Is RFID Heyday Just Around the Corner?

September 21, 2010 Alex Woodie

A big purchase of radio frequency identification (RFID) equipment by Wal-Mart is emblematic of growing support for the highly touted technology, according to a new RFID report from ABI Research, which tracks the adoption of RFID and related technologies in the consumer goods supply chain and elsewhere.

ABI Research last week released a rosy RFID spending forecast that found spending on RFID will exceed $6 billion in 2011. Moreover, the group, which has released overly optimistic RFID spending forecasts in the past, found RFID spending will grow on average between about 22 percent and 29 percent per year for the five years from 2010 through 2014.

That’s a big change from the dire RFID forecast that ABI issued just six months ago, which predicted a compound annual growth rate (CAGR) of about 14 percent for total RFID spending between 2010 and 2014.

The market conditions appear to have changed from spring, when ABI was predicting total RFID spending of $5.35 billion. Now, the Oyster Bay, New York-based research group is saying total RFID spending will exceed $6 billion this year.

So what happened over the last six months to change the market’s mood? For starters, there is the rebound effect from the terrible, horrible year that was 2009. The farther we get from 2009, the better things seem to look.

Or as ABI’s practice director Michael Liard put it: “In response to the weakened economy, most RFID and RTLS [real time location service] value chain participants reported reductions to marketing expenditure, staff, and on-hand inventory levels beginning in late 2008 and continuing throughout 2009.”

Another factor providing a boost to RFID’s fortunes could be Wal-Mart’s suddenly revived plans for item-level RFID tagging. Says ABI in its RFID forecast:

“Emblematic of the industry’s generally cheerful outlook is Wal-Mart’s recent multi-billion unit passive UHF RFID apparel tag and 15,000-plus handheld reader RFP order and its expected U.S. rollout, which some observers believe has sparked renewed interest in RFID for item-level tracking.”

Wal-Mart’s first go-round with RFID, in which it mandated its suppliers (many of which are IBM i shops) did not end well. Many of its suppliers are still smarting from the forced march to buy and install the technology necessary to implement pallet-level RFID tagging.

The world’s largest retailer scaled back its RFID mandate before too much blood was spilled by suppliers. But now it looks like it’s ramping the RFID thing up again. Hopefully it applies the lessons learned from the first go-round.