German supermarket uses wireless, RFID to run business.
Imagine a transponder tagged to a bottle of shampoo tracking its whereabouts in a supermarket, or a “smart” shelf informing staff to replenish the selection of cream cheese, or a mini-PC attached to the shopping cart, letting shoppers scan their own purchases, call up bargains and navigate the store.
No, these gizmos aren’t science fiction; they’re cutting-edge IT retailing systems that are being tested in a supermarket in Rheinberg, Germany. The store is serving as a retail laboratory for its owner, Metro, with about 40 hardware and software partners from around the globe. And it’s raising some eyebrows in the industry.
The collection of applications in Metro’s Future Store initiative aims to boost store efficiency, through such improvements as enabling targeted marketing and ending long queues.
Not everything in the Future Store will find its way into the market. After all, this an experimental store, but it’s one that involves real customers using real technology in real time. And it’s run by the fifth-largest retailer in the world, with 2,300 stores in 26 countries and sales of $54 billion in 2002.
Even hardened, retail technology executives acknowledge that the prospect of testing and refining multiple technologies in a retail setting is enough to make their hearts pound. “This is a unique IT retailing experiment, and we’re glad to be a part of it,” says Dimitris Nikolatas, product manager of Cisco.Ciscois providing a lot of the hardwired and wireless IP infrastructure, including a content delivery platform that broadcasts audio and video content and data to any number of delivery points.
Of all the technologies being tested, two stand out: wireless and radio frequency ID (RFID). The two are linked to just about every new technical gadget being tested in the store.
The 4,000-square-foot building is covered by a wireless LAN (WLAN), based on the802.11bstandard. The network links all mobile devices, such as personal shopping assistants (PSA) and PDAs, and some stationary devices, such as electronic shelf labels (ESL), checkout points and flatscreen displays for product promotion.
The PSA is, essentially, a mini-computer attached to the shopping cart and linked directly to the WLAN. Manufactured by Wincor Nixdorf International, the PC includes a touchscreen with an integrated scanner that lets shoppers scan their purchases for quick payment at the checkout point. Purchase data is transmitted over the WLAN to the checkout terminal. Shoppers give the clerk their reference number assigned by the PSA and pay without emptying the shopping carts.
Store employees are equipped with PDAs. The Future Store is testing HP’s iPaq 5450 and 3970 models and Symbol Technologies’ PDT-8100. The handheld devices run Windows Pocket PC operating system.
Linked to the WLAN, the PDAs let employees check inventory or reorder goods by accessing Metro’s merchandise management system and from anywhere in the store. The next phase of development calls for the PDAs to receive “soft phone” features, letting staff make calls in addition to sending messages or downloading information, according to Nikolatas. The service will be based on voice-over-IP technology, as are all other hardwired and wireless in-store communication systems.
While ESL technology isn’t entirely new (the technology has been around for almost a decade), its prohibitive cost had prevented widespread use.
Almost all the products in the Future Store have electronic labels. These labels receive price information directly from the merchandise management system via the radio network using base stations in the ceiling. Price information is transmitted simultaneously to the shelf and checkout point to avoid price differences because of erroneous labeling. The price labels are equipped with an easy-to-read digital LCD, battery and radio receiver.
One of the most talked-about technical novelties of the Future Store is RFID. It’s a technology that is high on the priority list of Metro and other big European retailers, such as Tesco in the U.K. and Carrefour in France, not to mention the European Central Bank, which is struggling to stem the flood of counterfeited euros.
But RFID also has been deeply criticized by privacy advocates, such as Consumers Against Supermarket Privacy Invasion and Numbering. The group worries that such technology could create an Orwellian world where sales clerks or law enforcement officials could read the contents of a handbag with the wave of a wand.Consumer concerns about RFID have prompted Wal-Mart to scale backambitious plans for deploying the smart-tag technology.
Privacy issues aside, RFID systems have come a long way from their origins in World War II when the U.S. government used transponders to distinguish friendly aircraft from enemy aircraft. Today they’re being used, albeit in limited numbers because of the cost of manufacturing the chips, for delivering packages, handling luggage and monitoring highway tolls.
A typical RFID tag contains a computer chip and an antenna. Unlike bar codes, which need to be scanned manually and read individually, RFID tags don’t require line-of-sight reading. So it’s possible to read hundreds of tags a second.
Moreover, when stimulated by a radio signal, the chip transmits a unique code to identify the product to which the tag is fixed. This unique identifier carries not only the product’s universal product code as bar codes currently do, but also gives that item its own unique identification. For example, instead of a bar code saying: “This is a box of Brand X detergent,” the RFID chip says: “This is box No. 12345 of Brand X.”
If the difference is subtle, the potential is huge. For instance, a retailer quickly could trace and remove a bad lot of canned goods.
Metro is using two types of RFID technology in the store: one operates at the 13.65-MHz high-frequency range; the other uses the 900-MHz to 1000-MHz UHF band. The high-frequency RFID technology is used to track individually tagged items within a 5-foot range inside the store. The UHF version tracks pallets and boxes, and can read at a distance of up to 22 feet.
A new system being tested in the Future Store involving RFID tags is the “smart shelf.” Tagged on shelves with embedded readers that communicate with the merchandise management system via the WLAN. The shelves recognize when tagged goods are removed or replaced, and report the movement of goods to the system. A big advantage is that the shelves trigger requests for fresh supplies.
Another RFID application under testing is delivery. Pallets and boxes are tagged at Metro’s distribution center in Essen, Germany, and recorded as they pass through a gate in the Future Store. The system is designed to provide real-time data on warehouse shipments and inventory.
A huge challenge, says Gerd Wolfram, project manager of the Future Store, is managing the data generated from the movement of tagged products. SAP is testing an RFID inventory control system aimed at connecting every piece of RFID technology to the company. Intel, together with SAP, is a principal technology partner behind the Metro pilot, provides the technology to crunch the these numbers.
If RFID tags replace bar codes, Metro foresees PSAs and checkout counters being equipped with tag readers. Readers integrated in the PSAs automatically would register what shoppers have in their carts.
Of the Future Store’s nearly 40,000 products, only around 30 carry individual tags, including razor blades from Gillette, cheese from Kraft Foods and shampoo from Procter & Gamble.
The day when RFID tags replaces bar codes, however, could be several years away, Wolfram says. The price of the chip, he says, is a big factor. “The current chips cost between 30 cents and 60 cents,” he says. “For us to deploy RFID chips economically, the price will have to come down to around 2 cents.”
If the price of manufacturing RFID chips is a concern now, the issue of privacy could prove a potential drawback. In April, fashion retailer Benetton Group postponed plans to roll out RFID tags in one of its clothing outlets after protests from privacy groups. Philips has responded to these growing fears by implementing a new feature into its tags that disables them at the point of sale. Gillette also says its use of RFID tags is to improve supply-chain management efficiency, and says its focus is on tracking pallets and cases, not customers.
Metro is aware of the privacy concerns linked to RFID, Wolfram says, and will do what is necessary to ensure that consumers’ privacy rights aren’t violated.
Blau is a correspondent with the IDG News Service’s bureau in Düsseldorf, Germany.
Copyright © 2003 IDG Communications, Inc.