Saddled with unrealistic expectations and persistent high costs, RFID technology has not taken off in the retail industry as expected and many providers must climb out of "a trough of disillusionment," according to David Hogan, the senior vice president and CIO of the National Retail Federation.

Echoing those comments, ABI Research today said it has reduced its 2007 market forecast for RFID software and services revenue by 15 percent, to $3.1 billion from $3.65 billion.

Those downbeat figures contrast with increasing evidence of what might be called "pre-RFID" wireless technology in retail chains such as fabric and crafts seller Jo-Ann Stores Inc., which operates some 820 stores in 47 states.

As part of a major company-wide technology upgrade, Jo-Ann Stores has contracted with Symbol Technologies Inc. (NYSE: SBL) to install new mobile computers and WiFi networks at 278 of its highest volume stores. The new infrastructure includes an upgrade from legacy applications based on the programming language DOS to Windows-based software provided by Creative Concepts Software.

The shift from DOS to Windows, a long-accomplished process in many industries, is a basic and critical step for the more widespread adoption of RFID that many observers still see as inevitable for the retail industry.

"In order to use the latest technology and to prepare themselves for newer applications, Jo-Ann Stores is upgrading from their current DOS level devices to the newer Windows devices," says Frank Riso, the senior director of Symbol's Retail Industry Solutions Group. "They will continue to be very competitive because they can now take advantage of more productive applications, improve their inventory status, and enhance the shopping experience of their customers."

"The Symbol deployment has been completed in approximately 275 of our stores," adds John O'Donnell, director of systems development for Jo-Ann Stores, "but moving forward, the implementation of the Symbol mobile computers is a key element of a major technology upgrade that will eventually impact all of our stores."

In addition to installing WiFi in most of its stores, the company plans to standardize the technology for its controllers and switches and add new registers, scanners, checkout keypads and more.

“Initially, expectations [for RFID in the retail field] were so high, it was not realistic,” Hogan, of the National Retail Foundation, told RFID Journal last week. The high prices of RFID labels and readers combined with the lack of a clear and powerful rationale for replacing existing bar-coding systems cooled enthusiasm for RFID among many retailers and suppliers. (See RFID Digs In.)

Today, the average cost of RFID labels remains at 20 to 25 cents, compared to a fraction of a cent to apply bar codes on packages. Most observers believe that the price of labels must halve before widespread adoption gets underway in retail chains. Eventually, the price of labels will drop to the five-cent range, most industry analysts believe.

At the moment, the high price of RFID tags limits them to expensive merchandise like electronic components and couture -- U.K. fashion chain Marks & Spencer, for example, is now tagging some costly men's suits.

Jo-Ann Stores, by contrast, sells distinctly inexpensive merchandise, including ribbons and fabric in bulk. The company is using Symbol MC3000 handheld computers at its fabric cutting-stands, for example, to enable employees to scan the cost-per-unit information and calculate the total price of fabric selections using purchase quantities and sizes, on the salesroom floor.

They system uses an original Jo-Ann Stores in-house software application that has been converted to run on Windows-based devices by Creative Concepts.

O'Donnell declines to share cost or ROI data for the deployment but calls the cost of the system "minimal" compared to the returns the company is already enjoying.

Such phased adoptions of more advanced retail systems will mark the transition to full RFID deployments and storewide WiFi coverage, says Michael Liard, RFID practice director at ABI.

"The goal," he says, "is seamless integration." And seamlessness, as any Jo-Ann Stores customer knows, takes time.

— Richard Martin, Senior Editor, Unstrung