Metro Store bows to pressure from anti-RFID activists

Consumer uneasiness about the use of RFID (radio frequency identification) chips has prompted yet another large retailer to scale back its ambitious plans for deploying the smart tag technology.

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Ahead of a planned demonstration on Saturday, Metro AG decided to drop the use of RFID tags in customer loyalty cards used at its Extra Future Store supermarket in Rheinberg, Germany, where the retail group is testing several new IT retail technologies, Metro company spokesman Albrecht von Truchsess said Monday.

Metro -- the fifth largest retailer in the world -- is the latest high-profile retailer to bow to pressure by privacy advocates over the use of RFID chips. Last year, Wal-Mart Stores Inc. and the Benetton Group SpA were among a group of high-profile retailers forced to tweak their ID tag strategies following complaints by activists, including the highly vocal Consumers Against Supermarket Privacy Invasion and Numbering (Caspian) in the U.S.

Caspian and several other privacy and civil liberties advocate groups, such as FoeBud e.V. and FITUG e.V., worry that RFID could create an Orwellian world where sales clerks or law enforcement officials could read a handbag's contents by simply waving an RFID chip reading device's wand.

Retailers, however, aren't the only ones to have caused a public outcry over privacy violations. Activists have also expressed concerns about the plans of the European Central Bank to embed RFID chips into the fibers of bank notes to thwart counterfeiters. They are worried that the chips could record when and where monetary transactions take place, destroying the anonymity that cash payments typically provide.

At the Rheinberg supermarket, Metro had embedded RFID chips in loyalty cards for the sole purpose of identifying the age of shoppers wanting to view DVD trailers, according to Truchsess. German law, he said, prevents anyone under the age of 16 from viewing certain movies, so stores like Metro need to have an identification system if they want to provide a viewing service.

The ID chip on the loyalty card, which shoppers use to activate the monitor for viewing DVD trailers, contains the customer number only, according to Truchsess. Data about the individual shopper, such as age, is stored in a database linked via wireless LAN technology to an RFID reader in the DVD section. "We wanted to test RFID technology for this application instead of bar codes, but because of protests by some groups, we have decided to use bar codes," he said.

None of the other areas where Metro is testing RFID technology, however, are affected by the company's decision to abandon RFID chips in loyalty cards, according to the spokesman. "We remain totally committed to using RFID in the area of supply chain management," he said. "A top priority is the use of this technology for tracking pallets and cases. And although we're still interested in testing the technology at the item level, this isn't a priority at the present."

Metro views RFID technology first and foremost as a way to manage the huge flow of merchandise in and out of stores more effectively, while at the same time reducing inventory losses and labor costs, according to Truchsess. Using this technology, employees can read an entire pallet of goods almost instantly with an RFID chip reading device, he said.

From November onward, Metro will require 100 key suppliers to affix smart tags to their pallets and transport packages, according to Truchsess.

Also, the retail giant will continue to conduct RFID tests at the item level as part of its "smart shelf" pilot system, he said. This system automatically informs staff to replenish select merchandise. RFID tags are attached to packages of razor blades from The Gillette Co., containers of Philadelphia cream cheese from Kraft Foods North America Inc. and plastic bottles of shampoo from Procter & Gamble Co. As customers remove the tagged products from the shelves, signals are transmitted via the wireless network to the merchandise management system, which tracks the number in stock and issues alerts to clerks carrying PDAs (personal digital assistants).

Deactivators located at the store exit currently enable shoppers to erase the product code stored in the RFID tag but not the chip's serial number, according to Truchsess. "We aim to be the first in the industry to provide an RFID deactivation systems that erases both the product code number and serial number," he said. "We plan to have this system ready to go by the middle of the year."

Metro, in Düsseldorf, Germany, owns and operates more than 2,300 wholesale stores, supermarkets, department stores and specialty retailers, such as consumer electronics stores, mainly in Germany and the rest of Europe.