WAL-MART PULLS PLUG ON RFID STORE TEST

Matt Kelly

BROCKTON, Mass. -- RFID technology pioneered by the MIT Auto-ID Center suffered a public relations setback last week as a major field test was halted and the Auto-ID Center was accused of downplaying consumer privacy issues surrounding the technology.

Wal-Mart Stores, Bentonville, Ark., and Gillette, Boston, confirmed last week that they canceled a test of an anti-theft RFID application at a Wal-Mart here . That move came just days after the Auto-ID Center at MIT, Cambridge, Mass., which has developed the technology since 1999, was found to have dozens of documents on its Web site labeled "confidential" that discussed how to ease consumer worries about privacy.

Spokesmen for Wal-Mart and Gillette said they decided to cancel the store test in order to focus further study of RFID at the warehouse and pallet level; the Auto-ID Center said its documents were only mis-labeled "confidential." But a consumer advocacy group against RFID, seized on the events as evidence of public doubts regarding the technology.

The two events also come in the wake of Benetton's reversal earlier this year of plans to put RFID tags in clothing.

Auto-ID technology is built around special tags that include RF antennas and chips containing 96-bit identifiers called the EPC (electronic product code).

"Behind closed doors, I suppose this does sound like a good idea," said Katherine Albrecht, director of Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN). "But once consumers hear about it, they think 'Oh my gosh, this is ripe for abuse'."

Wal-Mart spokesman Tom Williams said the retailer is still "very high" on the potential of RFID and still plans to install RFID readers at all 103 of its distribution centers by 2005. While privacy is a legitimate concern that Wal-Mart does carefully consider, privacy advocates make too much of the issue, Williams said. "That distracts from what the real issue is, which is what the technology can do," he said.

Gillette and Wal-Mart had originally planned to fill a shelf at the Brockton Wal-Mart with Venus razors individually tagged with RFID chips. The shelf would have electronic monitors to measure consumer buying patterns and to detect theft -- as when someone grabs 10 razor packages at once.

Paul Fox, a Gillette spokesman, said the company will continue to work with Wal-Mart in studying RFID on pallets and similar large-volume containers. He said Gillette does take privacy concerns "very seriously" but "I think there's a degree of misunderstanding of what the technology does."

Analysts warned that misunderstanding could mean trouble in the future for RFID. "They're stumbling," said Paula Rosenblum, a retail analyst with AMR Research, Boston. "But they have a very interesting technology, with some profound implications."

Still, Rosenblum said, RFID has plenty of room to grow in the logistics and transportation industries long before it has a real effect on consumers, "and those are the more interesting applications anyway."