Benetton feels privacy heat

When the super model Claudia Schiffer went shopping in a prototype al-electronic ‘Extra Future Store’ in Germany in April, lots of pictures were taken but no-one got snappy about the implications of the technology.

And when Italian fashion house Prada tagged every item in its New York Epicenter store, enabling it to electronically match details of buyers with the products they like, its wealthy customers said nothing at all.

But Benetton’s announcement in April that it plans to electronically tag and track some 15 million items throughout its supply chain, and in its 5,000 stores worldwide, seems to have been an embedded chip too far, both for privacy campaigners and for the image conscious fashion retailer. The biggest ever RFID (radio frequency identification) tagging implementation in the clothing industry has, depending on how the various statements, clarifications and press reports are read, either been postponed, or cancelled, or, according to the most recent statement, was never even definitely planned in the first place.

One thing is clear, however. The three suppliers involved, Philips Electronics (the Dutch manufacturer that makes the I-Code radio tagging systems), LAB ID (the Italian systems integrator), and Psion (supplier of handheld data collection devices), can probably leave the bulk of the multi-million euro order out of their sales forecasts for a year or two – and maybe more.

Benetton’s apparent worry is that consumers, acting rationally or not, will boycott the shops or damage the company’s chic image because of privacy concerns. And that, for a company that so heavily relies on a carefully cultivated brand and image, could create financial damage that far outweighs any benefits in terms of improved supply chain economics.

Although it was Philips, and not Benetton, that publicly announced the RFID plan back in March, Terry Phipps, Benetton’s consulting CIO, was happy to confirm in press interviews that the project was underway. He explained how initially carton-level tracking, and later item-level tagging, would enable items of Sisley clothing to be closely tracked throughout the supply chain. “This is a huge saving for our store owners. It makes the management of the shops more efficient.”

Even at that stage, however, privacy concerns were clearly an issue. Benetton said it would use the RFID system to tag cartons, not the items of clothing. Item-level tagging was only a possibility for later down the line, and would need a further investment. The point is underlined by the fact that Benetton uses franchises, and does not own its stores. So the store owners would have to make the investment, not Benetton.

And from the outset, Phipps, the CIO, stressed that there was no plan to track the garments after they have been sold. “Once a garment has been sold, it is not your property anymore.”

This seems an obvious point. However, some zealots in the RFID industry have suggested that if items can be tracked after purchase, then returning customers can immediately be identified as they re-enter the store – and that means they can be welcomed and made special offers. Some have even suggested that big personalised welcome messages be displayed on electronic screens as customers enter wearing their purchases.

Such issues have sparked a vigorous debate among privacy campaigners – especially at the Electronic Frontier Foundation, a US pressure group. In January, Gillette’s decision to buy half a billion tags sparked calls to boycott the company, with one campaigner saying he would “grow a beard” rather than buy from Gillette.

It is still not entirely clear what threats, if any, were made to Benetton. However, in late April the company issued a statement saying: “No microchips are present in more than 100 million garments produced and sold throughout the world under its brand names, including the Sisley brand.”

It went on to say that it was only studying the use of the technology, and that it had not even carried out any feasibility studies. Its studies, it emphasised, would take into account any “potential implications for individual privacy”.

Specialists in the RFID business say, however, that Benetton’s close working relationship (and family ties) with the systems integrator, LAB ID, and with Philips, suggest that the carton-level tracking plan, at least, will go ahead.

As if to show its irritation for having to publicly deal with the whole matter, that statement also added: “The company reserves the right to take the most appropriate decision to generate maximum value for its stakeholders and customers.”

Phipps told one supply chain web site, Frontline, that, “To do the kind of tracking that causes these concerns, our employees would have to follow people around at a distance of 30 centimetres. I think our customers would notice that.”

For privacy campaigners, this would not probably not be reassuring. Such systems, once installed and accepted, can easily be upgraded, they say.

The likelihood is that the system will go ahead, but more cautiously. But executives at Philips, as at Benetton and elsewhere, are now starting to think about how to handle the rumblings over privacy that are gradually building up around the use of RFID chips by retailers and others.

As AMR analyst John Fontanella advised, “This is a clear warning sign to other companies planning to introduce the use of tags into a consumer setting. More general education needs to be given on the technology and the benefits it will bring to consumers in their shopping experience.”

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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