RFID grabs retailers' interests
By Li Weitao (China Business Weekly)
Updated: 2004-10-28 13:55

Chinese manufacturers and retailers apparently are quite interested in the radio-tag technology, which is expected to be the next big thing in the retail market.

Fifty-six manufacturing and retail executives anticipate high returns on their investments in radio frequency identification (RFID), indicates a survey by global research house Accenture.

The survey, released recently, was conducted in Japan, South Korea, China and Australia. It found Chinese manufacturing and retail executives are optimistic about their investments in RFID technology.

Chinese executives only lag behind their counterparts in South Korea. Seventy-two per cent of South Korean respondents said they expected high returns.

Respondents in Japan seemed unconvinced of RFID's value. A mere 16 per cent said they anticipated a high return.

Thirty-six per cent of the respondents in Australia said they expected high returns on their RFID investments.

The RFID technology, a supercharged version of the barcode, can help track goods, automate banking services and improve product quality.

RFID tags -- composed of an antenna and silicon chips that carry unique, rich information that can transmit data to a wireless receiver -- could eventually be used to track almost any physical item.

Josef C Mueller, a partner in Accenture's Products operating group in Asia-Pacific, said 12 of the 25 surveyed Chinese firms plan to apply RFID technology by 2007.

Some firms plan to adopt the radio-tag technology by 2006, and 30 per cent of the respondents said they know nothing about the technology.

The dramatic price drops of chips and reader devices, combined with the increasingly serious counterfeiting and thefts of retail goods, have boosted the development of RFID, Mueller said.

He said he is optimistic about the adoption of RFID in China's retail sector, which is fuelled by increasing demand from Chinese consumers, most of whom are youth, to improve their shopping experience.

Unlike the finance and telecoms sectors, the retail industry has been traditionally slow in adopting new technologies.

As a result, retailers have spent much less on IT (information technology) investments.

However, that is changing.

The world's largest retailer, Wal-Mart, has announced it will require its top 100 suppliers to use RFID tags on pallets and cases by January 2005.

Chinese retailers are expected to be forced to look at new technologies to improve their competitiveness.

In accordance with China's commitments to the World Trade Organization (WTO), the nation's retail market will open to all foreign players by year's end.

Accenture's survey found Chinese manufacturing and retail executives still have much to learn about RFID.

Ninety-one per cent of the Chinese executives surveyed said they placed the value of RFID within their own organizations.

In stark contrast, most respondents in Australia, Japan and South Korea said RFID's greatest benefits would be found across multiple organizations, rather than just within their own organizations.

"The emphasis on the extended supply chain, while not universal, is prevalent, and promises to enable a new level of visibility and collaboration for manufacturers, distributors and retailers," said Lyle Ginsburg, managing partner for technology innovation in Accenture's products operating group.

Mueller attributed the Chinese respondents' focus on RFID adoption within their own organizations to the immaturity of China's supply chain.

Most respondents in Asia-Pacific cited production visibility and inventory visibility as the main benefits of using RFID.

"There is a feeling RFID implementation is inevitable, even when not driven by mandates, so executives in each country are examining how it can improve their businesses and their ability to compete," Mueller said.

"We will continue to see distinct regional differences, but the focus on the supply chain as the priority area for maximizing benefits is a common theme within Asia and globally."

Yet, hurdles remain.

About 70 per cent of the Chinese respondents said the cost of the radio-tag technology and the lack of standards are the major barriers to implementation, Accenture's survey indicated.

Some companies are hesitating to invest in RFID studies and programmes, as they fear their investments will be wasted if they make a wrong decision.

The Chinese government has established a National Auto-ID Standard Working Committee to develop standards for the RFID technology.

Mueller said the government should play a greater role in setting standards, which would help spur the development of the RFID technology.

When the standards are set, more technology vendors and retailers will join in the RFID development, which will help drive down the cost of the radio-tag technology and boost its adoption, he said.

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