Rolling Back RFID Expectations at Wal-Mart

Wal-Mart advertisements have always boasted about the retailer’s ability to “roll back prices” on its merchandise. A yellow smiley face usually accompanies the catchphrase and provides a comforting message to customers. “Ahhh, the smiley face. I know I’m gettin’ a good deal!”

But not all is so comfortable these days inside Wal-Mart’s fortified headquarters in Bentonville, Ark. For starters, the familiar cacophony of anti-Wal-Mart sentiment (protesters, industry watchers, the media) seems more fervent than ever. And a nasty and embarrassing scandal involving a former IT worker who is revealing all kinds of company secrets of how Wal-Mart runs its internal IT and physical security efforts is adding more fuel to the anti-Wal-Mart fire that seems forever ablaze. (Kind of like one of those fires that runs amok at landfills or where they throw away old tires–it just smolders forever looking for the next spark, and stinks to the high heaven.)

It also appears that Wal-Mart is “rolling back” the expectations on its much heralded, revolutionary and nearly religious adoption of radio frequency identification (RFID) technology in its store and supply chain operations. (No smiley face here, sadly.)

A recent Computerworld article broke the bad news from Bentonville: the retailer failed to meet its own plan for setting up RFID systems in its distribution centers. In a rare acknowledgement of defeat, Wal-Mart said in the article that it didn’t meet its goal of having RFID up and running in 12 of its 137 massive distribution centers by year-end 2006. The RFID focus was now more on the stores and not the DCs. Wal-Mart claimed that it would have RFID systems operational in 1,000 of its stores by the end of this month. The store-level views, a spokesperson said, were more important than distribution center data. One RFID analyst seemed a little perplexed by the change in plan.

The thing is that RFID’s adoption, in general, has now become so intertwined with Wal-Mart’s adoption, in particular, that RFID will now only be as successful as Wal-Mart wants it to be. And that’s pretty powerful. And pretty scary. In a March column, NetworkWorld’s Howard Anderson theorized that there’s roughly $1.3 billion invested in 65 venture-backed companies that were banking on RFID’s future successes. If you were one of those 65 companies, you would be praying that Wal-Mart keeps moving full steam ahead with its RFID vision. Or else.

What’s also interesting to note is the subtle, covert messages from those Wal-Mart suppliers that are trying to satisfy Wal-Mart’s demands as well as run a business and efficient supply chain. The song goes something like this: Almost four years later, this whole RFID thing is still really, really hard. Why Wal-Mart?! Why??!! (Insert sigh here.)

Not that any of this should be surprising. I wrote about the unresolved and massive challenges back in 2004, 2005 and 2006. Even today, the costs are still too high, the integration challenges still too complex, and the technology, well, it’s just not absolutely necessary. The sources I’ve spoken with have repeatedly told me that, for the most part, their supply chain is working just fine, thank you. RFID just adds more questions, while few, if any, answers can be found. As Anderson elegantly summed up: “RFID is a technology in search of a problem.” I love that one.

In his key note address at the 5th Annual RFID World Conference in March, Best Buy CIO Robert Willett displayed the customary praise for RFID. Afterward, however, in an article that appeared in The Wall Street Journal (reg. required), his comments didn’t sound like someone offering a ringing endorsement. (More like someone who was trying to hedge his bets.) “I wouldn’t want to say specifically, but I think (widespread adoption) [of RFID] is in the foreseeable future,” Willett was quoted as saying in the article, just after giving the keynote. “It’s not weeks or months, but it is years.”

Years? How many more? Anyone? In the article, Willett also pointed out the fact that it took “22 years for society to perfect and embrace something as relatively simple as the toaster.” I’m no RFID expert, but an RFID system seems a tad more complicated than a toaster (and a lot more expensive to get right).

Granted Best Buy is not Wal-Mart, but Best Buy isn’t your local Mom-and-Pop store either. Best Buy is a leading edge, technology-centric retailer.

Perhaps what this all means is that Wal-Mart’s strategy of bludgeoning its way to the RFID finish line (and bullying suppliers along the way) hasn’t gone as planned. The whole “you’re with us or you’re against us” mentality, which seems to sum up Wal-Mart’s supplier-relation strategy, might have backfired this time.

The problem, however, is that you have to wonder if anyone inside the Bentonville city limits even heard the backfire.