Walmart is mandating all home goods products carry radio frequency identification (RFID) tags by September, and projects it will extend the mandate to more categories over time, in a major expansion of a tracking technology that appeared all but dead only a few years ago.

The full-on embrace of RFID by the biggest U.S. retailer brings large new swaths of product categories into the so-called “internet of things.” That could eventually spawn new marketing, analytics and research capabilities—particularly in studying in-store behavior or enabling touchless checkouts.

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But for now the move is aimed at improving Walmart’s supply-chain efficiency by making it easier to track items everywhere they go in stores, which has become a much greater concern as the retailer’s curbside pickup and Walmart+ delivery businesses grow. Customers of either service can attest that it’s common for Walmart’s app or website to show items in stock and ready for delivery from stores when they’re really not, which leads to last-minute substitutions and sometimes causes cancellations or forces the retailer to make good on free deliveries that fall below order minimums.

Post-hype relevance

RFID was a heavily hyped technology early in the millennium, since overshadowed by everything from smartphones to QR codes. Walmart and suppliers including Procter & Gamble Co. once strongly pushed RFID pilot projects as a next-generation way to track inventory, reduce theft and cut costs. But momentum fizzled under the weight of high costs of chip readers to track them.

But in recent years, the cost of RFID chips has declined 80% to about 4 cents, according to a recent report by McKinsey & Co. And privacy concerns cited years ago by critics—including the theoretical threat of people being tracked by RFID chips on their products—have faded relative to the more immediate reality of people routinely being tracked via smartphones, cookies and other digital identifiers.

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In a recent memo to suppliers, Walmart said it’s been implementing product-level RFID tags on apparel over the past year and now is expanding that to home goods, including kitchen and dining products, home décor, bath and shower, bedding, furniture, and storage and organization products. The memo also suggests more categories will have similar mandates over time.

All Walmart home goods products must be RFID tagged by Sept 2. Walmart will hold a training webinar next month in partnership with the Auburn University RFID Lab and GS1 US, the nonprofit which oversees UPC codes and similar industry standards, to cover technical requirements.

“Over the last year, we have successfully implemented RFID technology in our apparel departments and have seen dramatic results,” the memo said. “We have improved on hand accuracy, which has grown online order fulfillment. These dramatic improvements have had major impacts on sell through and customer satisfaction,” the memo said.

'Greater sales opportunities'

“With the success of this initiative, Walmart plans to continue expanding this program to other departments and categories. RFID will help improve inventory accuracy, which leads to a better in-store shopping experience for customers, more online and pick-up in-store capabilities and greater sales opportunities,” the memo continued.

Walmart’s move could help push the U.S. toward a tipping point of near-universal adoption, said Brendan Witcher, VP and principal analyst at Forrester. Other retailers, including Macy’s, have been moving toward product-level RFID, particularly in apparel. But Walmart’s signaled intention to move the technology into a broader array of categories could help create the infrastructure that eventually justifies chipping almost everything.

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“Manufacturers generally feel that when they reach about 40% of their items requiring RFID it just makes sense financially to put them on everything,” Witcher said. “Walmart’s going to be a big contributor to getting to that 40%.”

What that means for marketing remains unclear, but having RFID chips on nearly every product, similar to what are already in many credit cards or music festival wristbands to track data, opens intriguing possibilities.

A Walmart spokeswoman made clear the retailer is only planning to use RFID for inventory and supply-chain management at this point. But speculation about the technology, particularly during its early hype-laden days more than a decade ago, covered a wide array of widespread marketing applications.

Future marketing potential

Data on RFID chips can be re-writeable. And one speculated use is in running shoes, where the chips might allow brands to track when and how much they’re used, which could in turn trigger promotional offers or alerts for users when it’s likely time to re-order. Similar in-home monitoring, alerts and promotional tie-ins could ultimately be applied to promote re-orders of packaged goods ranging from orange juice to razor blades. Or, given that Walmart is extending RFID into home organization, an RFID reader could help consumers find and match often-lost storage lids to their matching bowls.

There are significant obstacles to such applications becoming widespread, Witcher said. RFID readers at this point are four-figure investments that would be prohibitive for in-home use. And it’s not clear the reader technology can be readily incorporated into apps on mobile phones. Apps can track near field communication, or NFC, chips. But those aren’t the same as the RFID chips Walmart will be using, which can have a wider reading range.

The other drawback to home use of RFID is the privacy concern. “The whole issue of marketing in the home has a lot of landmines,” Witcher said.

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It’s more likely RFID would be used for marketing in stores, which already will have to be outfitted with readers for the technology to work, he said. The technology could help make in-store shopping more like online shopping in many ways. For example, retailers could track which items people put in carts together. Or, if someone had just picked up a phone without picking up a matching charger, they could be prompted to do so either by a smart cart or in-store display. RFID could also make it easier for retailers to research how people move through stores and how picking up one item, or being exposed to an in-store offer, influences the rest of the shopping trip.

Again treading on privacy concerns and possibly requiring legal permissions, it’s possible for RFID readers to identify shoppers in stores based on their chipped credit or other ID cards and match their identities to items in their carts before they check out. Similarly, the technology can enable automated touchless checkout by matching a shopper’s identity and payment with items they’re taking from the store as they leave.

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And, particularly combined with video surveillance, RFID could make it far easier to document when people leave stores with things they didn’t pay for.

For suppliers of Walmart, better RFID-enabled real-time information about what’s in each store and on each shelf could help eliminate out of stocks or send alerts for store employees or suppliers’ own merchandisers to move products from back rooms to shelves.

And besides simply making curbside pickup and delivery ordering more reliable, Witcher said the potential RFID brings for more efficient inventory management and checkout could free capital to fund other marketing initiatives or just lower prices.