Will Customers Buy into RFID?

March 1, 2004
We know that Wal-Mart and the DoD want radio frequency identification technology (RFID), and we know that suppliers to those huge supply chain partners

We know that Wal-Mart and the DoD want radio frequency identification technology (RFID), and we know that suppliers to those huge supply chain partners are trying to learn how to make it work for their own companies, but what do John and Jane Consumer want out of the technology? Do they even know anything about it?

A recent survey of 1,000 North American consumers conducted by Cap Gemini Ernst & Young provides a picture of consumers' awareness and perceptions of RFID, their willingness to purchase RFID-enabled products, and their views regarding the potential benefits of the technology, as well as their concerns and issues. While only one-quarter of consumers have heard of RFID, they are bullish on its potential but are looking for more information.

Here are highlights of the study:

Of those consumers who are familiar with RFID, perceptions are mixed: 42% have a favorable perception; 10% unfavorable; 48% don't know or have no opinion.

Consumers who have heard of RFID get their information from a variety of sources, primarily the media and word-of mouth.

Although about half of all consumers surveyed either use or have heard of existing RFID applications such as Mobil Speedpass or highway toll devices like E-ZPass, eight out of 10 were not aware that these applications use RFID technology.

The top 5 potential benefits from RFID that are most important to consumers are:

Faster recovery of stolen items

Improved car anti-theft capabilities

Consumer savings stemming from reduced product costs

Improved security of prescription drugs

Faster, more reliable product recalls

Obviously, it is in the vendor community's best interest to educate consumers on RFID if item-level applications are to become as accepted at carton and pallet level tagging. Material Handling Management interviewed Ed Westenberg, vice president, Cap Gemini Ernst & Young, to get more information on how manufacturers can win consumer buy-in for RFID. To learn more about this study, go to www.cgey.com and click on industries. -- Tom Andel, chief editor

MHM: If consumer education is essential for RFID to be accepted, what form should that education take? Direct mail, TV, magazines, what?

Westenberg: Companies should utilize whatever vehicles they typically find most effective in communicating with their customers. Those vehicles may be different for different companies. For instance, some businesses have successfully used consumer focus groups when introducing new products and technologies to consumers. This can be an effective way to gain a better understanding of which issues are most important to their own customers and how best to address those issues and educate their customers. It's important that the initial communication with consumers is educational -- rather than commercial -- in nature. Explain what the technology is, what the potential benefits are and how it's already being used in applications such as the Mobil Speedpass and express highway toll tags. Vehicles such as direct mail or company newsletters may be the best way to begin to educate consumers as they allow for more content to be conveyed, compared with a 30-second TV spot.

MHM: Do our readers in warehousing and distribution and supply chain management have a role in that education?

Westenberg: Our research showed that many of the benefits identified as important by consumers -- such as recovery of stolen items, security of prescription drugs and improved food safety/quality -- stem from supply chain applications that in some cases are already under way. Given that fact, it makes sense for companies in this area to work with their business partners in formulating the messages that are conveyed to consumers as part of the education effort.

MHM: Does industry itself have all the facts about RFID to present a fully factual education campaign to consumers?

Westenberg: Retailers across North America have various levels of education around RFID. From the slap and ship approach, that is doing what is only necessary to be compliant, to having a deep understanding of RFID as a tool to maximize supply chain visibility for the retailer. We have found that generally the retailers that are on the leading edge of RFID adoption are running pilot projects within their own supply chain; they are essentially playing around with the technology to get comfortable with it. To ensure that consumers are equally comfortable with RFID technology, retailers need to do a better job in educating their customers to the potential benefits of RFID.

MHM: Do we really know that consumers will see lower prices as a result or is that an educated guess at this point?

Westenberg: While no one can be absolutely certain that consumers will see lower prices as a result of RFID, Wal-Mart has made it clear to their suppliers that they are not to pass along any costs that could result in higher consumer prices. In fact, the supply chain improvements resulting from RFID are expected to take significant costs out of the system, which should translate into lower prices for consumers. Given the importance and concern that consumers in our survey placed on costs and prices, it will be important that businesses pass along those lower costs in order to get consumer buy in.

MHM: Do you expect that the vocal consumer privacy advocates who put a hold on Wal-Mart's item-level plans will fight this consumer education effort no matter what?

Westenberg: It was not only the consumer privacy advocates that led Wal-Mart to discount their item level tagging initiative. Economic factors also played an important role. In addition, consumer advocacy groups are not always representative of the population at large, which were the focus of our RFID study. With that said, consumer awareness of RFID is predictably low at this time, with just 23% of respondents saying they had heard of the technology. However, among those who are familiar with it, their perceptions are mixed, with nearly half saying they didn't know or had no opinion. This finding indicates that many consumers have not yet formed an opinion about RFID, making it particularly important for companies to educate their own customers about RFID and its potential benefits.

MHM: Is there an anti RFID effort that will be hard to fight?

Westenberg: Wal-Mart's mandate, thus far, extends to the case and pallet level with item level tagging 3-5 years off. In that time, RFID technology will only get better and more cost effective, and consumers and retailers alike will, invariably, become better educated and will understand that RFID tagging of items is not being institutionalized for personal information collection. New technology, the Internet for example, is initially met with resistance, but has over time become an integral and beneficial part of daily life. In addition, frequent shopper programs similarly raised concerns about privacy, yet most consumers today typically carry a number of these cards on their key chains.

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Material Handling Management magazine, in cooperation with Siemens Dematic and the Northeast Ohio WERCouncil, will sponsor a live panel discussion and webcast during NA 2004, the Material Handling Show and Forum, on the morning of March 31, 2004 at Cleveland's I-X Center. Presentations will answer your questions about:the state of standards, the latest technology developments, best practices and how you can quickly get into compliance shape

Our Panelsists include:

--Maurice Stewart, Deputy - DoD AIT Office, US Department of Defense

--Sue Hutchinson, Product Manager, AutoID, Inc. U.S., the subsidiary of the Uniform Code Council working on the commercialization of the electronic product code (EPC)

--Joe Dunlap, supply chain solutions specialist, Siemens Dematic MaterialHandling Automation

--Guillermo Gutierrez, manager of International Paper's Smart Packaging Group, and supplier to Wal-Mart

We'll compare and contrast the RFID approaches the Military and Wal-Mart are taking in implementing their supplier compliance mandates, but we'll devote a good chunk of time to answering your questions, so come prepared to participate!

To register for webinar participation, go to www.MHMonline.com/events/RFID.

To register to attend the event while in Cleveland, contact Tom Andel, Material Handling Management magazine, 216-931-9346 or e-mail him at [email protected].