Evan Schuman's StorefrontBacktalk

Riding small CPUs enabling much smaller form factors, Motorola on Tuesday (April 28) a 1.8-pound fixed RFID reader measuring 7.7 inches long, 5.9 inches wide and 1.7 inches deep. The vendor described the FX7400 series units as being “less than half the size of traditional fixed RFID readers, making it ideal for retail stores and other customer-facing environments.”

But analysts were less than impressed, pointing out that the Motorola units were actually larger than many other major RFID readers today, despite being smaller than other Motorola RFID readers. “I definitely classify this as ‘ho hum.’ ThingMagic and Impinj as well as some others have much smaller form factors and more functions,” said Pete Abell, a longtime RFID analyst (used to be with IDC) who today works as an independent consultant.

Washington State’s governor has signed into law one of three bills relating to RFID and privacy, a measure that prohibits, with a dozen exceptions, the scanning of RFID chips by anybody other than the company that attached them.

The signed bill includes a number of significant changes to the initially-proposed measure which was denounced in January by Dan Mullen, President of the Association for Automatic Identification and Mobility (AIM), as potentially being “traumatic” to retailers and consumers. Mullen, according to an RFID Journal report, believes the enacted version is “pretty reasonable” because it focuses on banning the surreptitious scanning and reading of RFID chips, as opposed to the devices directly.

The worldwide RFID market, which reached $5.25 billion in 2008, will climb to $5.56 billion by the end of 2009 with most of the money, about $3 billion, being spent on RFID cards and associated services, according to a new report by RFID tracking firm IDTechEx. The study asserts much of the growth of the RFID market can be attributed to “government-led RFID schemes” including transportation projects, national ID initiatives, military uses and animal tagging.

However, not all areas of the RFID world are in good shape. According to IDTechEx, the adoption level for pallet and case tagging has been slow. “The tagging of pallets and cases remains a failure, with only 225 million passive UHF tags used for this application in 2009 – a far cry from the 35 billion tags that one consumer goods company alone predicted that it would be buying in 2009, when they presented at an event in 2003.”

This is one of these ideas that could work extremely well in a very limited set of circumstances. A whisky company opted to put up a billboard in a densely-populated and traveled urban area and wanted it to change–very significantly–with every person who saw it, tailoring to that person. The problem is that it can’t scale, requires workers on site (and workers who can craft ad copy on the fly, with literally seconds to create) and is likely quite expensive.

Still, as this video of Jameson’s truly interactive billboard illustrates, the marketing tactic can break through the clutter of a message-laden environment. And it’s hard to argue with the potential of a billboard that–as shown in the video–hailed a cab for a prospect. But could it be practical for in-store use? Maybe at a large mall? And what of the flip side: Are there consumers who would be alienated by having such a public message directed at them? And what if it was connected with CRM, allowing for personalization beyond that which can be observed? In this day of digital messages overflowing consumers’ cellphones, Web screens and shopping carts, it’s absolutely a concept not be dismissed too quickly.

Grocery chains have for years struggled with self-checkout systems that couldn’t easily deal with produce, POS stations that simply couldn’t handle complicated coupons and barcodes that didn’t understand expiration dates. But in a move that many in retail IT see as the potentially biggest change in product labeling since the rollout of the UPC barcode 35 years ago, the GS1 DataBar is looking to sharply increase its retail presence as of January. Among the chains most vocally advocating for the advance are American chains Walmart, Winn-Dixie and Krogers plus Canada’s Loblaw.

At its core, the DataBar codes are today’s barcodes but are much more tightly packed with much more information. But not all of this transition will be akin to scanning sugar and spice. Most chains will have to absorb non-trivial costs to support the upgrades, a tricky move at a time of store closings and massive layoffs. Most product scanners built since 2000 are capable of reading DataBars but investments need to be made beyond just the scanners.

