Retail Item-level RFID Tagging: Is the Privacy Threat Real? By Bill McBeath Published on Aug 3, 2010 Recent articles on Walmart's item-level tagging announcement dedicated a lot of print to privacy concerns. Is that the central story?

Tracking Jeans and Underwear

Walmart recently announced that, starting this month (August 2010), they will be putting RFID tags on individual jeans and underwear in some stores. If that works they will roll it out to more stores. The garments will be tagged at the source (the point of manufacture). If these categories work well, Walmart will expand to other categories, but not all types of items. According to RFID Journal, Myron Burke, Walmart's director of store innovation, said, “We are focused on items that require a more complex purchasing decision by the customer. With denim, the customer has to make a decision based on brand, style, size and cut, in addition to price, of course. There are other areas of the store where we sell items with similar attributes. Tires are one. Some electronics items, such as TVs, are another."

Growth in Item-Level Tagging for Apparel

This announcement reinforces apparel as the place that item-level tagging is really taking hold. Marks & Spencer (a major U.K. retailer) is the clear leader in item-level tagging and is doing item-level RFID at over 100 of their stores, consuming nearly 200 million tags per year. American Apparel has rolled it out to many of their stores, though still only a fraction of all their stores. Many other retailers have been doing pilots and trials, including Old Navy, Bloomingdales, JCPenney, New Balance, Nine West (Jones Apparel), and many others.

Item-level tagging in apparel is proving to be a winner in terms of dramatically reduced cycle counting labor and duration, improved inventory accuracy, reduced shrinkage, anti-counterfeiting, and (the big one, resulting from better inventory accuracy) reduced out-of-stocks leading to increased sales. Walmart’s announcement can be seen as one more sign that item-level RFID for apparel is moving into mainstream adoption. As one of the recent signs of life in the RFID sector, item-level apparel is a key element driving higher volumes of tag consumption that RFID tag vendors have been desperately seeking ever since Walmart’s original RFID mandate in 2003.

Suppliers’ Costs

The media coverage has focused on privacy issues and, to some extent, on the cost to suppliers. The cost to suppliers is a valid concern, as pushback from suppliers was a major cause of Walmart’s inability to roll out previous RFID initiatives as broadly and rapidly as they had hoped. The WSJ and others reported that Walmart will be subsidizing the tag costs (but not readers). Learning from past efforts, Walmart’s Burke said, “We are sensitive to the impact this will have on suppliers. We will give them time to engage, review their processes and ultimately change their processes. We don't want to accelerate unnecessarily and put undue pressure on them."  

Tackling the Privacy Issue

The majority of articles about Walmart’s item level tagging initiative focused on the privacy issue, with titles like “Understanding Walmart’s Bugging of Underwear,” “Should You Worry About the Tags on Walmart Underwear,” and “Are Walmart’s Smart Tags an Invasion of Privacy.” I was slightly disappointed by the lack of coverage of the business benefits. Having said that, as a supporter of privacy rights, I’m glad that there are voices expressing concern. I’m not sure where RFID ranks on the list of privacy threats that we are facing today, compared to, say, intelligence agencies increasing scanning of our online and voice communications, and other types of surveillance by both government and non-government entities. Furthermore, in the digital era, people often cede their own privacy, largely because they don’t fully appreciate the public visibility of their various electronic communications, especially on social networks. People are putting their lives out for display on Twitter and Facebook.

Regarding RFID and privacy, the potential threat for abuse is real, even if sometimes overblown by privacy advocates. A good course of action for retailers that want to do item-level tagging is full transparency and disclosure, maintaining consumer anonymity by default, education, and providing the ability for consumers to opt-out. That means prominent notifications on what items are tagged, along with materials describing the program, rationale, and any benefits to the consumer. It means not tracking individual consumer’s behaviors without their consent/opt-in. It means not embedding the tags in the item, but making it part of a separate tag that is thrown out. And explaining to the customer how to properly dispose or, if necessary, disable the tags after purchase. If the customer knows it's as easy as cutting up the tag with scissors, or if you provide them with tags designed to be disabled, they should be more confident that their privacy is not being compromised.

Then let the public decide. Informed consumers can choose whether the privacy implications are important enough to forgo buying item-level tagged merchandise. With the right set of policies and an educated public, it should be possible to protect privacy and still get the benefits of retail item-level tagging.

To view other articles from this issue of the brief, click here.