My most recent work in RFID is geared towards preparing a webcast on the subject of retail supply chain initiatives. I've been digging through the data from our Benchmarking & Best Practices initiative, which conducted a survey of more than 100 retail, consumer products companies and other organizations.
What I've found substantiates recent news reports of a slowing of the EPC Gen 2 retail market. However, this contrasts sharply with the expansion of other, proprietary forms of RFID technology, such as systems to track oceanic shipping containers. The different experiences of these two markets present a classic illustration of the "network effect."
The Network Effect
The "network effect" is a term used by technologists to describe the way some devices grow more useful as more people use them. The classic example is the telephone. In the early days of telephone technology, nobody had them except for a few wealthy households. This limited the usefulness of the device, so urgent communications still relied on the telegram. As the telephone network expanded, behavior changed and the expectation rapidly developed that everyone would have a telephone. The phone pushed out the telegram and created a new assumption of normal behavior -- the assumption that anyone could be reached by voice in real-time.
More recently, e-mail has followed the same trajectory in going from a device used primarily by university researchers in the 1970s to ubiquitous public use in the 1990s. Therefore, the two key characteristics of most "network effect" technologies are: 1) they create a productivity-bonus tied to the social behavior of groups of people (i.e., the network users); and 2) they create a new expectation for the amount and quality of data available to the network users.
Current State Of Retail RFID
Wal-Mart has created their own network of RFID technology to achieve their own goals of reducing retail out-of-stock occurrences. They pursued an admirable strategy of promoting open standards (via cooperation with EPC) while building what could easily have been a closed Wal-Mart proprietary network. However, even with the market dominance of Wal-Mart, the expected explosion of the RFID technology market has not occurred.
As a case in point, consider this month's Baird Report. It describes the customers of RFID technology as still focused on pilot-programs and educating themselves. It goes on to summarize manufacturers as concentrating on new technical development (technology evolution, not production). In a parallel development this month, RFID reader manufacturer Sirit announced layoffs of 25% of their workforce in recognition of a weak market for retail RFID sales.
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