Shoppers with RFID-enabled loyalty cards from a chain of Washington State grocery stores get their accounts automatically credited the price difference, plus 1 percent, if products they buy go on sale within a week of their shopping trips. Now there’s an incentive to use the cards. The program is being trialed at the Top Food & Drug chain, which owns 33 supermarkets in Washington and Oregon under the TOP Food & Drug, Haggen Food & Pharmacy and Larry’s Market names.

“If you buy milk for $4 on Tuesday and the provider sells it on Thursday for $3.50, you get an E-mail saying you’ve got fifty cents in your account based on the fact we put this on sale,” said Peter Gruman, president of Accelitec, a vendor involved in the program. “The next time the customer visits the store and taps his loyalty card at the POS, the cashier will see he has fifty cents credit and will ask if he wants to apply it to the sale or let it remain in the account.” The program also provides no-questions-asked automated refunds for products with quality problems. If a loyalty card holder finds the milk was sour, he can call the store and ask for a refund, which will also be credited directly to the CRM card.

Here’s one way to get people to try using mobile phones to make retail payments: Give them the phones if they buy enough stuff.

That’s the deal being offered by Citibank Singapore, Visa payWave and mobile network M1 as part of a 3-month pilot program in Singapore. For the trial, which involves as many as 300 people, the companies are allowing participants to keep the Visa payWave-equipped Nokia 6212 Classic handsets if they make at least eight transactions with the phones each month.

Subway, the 31,000-store sandwich restaurant chain, has agreed to be the latest guinea pig for Visa’s contactless payment program. Subway confirmed Thursday (April 30) that it will soon make the payment technology available to “participating” locations in Canada. Subway has about 2,400 stores in Canada, many of which are franchised.

Typically, statements announcing such deals (which, in this case, included Subway’s acquirer for its stores in Canada, Chase Paymentech) feature a canned quote from an executive with the chain, praising the vendor for their wisdom. In this case, the quote provided by Subway was anything but warm.

In a piece last week, we talked about a series of future security offerings that Visa is pushing, including a comment from a Fifth Third Bank executive that end-to-end encryption has logistical challenges, especially “a tremendous key management issue.”

One reader argued that Fifth Third’s resistance had much less to do with making life easier for retailers and more to do with minimizing the processor’s own liability. “Fifth Third sees a major transfer of card fraud liability shifting exclusively to them from the merchant who traditionally has (effectively) 100 percent of the liability. This dynamic would leave Fifth Third (and all acquirers) as the sole liability holder for all card fraud,” wrote one reader. “I can understand their concern. It is rational and it is well-founded.”

When Blaze Mobile and others started pushing an RFID sticker as their own contactless payment form factor, it was a media-friendly way of presenting an idea that misses the point of why contactless payment is struggling. Contactless payment has been besieged by challenges, ranging from half-hearted marketing efforts by some of the key financial players, early reports of faulty equipment and serious issues involving contactless security and the perceived lack of any security.

But the key issue has consistently been much simpler. Unlike other forms of consumer-issued RFID devices—such as EZPass and even the keyless entry systems of some newer cars—typical contactless payment methods have not given consumers any real reason to use them. With no significant convenience or cost-savings issue, one need not look too far to figure out why contactless is struggling in many sectors.

Visa has been experimenting—through retail and processor partners—with several alternative security approaches for its cards, including a challenge and response effort at OfficeMax, a digital card fingerprint-like image at processor Fifth Third and a strict data segregation experiment at McDonalds.

“None of our internal systems will even have access to cardholder data,” said McDonalds CIO David Weick. In the U.S., he said, the typical McDonalds brings in about $2.1 million to $2.2 million in revenue per store. “So any solution that I come up with needs to fit within a P&L that starts with a $2.1 million or $2.2 million revenue line. If I come up with something that is way out of line, I have the franchisees who are there to tell me and to describe for me the economics of their business and whether or not it fits,” Weick said.

The RFID industry is being slowed, but not stalled, by the recession, according to ABI Research. The company’s latest market data shows that total revenue earned from RFID transponders, readers, software and services will exceed $5.6 billion by the end of 2009. “The recession has had an undeniable effect on deployment plans,” said ABI Research practice director Michael Liard. “Despite some project deferrals and terminations, there will be market growth, albeit fragmented.”

