Radio Frequency ID enters second phase

Radio Frequency Identification (RFID) received a strong boost during 2004, with most of the major global retail companies conducting trials of the wireless technology and reporting varying degrees of success, newly published market research has revealed.

A study by ABI Research found that retailers have begun to embrace RFID to a greater or lesser degree. However, many companies started only small-scale deployments, allocating much lower budgets to the effort than the $2m to $3m some analysts had predicted.

These companies will increase their investments this year to scale up and integrate RFID into their normal operations.

"We are seeing companies increase their RFID budgets three to five times this year compared to 2004," said Erik Michielsen, ABI Research's director of RFID research.

While many smaller RFID vendors were involved in these 2004 trials, feedback from end-users led ABI Research to conclude that, in this phase of RFID implementation, these companies will more often return to their traditional technology partners for larger and more integrated solutions.

"In 2004 we saw many end-users working with smaller RFID companies. But the big-name relationships didn't come, because they weren't necessary," said Michielsen.

"Now if companies are going to make a big investment in RFID tags and readers, they'll turn to the partners traditionally able to meet their needs, which can provide a global service. Many RFID companies cannot do that."

The analyst firm noted that RFID is not currently central to many of these traditional partners' businesses, including Avery Dennison, CCL, TI, Philips, LXE, Symbol, Zebra, and technology product and service providers such as Cisco, IBM, Microsoft, Oracle, SAP and Sun.

However, ABI expects that these firms will form the most significant RFID relationships with major retail players as the technology matures.

Any lack of cutting-edge knowledge will be more than offset in the minds of executives at companies like Johnson & Johnson, Campbell's Soup, Gillette, Kimberly-Clark, Kellogg's, Kraft, Nestlé Purina, Proctor & Gamble and Unilever by the comfort factor that large, familiar partners can provide, ABI Research predicts.