Wireless Transforms the Retail Industry
By Niall McKay, Mon Oct 08 00:00:00 GMT 2001

Mobile data technologies help teach the old industry new tricks.

Over the last twenty-five years the use of barcode technology has transformed the retail industry enabling stores to quickly and easily price, track and keep inventories of their goods. Soon it's due to go through yet another revolution using wireless technology that will bring shopping into the 21st century.

Picture this: Your refrigerator is thinking. By communicating with a computer chip on the side of the milk carton it notices that you are running low; similarly your cupboard realizes that you are down to your last bowl of cereal. So you get a message on your phone making you aware of the situation and telling you that your house computer control system has compiled a list of items that you need to purchase from the supermarket.

You review the list and realize that you need some extra items for a dinner party later in the week. You add them to the list and send it back to your home computer, which trawls the top four supermarkets for the best deals. Then it sends the list on to that supermarket's computer system, which beams them to the stores shop bots.

The robots can find each item because every product's computer chips beams its coordinates on the warehouse floor. In a couple of minutes the robots have collected and boxed the goods and they are ready for collection or delivery.

Preferable preferences

The system is tailored to your own unique needs. Perhaps you don't mind the store sending you Cornflakes but you would rather choose your own meat and organic vegetables. Or perhaps you'd prefer have the supermarket give you the ingredients for your favorite meals - spaghetti-bolognaise or meat loaf, for example.

When you arrive at the store you pick up a couple of extra items, collect your pre-packed box of shopping, and walk out of the store. As you pass through the exit the supermarket's computer systems debits your cell phone or PDA via a wireless Bluetooth link and emails you the receipt.

Such are the systems that are currently being developed by supermarket technology suppliers such as IBM and technology research institutions such as Massachusetts Institute of Technology.

Already, there are a number of early stage systems in development. 7-11 in Japan changes the complete floor plan and pricing of goods three times a day. Information from the supermarket tills or point of sale equipment is constantly beamed back to the companies central computer system in Tokyo, which uses data mining technology and predictive software to reconfigure the floor plan of each store.

For example, newspapers might have a prime position in the morning and in the evening milk and cookies might move to the easiest shopping spot. In the UK, Tesco and Safeway supermarket chains are giving Palm Pilots fitted with bar code scanners to their customers who then scan each item as they pick it off the shelf. And in Ireland SuperQuinn is using handsets fitted with bar code scanners so that customers can skip the checkouts. The glue that holds all these systems together is wireless networking.

Safeway UK's system enables the customer to take their Palm Pilot home and update their shopping list from their kitchen. For example, when they are throwing out the milk carton they can scan it and it will be automatically added to their shopping list. At any time the customer can then beam that list to the supermarket, which will box the goods and have them ready for collection.

Passive, active RFID ubiquity

However, as sophisticated as these systems are, the real revolution is just around the corner with the proliferation of low-cost radio frequency identification or RFID tags, according to Doug Heintzman, IBM's manager for strategy and standards. "Tag technology will allow us to do some really neat things such as build very sophisticated inventory management system that not only track the product but how near it is to its expiry date," he says.

RFID tags are primitive computer chips with information such as price, quantity and ingredients stored on them. There are currently two types of RFID tags: active and passive. Active tags have a battery and emit a low powered signal. Such tags have, for a longtime, been used for auto toll collection and to keep track of livestock.

For example, they enable drivers to wiz through auto toll kiosks radioing their identification number or deducting a credit. And they enable farmers to keep track of each sheep or cow; the shots they have received, the diseases they have had, their age, yield and so on.

Sales of such tags are already mounting, according to a recent report by the market research firm Frost and Sullivan, world RF-location and tracking systems sales generated $27.32 million in 2000 but this is projected to rise to $277.82 million by 2004.

"There is a need within the market for alternative tracking technologies and systems. Manual tracking is inefficient, sometimes unreliable and costly," says Frost & Sullivan Analyst Deepak Shetty. "People are interested in more sophisticated technologies that are multi-user friendly and have multiple operations. RF seems to have many of these advantages."

Passive tags are, however, more suitable for the retail industry. Such devices only emit a signal when a device or reader is pointed at them. Currently, the problem with using passive tags is their high-cost.

"Recently we've made great strides because we can now manufacture them on a very thin plastic substance," says Martin Boi, product marketing manager for Omron, a company that manufactures RFID tags and equipment. "This means that we've got the cost down to less than a dollar per tag which is ideal for the manufacturing business."

However according to Boi, for RF tags to become viable in a retail setting the price needs to come down to under ten cents.

Developing low-cost solutions

Fortunately, low-cost tags are already in development. MIT's Auto-ID Center (sponsored by the Uniform Code Council which created the Universal Product Code or bar code in 1973) is currently working on such systems.

Indeed, the MIT's Electronic Product Code (ePC) project is even more ambitious - extending the use of tags not just to products but every item, components, parts and packaging.

Meanwhile, Motorola has come up with a technology called BiStatix a tag that transmits a signal and can be printed on packaging that could reduce the cost of production significantly.

Currently, RFID tags are going through an upswing in the manufacturing industry (to keep track of parts). However, such printable tags would enable a supermarket to take a complete inventory of all its goods in the store simply by turning on a tag scanner. Furthermore, stores could employ robotic technology to move items from warehouse to truck and from truck to store.

The tags emit the product codes so there is no need to have a human recognize the product, turn the bar code out, and to scan it with a bar code scanner. RFID tags will also let the supermarket build intelligence into dynamic pricing so that items could say drop in price as they got nearer to their sell-by date. In the supermarket such a system would probably be used in conjunction with small liquid crystal displays that could discount prices. For example, bread or meat might come down in price as the day wore on.

Improving customer service

"In the US the supermarket industry has introduced technology to reduce costs and manage inventory," says Ryan Mathews a retail analyst with FirstMatters, a consulting firm. "Systems such as loyalty card schemes have done a great deal to improve the efficiency but have done little to improve the customers shopping experience."

Loyalty programs help supermarkets collect and categorize information about their customers but the reward to the customer is that they receive what amounts to a dubious discount for products, he says.

"If I decide not to participate in their program I am penalized by paying higher prices," says Mathews. "The basic message is - give us the information we want or we'll rip you off."

Certainly, Mr. Mathews has a point. Loyalty programs have done little to increase customer spending. Quite the opposite, in fact, apparently, Americans are eating out more than ever and supermarket sales are on the decline.

The solution, according to Mr. Mathews is to use new technology to provide better customer services. "The ideal implementation would use RF technology in conjunction with customer databases and that way recreate the old days when the grocer had a direct relationship with a customer."

For example, if customers have access to the supermarket database they can program the device to select the cheapest possible toilet role, or tell it that one that a family member is extremely allergic to nuts and under no circumstance should that house hold be supplied any item that lists nuts as an ingredient.

Apply the same technology to the pharmacy database and the system can throw up a warning if you go to buy two drugs that when mixed create a bad reaction.

Still, this should be personal wireless technology's killer application - after voice - bringing personalization and automation together in a single solution.

Niall McKay is a freelance writer living in Silicon Valley. He can be reached at www.niall.org.