The RFID market is “worthy of cautious optimism in the near to mid-term, particularly in the closely-watched passive UHF segment,” said ABI Research. And while the RFID industry, like most others, is struggling, the researchers said they “would not characterize it as being in a state of despair or turmoil.”

Many retail IT budgets in 2010 will have about the same ratio to sales they had in 2008, and a decent percentage of those budgets will be boosted to cover projects currently in progress, according to a new report. Surveys like this raise skeptical eyebrows, as they should. Do those IT execs truly expect their budgets to go up or are they merely hoping that they’ll go up?

Even more cynically, is it possible that those execs know that surveys like this tend to impact CEO/CFO expectations and, therefore, they’ll give the answers they want their CFOs to believe? Even if the execs are being straight with the survey takers—and that the survey takers are being straight in reporting all of the collected data without sanitation—we have to wonder what was behind those answers.

In a Japan-only (for now) rollout, Sony is including a TV remote control with its new line of HDTVs, but this is no ordinary remote control. With a built-in RFID tag reader, it’s designed to talk with consumer’s cellphones and authorize purchases.

Initially, the devices are to be used to pay for very TV-related items such as video-on-demand, ringtones from a music show and other multimedia features. But the next phase could include any purchases, whether it’s a barbecue grill from the Home Shopping Network, a washing machine from Amazon (as seen through the TV’s Web connection, courtesy of a built-in Ethernet port) or groceries from the local Wal-Mart (to be picked up later). Of course, that’s in Japan. Here in New York metro, I’m happy if my Treo can actually connect two phonecalls in a row.

While Hawaii pushes its Internet sales tax through its state legislature, it has become the latest in a long string of states trying to set rules for conducting commerce within its borders, with other states tackling everything from data privacy, payment security and RFID notifications. Of course, when it comes to global E-Commerce operations and national (and sometimes multinational) retail brick-and-mortar chains, a state’s border doesn’t have much meaning.

Some of the state legislation doesn’t even limit itself to dictating what retailers must do while operating in their states but are setting new rules protecting the residents of that state when they happen to be shopping out-of-state or online. Do they expect cashiers at Wal-Mart to ask what state a customer lives in and then, based on the answer, change the way they handle a credit card payment?

Just a couple weeks after word got out that Wal-Mart and Procter & Gamble had backed off their support for RFID tags on marketing displays comes the news that the nation’s largest drugstore chain, Walgreens, is boosting its support for the very same RFID tagging of promotional displays.

“The results have been impressive: Over the past year, our in–store execution has grown to nearly double the industry average,” said David Van Howe, purchasing VP for the $60 billion 6,658-store chain. “Store–level information about what is up and where it is in the store allows unprecedented accountability for achieving program potential.”

One vendor is trying to get consumers to sidestep the hassle of filling out loyalty card applications at every store by integrating the functionality into a PDA.

The field test by Japan’s NTT Communication started this month, just as the vendor promised when it rolled out the program in October 2008. NTT’s new “Gyazapo” system, which uses an RFID chip in a mobile phone to carry loyalty card information for multiple retailers, can allow RFID scanners at the POS to grab shoppers’ personal information from a central database managed by NTT.

In a proof-of-concept experiment in Bangalore, Intel India is marrying RFID tags and POS with a CRM database where “frequent customers would have their preferences and favorites recorded.” Such a system could tout related products and flag new versions of that consumer’s preferred brands.

“This system is designed to replace the current simplistic computer or other system that only provides billing and basic services,” said Sanat Rao, Marketing Director (Emerging Markets), Embedded and Communications Group, at Intel. “Our system, once implemented, allows the possibility of being operated as a kiosk and provides the information on inventory.”

Facebook officials learned a hard lesson this month when the social networking site snuck in a privacy policy change that could have allowed it to access users’ content—and use it forever for pretty much anything Facebook could think of—even after users had deleted it from their accounts. After public backlash, the policy was reversed—for now. But I’ll bet serious money that these execs learned the wrong lesson.

