What the world's largest retailer once did for bar coding, it may be about to do for radio frequency identification (RFID). In June, Wal-Mart announced that it would require its top 100 suppliers to use RFID tags on cases and pallets beginning in January 2005. The question is, could the retail giant's stamp of approval on the technology cause a ripple that will be felt across the supply chain?

"If anyone can, it would be a company with Wal-Mart's status," says David Krebs, a group director at Venture Development Corp. in Natick, Mass. "I don't think they can do it alone, but they do have enough clout to get suppliers to listen when they speak."

One thing that suppliers will need to hear is clear instructions on what they must do to fulfill those demands. "Wal-Mart has to be very specific about the sequence of events going toward compliance," Krebs says. "Some of these organizations only recently started investing in increasing their knowledge of RFID. The majority are still novices."

Although Wal-Mart has the influence to push RFID on its suppliers, the adoption of that technology still faces some barriers. Retail specialist Paula Rosenblum of AMR Research in Boston notes that most RFID readers don't work through metal or water, which could impede reading cases in the middle of a pallet. "If you have cases stacked on a pallet, you have to be able to read one case of canned peas to get to the next one," she says. "I'm sure there are workarounds, but it's not going to be the perfect universe."

Nor will Wal-Mart's endorsement hurry along the item-level use of RFID tags, believes Harry Forbes, senior analyst with ARC in Dedham, Mass. "Wal-Mart's mandate will certainly get its suppliers to execute development plans if they haven't already," he says. "They do not have the power to drive suppliers into tagging smaller levels of aggregations, though." Consumer reaction, moreover, may hold back item-level tagging. A recent plan to test item tagging in one of Wal-Mart's stores was scrapped when a consumer group raised questions about privacy issues.

But the real blockade is cost. Krebs says current tag prices are about 50 cents, depending on a number of issues. Potential users would like to see costs below 5 cents per tag; even so, the cost of tagging millions of individual items would be considerable.

How well Wal-Mart's suppliers answer the RFID call remains to be seen—as does the question of whether or not the company can bring RFID technology into the mainstream. But one thing is certain: The rest of the retail industry will be watching what happens very, very carefully.