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Wal-Mart: Radio-Frequency Tags Boost Sales

Wal-Mart Stores Inc. said its fast-growing use of radio-transmitting inventory tags has helped boost sales by keeping shelves better stocked with key merchandise.

The use of RFID, or radio-frequency identification tags (search), has reduced out-of-stock merchandise by 16 percent at the company's stores that have begun to use the technology over the past 12 months, Linda Dillman (search), Wal-Mart's chief information officer, said at the company's annual analyst meeting Wednesday.

Wal-Mart has been able to restock RFID-tagged items three times as fast as non-tagged items, she said.

The world's largest retailer began its rollout of the technology with a handful of stores and distribution centers in Texas last year, focusing on tagging cases and pallets of higher-priced and faster-moving merchandise. As of Oct. 31, Wal-Mart expects that 500 stores will be using RFID tags, Dillman said.

Earlier this year, a formatting standard was agreed upon for an electronic product code (search), or EPC, to replace the old UPC bar code (search), clearing the way for mass participation by manufacturers of all kinds, Dillman said.

Suppliers also have become more enthusiastic about the tags as their price has dropped, now selling for between 10 and 30 cents on average, compared with 20 to 50 cents a year earlier.

"We expect more suppliers to tag more items as tag prices fall," Dillman said.

The Bentonville, Ark., retailer now has more than 130 major suppliers shipping merchandise to its distribution centers with RFID tags attached, with about 5.4 million tags received at Wal-Mart distribution centers during the past year.

The company expects to add another 200 suppliers to the list by January, with about 1,000 stores and warehouses ready to receive their tagged goods, Dillman said.

Wal-Mart also plans to ramp up an RFID-based system at its Sam's Clubs next year that will help it better locate pallets, she said. The company plans to bolster the RFID program with yet another group of suppliers, which will number about 300, in January 2007, Dillman said.

The company continues to expand its use of the technology despite pockets of resistance from consumer-privacy groups. On Saturday, a group organized by CASPIAN, or Consumers Against Supermarket Privacy Invasion and Numbering, picketed a Wal-Mart supercenter in Dallas, protesting Wal-Mart's tagging of printers and document scanners from Hewlett-Packard Co. being sold at the store.

"This will make objects — and the people wearing and carrying them — remotely trackable," said Katherine Albrecht, a spokeswoman for the consumer group. "We have rock-solid evidence that they are already devising ways to exploit that potential."

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