To interpret motivation and real intent, sometimes a look at history can be useful. Do you remember another Facebook privacy incident back in December 2007? In that case, Facebook tried sharing—without permission—customers’ purchases with people on their friends list. Is this a pattern? Is Facebook trying things, and if it’s caught and there’s a loud enough protest, the site pulls back? In short, is Facebook trying the permission versus forgiveness approach? Indeed, it seems to have tried both options. For a company that is trying to solidify a brand and build as much trust as possible, these tactical approaches seem odd.

Wal-Mart has historically had a strong fondness for its own homegrown apps, given the $401 billion chain’s rather absurdly large size. The company has liberalized that policy recently, allowing a few shrink-wrapped enterprise apps to slip in. Now there’s a report in Economic Times that Bentonville is seriously considering an Indian business process outsourcing contract that could include “non-core processes of procurement, merchandising, finance, accounting and payroll” and be valued at as much as $500 million.

The story quoted from a Wal-Mart document that said “Wal-Mart will expand staffing of certain elements of IT application maintenance and development with some of India’s leading information technology firms. India is one of several countries that the company is targeting as part of its remote sourcing model for IT activities.” Vendors in the running, the story said, include IBM, TCS, WNS and Wipro.

It’s not surprising that so much has been made of the decision by Procter & Gamble (P&G) to abandon its RFID tagged promotional displays at Wal-Mart.

Given P&G’s reputation for ROI worship, many assumed the company pulled the plug because RFID was failing the test. What is closer to the truth is that the test failed, not the technology. And to the extent that Wal-Mart was as much a player in this trial as P&G, it could also be said that the test didn’t fail, the tester did.

ABI Research on Monday (Feb. 9) reported that, according to its latest RFID user survey, 36.7 percent of respondents expect to see a clear return on investment (ROI) from their RFID efforts in “less than 12 months.” An additional 25 percent see 18 months as a better target.

Some 13.3 percent of respondents say 18 to 24 months, and only 6.7 percent assume it will take “more than 24 months.” The respondents who “do not know” account for the remaining 18.3 percent. Those are some very sobering numbers. Do IT managers truly believe these goals, or have they convinced themselves to believe? Or were they forced to say what they really need to get their CFOs’ spending authorization and now need to be consistent?

Retail RFID use Down Under will no longer be held down by underpowered devices. After four years of study, the Australian Communications and Media Authority (ACMA) ruled in late December 2008 that RFID devices can operate with up to four watts of power, the same strength allowed in most other countries.

Prior to the ACMA decision, formally published Jan. 15, 2009, RFID devices were limited to one measly watt in Australia. Boosting the power of RFID readers will allow retailers to use fewer of the devices and enable the units to process more simultaneous data.

Noting that Wal-Mart, Target and Best Buy, among other major retailers, “are moving rapidly to require RFID tags on the products they sell,” two New York legislators have introduced a bill governing the use of the technology. Similar legislation has been introduced or enacted in 28 other states, according to RFID Update.

The “Radio Frequency Identification Right to Know Act” would require retailers to disclose the use of RFID devices and any gathered personal information. It would also require labeling of retail products or packages containing an RFID tag as well as POS removal of RFID tags. Additionally, the bill “restricts aggregation and disclosure of personal information.”

Sam’s Club, which wants suppliers to apply EPC/RFID tags on all pallets they ship to its stores and warehouses by next year, is significantly reducing the fee it will charge those who don’t comply, from about $3 per tag to 12 cents per tag. Some suppliers will simply opt to pay the fee, potentially risking the wrath of Sam’s Club—and its owner, Wal-Mart.

“Why would you want to invest in technology, training, software and people when Wal-Mart can do it for you for 12 cents?” asked Louis Bianchin, senior RFID analyst and program manager at VDC Research. “The risk there is that they (Sam’s Club) could have sent the wrong message to the supplier community. That is not the message the supplier community needs to get.”