RFID clearly is not interfering with the companys core business as Russell says: We are strong in retail point of sale; its the bulk of our revenue. Tags are still 25 cents today and bar codes are still free essentially and there are still tonnes of challenges.
He acknowledges that the challenges will be overcome eventually, but for the time being they exist. These challenges are not just the costs but include technical issues such as reading tags through fluids. And, tag prices will eventually get down to a penny, but he questions what the reliability is for something that costs so little. And let us remember that it is only now that the auto ID. market has the confidence itself to increase the length of warranties for bar code scannersi.e. very established technology. And then there is the standards issue, which seems to have been around forever and a day. He observes that some companies already claim patents and that everyone wants to have open solutions. He says that although Metrologic does not hold RFID patents, the company is reviewing this, and is also looking at niches where RFID will be useful and will approach its application in this way.
We are not going to just burn cash. Because nobody is making money [from RFID], says Russell. He cites a few examples including Samsys, which is losing money, and Alien which received a large cash injection from Datalogicthis indicates that the RFID companies need investments. The people who are making money, are the people who are making the tags, he says. The rest of the companies reportedly making money he says are software and services companies, as for readersthe sector where Metrologic would fitit is a different story. Nobody is making money out of readers, he says.
Metrologics entry point into the market will be through a partnership or by buying a relevant company. He says that the company receives many approaches from reader manufacturers. And it would make sense that a scanner company got involved in manufacturing or packaging the readers if only from a design point of view as it is difficult to believe that retailers would accept the prototype equipment we see today as final-finished product. These things are simply too ugly and visually look more like incidental props from a low-budget sci-fi TV series. The retail sector has access to so many superbly designed and beautifully engineered products these days it is hard to believe that it would accept jet-age styled technology.
And how about the logic of comparing RFID with what happened with bar coding? Russell says that this does not stack up because before bar code came along everyone was keying in data.
I think it will be tougher for RFID to get into retail point-of-sale because there is a solution already in place [bar code] and it works very well. And it is tough out there, says Russell. We are hammered constantly on reliability and performance. And we talk to large retailers who say if you save us one second at the checkout you save us a million dollars. I can see that by adding RFID in at the point of sale you could save money with a perfect solution where you push your cart through a reader and everything is scanned and read and then you debit your credit card and your done. That is the ultimate solution. But what if you dont read something that is in the cart? What is the loss there, is there shrinkage; what if you dont scan through five cartons of milk and you miss your very expensive side of beef.
Russell does believe that RFID does have its place in pallet, case and supply chain logistics. But he is doubtful about point of sale applications. Also, we must remember that the bar code market is also expanding and it is difficult to believe that such a well established, well supported technology segment can be eroded. Clearly, Metrologic is carefully considering the questions and looking for the answers before making its move.