Technology

Posted on Thu, Apr. 03, 2003

A device smaller than a grain of rice is sparking a battle between retailers, who see it as a better way to track merchandise, and privacy advocates who see it as a tool of Big Brother.

Called RFID, for radio frequency identification, the tiny chips are aimed at replacing the bar code as a way to track how many razors, tennis shoes and sweaters are sent to individual stores, and to know when racks and shelves need replenishing. They emit a signal that can be monitored up to about nine feet away, and they may eventually reduce the number of jobs at retailers as they replace human labor in tracking inventory.

Privacy advocates see a world where the chips can be used to track people's whereabouts. Opponents of the technology say it could lead to a scenario like the one in last year's movie "Minority Report," in which star Tom Cruise's presence in a store triggered reminders of products he'd recently purchased there.

"I think RFID is going to be the consumer privacy issue of the decade," said Katherine Albrecht, founder and director of Consumers Against Supermarket Privacy Invasion and Numbering.

The group initially formed to oppose supermarket loyalty cards, which they contend are a way for retailers to abuse knowledge of private buying habits, but in recent months the group has taken an increasingly high-profile stance on RFID technology.

The privacy group's most visible shot: It has called for a worldwide boycott of retailer Benetton, which recently announced it is considering using the chips in one of its clothing lines.

At the Charlotte Benetton store at SouthPark mall, customers and employees said on a recent afternoon that they hadn't heard about the boycott effort.

Charlotte customer Nancy Acitelli, who has shopped regularly at Benetton for years, said the idea of radio chips in her clothing would make her think twice about shopping there. "I think it would be horrible," she said.

In a telephone interview from the Benetton Group headquarters near Venice, Italy, spokesman Federico Sartor said the company is about a year away from deciding whether to include chips in clothing. The chips would be attached to the same tag as the garment's washing instructions and could be cut out by the consumer after purchase, Sartor noted. "We think the privacy issue can be easily managed," he said.

But the consumer-privacy group has vowed to maintain its call for a Benetton boycott until the company renounces any interest in the technology. The group is also targeting Gillette Co., which recently ordered a half-billion of the chips and is beginning to include them in the packaging of its Mach 3 razors. The privacy group also denounces Michelin, which is experimenting with the chips.

Charlotte-area retailers, like many across the country, say they're considering the use of RFID technology to track and manage inventories. Officials with discounter Family Dollar Stores Inc., based in Matthews, and Charlotte-based department store retailer Belk Inc. both said the technology can make their companies more efficient.

But two things are holding them back from using it. One is the cost of the chips, which is as much as $1 apiece and must get to a penny or less to be cost-efficient. Second is that the technology has not evolved to an industry standard, much the way it took several years for manufacturers to decide on the VHS vs. Beta format in VCRs.

The way the technology works: The chips contain a unique number capable of identifying an item's color, size and where it was manufactured. The chips have tiny antennas that activate whenever they're near a special reader. The readers can be installed on factory floors, loading docks and throughout stores to track merchandise.With the current system of bar codes, each carton of shirts or sodas must be run through a scanner in a distribution center. Once it reaches the store, employees must individually scan items on shelves to keep track of inventory.

With the radio chips, there's no scanning by hand -- computerized readers can automatically and instantly track the stock. And readers installed in shelves can automatically notify employees when stock on an item is low.

The result could be a need for fewer employees and a savings in labor costs. According to Forbes.com, a preliminary analysis by Procter & Gamble estimated that the company could save 4 cents on every dollar of merchandise when the chips reach a lower cost.

The technology is largely the work of the Auto-ID Center at the Massachusetts Institute of Technology. In response to privacy concerns, the center has issued a statement saying protecting personal privacy is an important mission of the center.

The statement notes that because of the small range of the radio chips, they couldn't be used to monitor individuals unless readers existed every nine feet or so.

Also, the chips are designed only to store information about products, not purchasers. But Albrecht of the privacy group notes that personal information about a purchaser can be linked with the chip in a store's computer system.

But others are skeptical about that scenario. Among them is Jack Trlica, who publishes a retail trade magazine in Charlotte. "I think that's really stretching the applications of the technology," he said. "I can understand people's concerns ... but I guess I have more faith in the industry to not violate people's privacy."

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