Douglas A. McIntyre
July 23, 2010
Walmart (NYSE: WMT) plans to put radio chips into clothing including underwear. The big box retailer wants to know what and how much people buy so it can order enough inventory. Walmart will be, of course, accused of spying on its customers, but the question is whether there is any harm in it. The move should certainly improve the company’s supply chain management.The new system will allow Walmart to see right down to the size level which clothing in about to go out of stock. If it is effective, all the Walmart locations will probably use the technology.
“This ability to wave the wand and have a sense of all the products that are on the floor or in the back room in seconds is something that we feel can really transform our business ,” said Raul Vazquez, the executive in charge of Wal-Mart stores in the western U.S. told  The Wall Street Journal.
There is some concern that if the radio-powered tags are not taken off the clothing that the movements and behavior of customers can be tracked. That depends on how rigorous Walmart is in removing the tags at check-out. Human error is certainly an issue at a retailer as large as Walmart, but tracking a pair of jeans or underwear would seem to have limited use and it is hard to see how it would really cause privacy issues. Secret tracking of the clothing would be an PR disaster for Walmart which means it will likely be careful about whether the devices leave its stores.
The technology should increase inventory efficiency for Walmart and its competitors. It is hard to quantify what the cost saving for this are, but it will allow the retailers to order inventory “just in time” instead of having large amounts of clothing sitting in warehouses waiting to be shipped until retail workers decide which items are about to sell out.
The process would also have some benefit to customers. Those 34 long pants buyers will not have to drive 20 miles to find that their favorite jeans are out of stock.