. It’s a great way to bring RFID to the retail floor and to trigger additional value down the supply chain. Right now, EAS is performing better, is pretty low cost and very well established. RFID is still a little pricy, and so there remains a lot of development that has to happen.”

The speed of the technology’s development will depend on the investment pace of its two primary developers, Checkpoint Systems and Tyco/ADT. Those two firms are the primary drivers of the technology, and both have retailers testing the technology in the pilot stage.

“I can’t give you a date when it’ll be commercially available,” says Paul Cataldo, vice president of marketing for Checkpoint, who notes that the Metro work is only in the lab stage. “But it’s another data point that shows people are talking about using RFID for more than just merchandise visibility. From a retail perspective, it gives them another way to justify bringing RFID into their business.”

Indeed, retailers stand to reap big benefits from RFID-based EAS technology, most notably by tackling the problem of inaccurate perpetual inventory caused by theft. RFID enables retailers to not only know when something is stolen from a store shelf, but also what specific merchandise was stolen. Therefore, retailers gain a far more accurate picture of inventory levels, allowing them to restock shelves immediately. Of course, fewer out-of-stocks leads to increased sales.

“By combining the advantages of EAS and EPC/RFID technology, we potentially realize the benefits of visibility throughout the supply chain together with the capability of deterring and detecting theft,” says Brand L. Elverston, director of asset protection systems and analysis at Walmart Stores. “Metro Group is working with Checkpoint to deliver standards-compliant, RFID-based EAS to both mitigate loss and optimize our merchandise management,” Dr. Gerd Wolfram, head of Metro’s CIO-Office, said in a press release. “This effort is in line with our stated RFID strategy to use tags for multiple purposes along the supply chain.”

Theft is a major issue for retailers, who last year lost $36.5 billion to retail theft, including shoplifting, employee theft, administrative error and vendor fraud. According to a recent survey conducted by the University of Florida and funded by ADT, the rate of retail theft in 2008 increased for the first time in six years (to 1.52 percent of overall retail sales). In 2007, the study reported the lowest rate of retail theft (1.44 percent) in the 18-year history of the survey. A single RFID/EAS item-level tag would be a boon to producers of high value goods like apparel, electronics and small appliances.

The GS1 EPCglobal guidelines were developed to illustrate where EAS implementation is possible for reusable and disposable tags and approaches to enabling the business use cases outlined using existing GS1 and GS1 EPCglobal standards. The next phase of this effort will include updates to the technical standards to address tags that are embedded in products and applications that will require electronic deactivation or tag alteration.

“GS1 EPCglobal’s RFID-based EAS guides that we released today present a new model for the way in which retailers will monitor and manage shrink,” says Chris Adcock, president of EPCglobal Inc. “EPC/RFID delivers high-resolution visibility, enabling retailers to reduce stock-outs, enhance the shopper’s buying experience, and increase sales in an unprecedented way.”

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