Wal-Mart's RFID Project Promising for Retail, CPG Industries



  Free preview of Gartner research


Wal-Mart Stores has identified major stock management efficiencies using radio frequency identification (RFID) technology. Retailers and consumer packaged goods (CPG) manufacturers should continue to build RFID business cases.

News Analysis


On 14 October 2005, Wal-Mart announced the results of research showing that customers found items they wanted in stock more often in stores that use RFID technology with embedded electronic product codes (EPCs) than in stores that do not. Researchers at the University of Arkansas found a 16 percent drop in out-of-stock (OOS) merchandise at RFID-equipped stores due to better in-store stock management. OOS items with EPCs were replenished three times faster than comparable items using standard bar-code technology.


Gartner believes that Wal-Mart's analysis of its RFID project is the most vital work now being done in retail RFID. Interest has centered on RFID's potential to transform retail — if the technology works. Now, with Wal-Mart's systematic business-case analysis about what RFID can actually do, we believe the industry will move from fascination with RFID to justifying its intrinsic worth to the business.

Although the study appears robust, it raises some questions:

  • It's not clear how much OOS reduction occurred in control groups. Wal-Mart must show complete baseline data to clarify the exact impact of the reduction.

  • The study doesn't quantify the impact of OOS reduction. Therefore, the doubts that retailers and CPG manufacturers have always had about measuring reductions in OOS goods remain. This data sheds no new light on the financial impact of OOS reduction on the value network.

  • The study doesn't show whether OOS merchandise on tagged stock keeping units (SKUs) vs. nontagged SKUs in the same store was balanced with OOS levels of identical SKUs at non-RFID stores. For this reason, RFID-tagged products may be getting priority stocking because they show up on the stock clerk's pick (task) list more often. As more SKUs get RFID tags, they will no longer experience this differential.

If Wal-Mart addresses these issues, we expect manufacturer resistance to this RFID project to decrease substantially, though not to disappear completely.

Recommendations for large retailers and CPG manufacturers

  • Don't accelerate RFID adoption time frames based on this data. The study will advance RFID, but movement won't be dramatic and has already been built into most adoption time frames.

  • Acknowledge these advances but look for more details from Wal-Mart. There is no "green light" for RFID yet.

  • Continue building a business case for RFID, but don't focus exclusively on OOS reduction.

Analytical Source: Jeff Woods, Gartner Research

Recommended Reading and Related Research

(You may need to sign in or be a Gartner client to access the documents referenced in this First Take.)

© 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartners research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

Not a Gartner Client?

Want more research like this?
Learn the benefits of becoming a Gartner client.

Contact us online



Why Gartner

Gartner delivers the technology-related insight you need to make the right decisions, every day.

Find out more