PICK 'N PAY TESTING RADIO-FREQUENCY TAG SCANNER

MATT NANNERY

PRETORIA, South Africa -- In what sounds like a "tomorrowland" exhibit at a World's Fair, a Pick 'n Pay hypermarket here recently demonstrated a technology that lets point-of-sale systems tally an order in one second without the shopper ever removing his purchases from the cart.

The system, called Supertag, relies on radio-frequency tags and simple, low-tech radio receivers wired to the registers. Clerks and shoppers on hand for two one-day, one-lane demonstrations recently were impressed.

"When our checkers saw it work, their eyes really fell out of their heads," said Ronnie Herzfeld, systems director at Claremont, South Africa-based Pick 'n Pay. "And consumers are fascinated by this gee-whiz kind of stuff."

American retailers are also intrigued by the technology.

"If this system works, it turns the whole front-end upside down," said Eric Verhoeven, director of market research at Mauldin, S.C.-based Bi-Lo. "This puts all the other self-scanning systems on the back burner. It could be a real time-saver."

Radio tallying figures to be more than a "gee-whiz" curiosity in South Africa. Pick 'n Pay's Herzfeld said any technology that could speed checkouts is taken seriously here because supermarkets typically close at 6 p.m. on weekdays and have very limited hours on weekends. The evening rush to buy groceries can be overwhelming.

"We have 70 lanes open on Fridays and Saturdays, and they are still 15 or 20 people deep," Herzfeld said. "The promise of improved throughput is a big spur. This could cut our lanes down to a quarter of what they are."

Were the system in actual use, the lanes would still likely be manned so the total could be paid immediately. The savings would be in man-hours, since a supermarket could do with substantially fewer lanes and cashiers, he explained.

The tags, roughly the size of a bar code, include a silicon chip and an antenna. They are programmed to transmit a number unique to a stockkeeping unit 25 times a second at a radius of up to four meters. Once that transmission is received, the receiver signals the tag to cease transmission. The process is repeated until the entire cart is "silenced" by the receiver.

Only three radio frequencies are required because of the system's ability to latch on to one signal at a time and then turn it off. Each tag acts as "a tiny mirror" that reflects radio waves instead of light.

Pretoria-based CSIR, which developed the technology, approached Pick 'n Pay for input two years ago, according to Herzfeld. CSIR already has garnered the backing of London's British Technology Group, which is responsible for all worldwide licensing of the magnetic resonance imaging technology that made brain scans a common procedure in U.S. hospitals.

Analysts, however, say the price-sensitive supermarket industry could prove less accepting of new technology than hospitals. The tags currently cost about 25 cents to produce, and if that cost doesn't drop, they say, the future of this futuristic alternative to scanning could be in doubt.

"This system reads 50 items a second at 99.9% accuracy -- you can't beat that," said Lloyd Semple, an analyst with Chicago-based Andersen Consulting. "It's just a matter of getting the cost of the transponder down."

CSIR hopes mass production could reduce the tag cost to 1.5 cents over the next several years, but even that massive a reduction might not be enough for the technology to prove viable for checkout applications. The receivers currently run about $600 per lane.

Bi-Lo's Verhoeven said the cost of the tags is about 1% of the average cost of a supermarket SKU. But he said that cost could be justified.

"As long as the system isn't cost-prohibitive, it could work," Verhoeven explained. "That penny and a half would have to be made up somewhere else, and that could be in labor savings at the checkout."

Andersen's Semple remains skeptical.

"That one-and-a-half-cent cost may still be a little too high in a grocery industry that operates on 1% margins," he said

Getting manufacturers to adopt the technology is another hurdle. Though the tags could be affixed by the supermarket, it would be simpler for the supplier to affix them. Ideally, the antennas would be "printed" on the inside of packaging using conductive ink.

"It won't be useful at checkout until every product in the store is tagged," Pick 'n Pay's Herzfeld said. He said, however, that the tags could improve supermarket efficiency at places other than the front end. And it is those spots where he said early applications are likely.

"If manufacturers could put that tag into use in warehousing and product tracking, the investment would be justified," he said.

Herzfeld said the tags would reduce labor and shrink in direct-store-delivery transactions. Fully 90% of goods delivered to South African supermarkets are delivered DSD, compared with less than 40% in the United States.

"The technology can be advantageous in DSD situations," he said. "Receivers could be placed at the gate of a supplier's vehicle and at the back door of our stores."

DSD applications are easier to bring on line early because they would involve one-on-one arrangements between supermarkets and individual manufacturers. Front-end applications would require tagging of all products sold in the store.

Herzfeld said the technology could speed the counting of DSD shipments and reduce shrink. The physical counting of products has been a thorn in the side of retailers who've moved to computerized verification and reconciliation of DSD accounts.

Radio tagging would also make it much easier for supermarkets to inventory their shelves, according to Peter Hawkes, a spokesman for British Technology. He said store managers could pass a portable receiver over shelves and inventory an entire store "in minutes."