Wal-Mart cans 'smart-shelf' store trials

Wal-Mart has unexpectedly cancelled testing for an experimental 'smart-shelf' in its US stores that would have used the controversial radio frequency identification (RFID) product tracking tags.

The trial with Gillette was due to begin at a store in Boston last month but Wal-Mart spokesman Tom Williams said this has now been ditched.

He said: "The shelf was never completely installed. We didn't want it. Any materials that were there were removed. We never had products with chips in them."

RFID technology uses microchips to wirelessly transmit product serial numbers to a scanner without the need for human intervention and is seen as an eventual successor to bar-code inventory tracking systems, promising to cut distribution costs for manufacturers.

Wal-Mart's proposed smart-shelf system was designed to pick up data transmitted from microchips embedded in Gillette product packaging, alerting store managers via computer when stock is running low on the shelf or when items may have been stolen - two informative and powerful measurements in the retail business.

The trial would have been the most aggressive step yet by a retailer to push RFID from warehouses into stores. Backers of the technology eventually see billions of packaged goods tracked remotely using RFID sensors through in-store systems that might one day help prevent shoplifting and speed shoppers through automated checkout lines.

Those ambitious plans now are likely to take a backseat to proposals to upgrade warehouse operations with RFID technology, which will require fewer chips and less computational power.

Wal-Mart, the world's largest retail chain with 4,700 stores around the globe, said last month that it is urging its top 100 suppliers to attach RFID chips to cases and pallets of products that they ship to Wal-Mart warehouses.

A Gillette representative declined to comment on Wal-Mart's decision to pull the plug on the wired shelf but said the company remains focused on helping UK supermarket chain Tesco and German retail conglomerate Metro with similar trials in Europe.

The smart-shelf trial by Wal-Mart was viewed as a potentially aggressive endorsement of an in-store application because of the company's ability to influence its suppliers and push the adoption of new technologies - something it helped to do with bar-code scanning technology in the 1980s. The unexpected cancellation of the test is letting some of the steam out of the market, but that may be a good thing, according to one analyst.

Jeff Woods, analyst with research firm Gartner, said: "The RFID industry has been floundering in a sea of science projects, which is what these trials have been to date. This is one of the most overhyped technologies out there, and this can be viewed as a precursor to the bubble bursting for RFID."

Privacy advocates have aired concerns about the technology and whether retailers and manufacturers would be able to monitor products after consumers purchased them.

But in May, several RFID chip manufacturers pledged to incorporate a "kill switch" that would be disabled at checkouts into their chips in a move to relieve consumer fears of the technology.

Economics may have played a role in Wal-Mart's decision to shelve its in-store RFID test. RFID chips are still too expensive for wide-scale use with consumer merchandise, according to Gillette spokesman Paul Fox. While today's price of around 10 cents a chip is cheap enough to fuel initial trials the cost of the chips have to fall to a fraction of a penny if they are to become ubiquitous in stores, which could take up to 15 years, he said.

Alorie Gilbert and Richard Shim write for CNET News.com