Category: marketing

The prospect of affordable tags has retailers drooling. If every item in a shop were tagged, an apparel retailer, say, could both improve customer service and combat top-line losses, which are typically 5 to 15 percent of sales. RFID technology could be used to locate mislaid products, to deter theft, and even to offer customers personalized sales pitches through displays mounted in dressing rooms. Ultimately, tags and readers could replace bar codes and checkout labor altogether.

Affordable RFID tags also have enormous implications for the supply chain: since all EPCs are unique, products tagged in factories could be tracked as they moved along the supply chain. The resulting visibility of inventory levels and flows of raw materials could result in large savings. We estimate that a retailer or consumer goods maker using RFID could cut total warehouse labor costs by nearly 3 percent, chiefly through more efficient receiving, shipping, and exception handling. More promising still are the potential effects of RFID on vendor-managed inventory systems. By exchanging the information gleaned from RFID readers over the Internet, a consumer goods maker could manage its own stock replenishment for key customers more efficiently, saving both parties 20 to 40 percent or more in inventory and out-of-stock costs.

But retailers and suppliers alike should cast a gimlet eye over the current state of the technology. The main value of RFID is that it eliminates the need to handle items individually—by allowing, say, distribution centers to receive mixed pallets of goods automatically. But if the tags themselves are not robust, reliable, and tamperproof, the savings evaporate. Tellingly, an October 2002 pilot by the Auto-ID Center found that RFID-tagged pallets failed 3 percent of the time even when double-tagged; only 78 percent of the individually tagged pallets were read accurately.

Companies should avoid fixating on the price of a tag lest they lose sight of the costly upgrades in enterprise-resource-planning (ERP) software that RFID technology requires. For relatively easy tasks, such as measuring inventory levels, simple add-ons might suffice. But tackling more complex applications, including tracking individual items throughout the supply chain, would require ERP upgrades that might cost tens or hundreds of millions of dollars for a large company. Server and network infrastructure would also need fortifying to handle the thousands of additional data transactions per product.

So the watchword, for both retailers and manufacturers of consumer products, is caution. For most retailers, long-term investments in RFID technology are still risky. They should be undertaken only by the small number of industry-dominating companies, such as Wal-Mart, that have the clout to influence suppliers as well as the deep pockets to weather the ups and downs inherent in using a nascent, albeit promising, technology. Wal-Mart’s recent announcements indicate that it plans to proceed slowly, concentrating first on pallet- and case-level tagging to reduce supply-chain-handling and inventory costs. [The McKinsey Quarterly]

The U.S. cable operator says it plans to double the downloading capability of its high-speed Internet service by the end of this year to distinguish its product from competitors. [CNET News.com – Communications]

In a potentially significant development, VeriSign Inc. is privately testing a service that could let it direct large portions of trash traffic to Web sites of its choosing, according to people familiar with the matter.

The Mountain View, Calif., company operates the largest Internet “registry” — a master directory with listings that enable Web users and e-mails to reach Internet addresses ending in the popular “.com” and “.net” suffixes. When it makes the service public, which could occur in the coming weeks, VeriSign will send users who flub an address — say by typing bestby.com into their browsers instead of bestbuy.com — to another Web site, most likely an Internet search engine. In effect, VeriSign will be capturing error-prone users before the software from companies like Microsoft and AOL can nab them, potentially shifting significant sums of traffic away those sites.

VeriSign could, in turn, make money for sending the traffic to another site. “Like many registries, we’re continually exploring how to enhance the user experience,” a VeriSign spokesman says, and that, he adds, includes testing the redirection of users who make errors in Web navigation. (For technical reasons, VeriSign won’t be able to divert users unless the Web addresses they mistype include a “.com” or “.net” on the end.)

It’s unclear how much money can be made from redirection or how much trash traffic there is, but some industry executives think the numbers are huge. Afilias Ltd., an Irish company that runs the registry for Internet addresses ending in “.info,” says 10% to 12% of the roughly one billion look-ups a day it conducts in its master directory are for nonexistent addresses. Ram Mohan, chief technology officer of Afilias, calls efforts like VeriSign’s “game-changing moves,” but says Afilias has no current plans to exploit trash traffic. [WSJ.com]

Advertisers are poised to waste $5.5 billion in television ad expenditures in 2007 if television networks don’t adapt to the rising penetration of the personal video recorder, with its ability to zap commercials. [TelevisionWeek ]

Who has the biggest index? The search engine size wars have erupted again to dispute this — and the new Google supplemental index is complicating matters. [Search Engine Watch]

Harvard Professor John Deighton asserts that consumers should capitalize on the value of their personal information and get something in return. [CNET News.com]

MCI on Tuesday signed an agreement with broadband service company Covad Communications to provide high-speed Internet services to its subscribers.

The deal will enable the carrier to extend its service footprint and allow it to bundle its local and long-distance voice services with Covad’s Internet services. [MCI bundles broadband Net with voice | CNET News.com]

In November, cell phone customers will be able to keep their numbers if they change wireless carriers. Now, the Federal Communications Commission is considering allowing customers to keep the same number if they move from a traditional phone service to wireless. [Mercury News
]

The 18-year-old James, whose storied high-school career generated multiple national television appearances and landed him on the cover of Sports Illustrated, signed a six-year endorsement deal with Coca-Cola Co. (KO.N) brands Sprite and Powerade, the company said on Thursday.

Financial terms of the deal were not disclosed. James has not yet played a minute of professional basketball. [NBA’s LeBron James Inks Coke Brands Deal]

Been wondering or looking for a more clear understanding? The Washington Post “investigates…”washingtonpost.com