Buyer Beware: Clothing You Buy May Inform On You

technology to shadow customers and record their every move

Management strategists are touting a miraculous new computer system that promises to revolutionize the way manufacturers and retailers track consumer goods from factory to cash register. But pranksters and profiteers could co-opt the technology to shadow customers and record their every move — a chilling prospect that business must anticipate and prevent.

The concern surrounds radio frequency identification, or RFID, a 21st-century digital marvel that involves a grain-sized microchip attached to a microscopic antenna that is "printed" on a clothing label, a can of tuna, a banana or virtually any other consumer item. The chip broadcasts a unique identifier to a radio-wave sensor that relays the transmission to a computer, which decodes and processes the data. And the manufacturer or retailer can see which goods of which size, style, color or weight have been assembled, packaged, sold or shipped.

A new believer in RFID technology is Italian clothier Benetton Group SpA, which will soon be sewing "smart" labels into every garment it sells in its high-end Sisley line. By learning exactly which item is coming from an offshore factory, is held at a warehouse or is displayed on this or that store shelf, Benetton will manage its supply chain more efficiently than ever. Orders from its 5,000 independently owned stores in 120 countries will be more accurate, and deliveries speedier. The company follows luxury clothing retailer Prada Group, another Italian firm, which has already introduced RFID inventory tags. And Procter & Gamble Co., Wal-Mart Stores Inc. and U.K.-based supermarket chain Tesco plc are all pursuing a smart-tag strategy for restocking, anti-theft and even anti-counterfeiting purposes.

Retailers predict that the breakthrough technology, which is widely used for tracking component parts through the manufacturing process at Dell Computer Corp., Toyota Motor Corp. and Ford Motor Co., may one day render bar codes obsolete. It's faster, more reliable and doesn't require that merchandise be unpacked and hand-checked.

It can also be used legitimately by business managers, who maintain detailed information about a loyal customer's buying habits to spur further sales when she makes a purchase. So, for example, when a salesperson sees that a customer bought a size 8 gray cashmere sweater last year, she can be offered the beautiful red one that just came in.

But the eerie possibility looms large that unauthorized marketers, unwelcome infomediaries or crooked opportunists might exploit RFID's snoop potential to the hilt. After all, chips can follow shoppers home, record their movements and transmit personal information about them to cyber-intruders who surreptitiously gather, and even share, dossiers on them.

Benetton has pledged to disable its chips at the point of sale. But other vendors haven't. And RFID can betray every factoid of our existence — what we wear, what we eat, what medicines we take, what we read, where we go and how we get there. Since any purchases we make may eventually be catalogued and tracked, each of our lives may soon be a perpetually open book, to be read by marketers, stalkers and hackers.

RFID tags belong in factories and stores everywhere, checking the routing of pallets and crates. But when smart tags are used on consumer goods, a business owes its customers a duty of disclosure. They're entitled to know if tags are embedded in the merchandise they're buying. And unless they want to themselves to the retailer by opting into a brand loyalty program, RFID tags should be automatically disabled at the checkout counter. The threat to privacy demands no less.

About the Author

Marc Lane is a business and tax attorney, a Master Registered Financial Planner, a Registered Financial Consultant, and a Certified Investment Specialist. Marc is the author of 30 books on business organization, taxation, and personal finance. His newest book, "Advising Entrepreneurs: Dynamic Strategies for Financial Growth" draws from his experience working with those who have successfully built their businesses. Marc is an Adjunct Professor of Law at Northwestern University and an Adjunct Professor of Business at the University of Illinois. His practice areas include Individual Taxation, Corporate Tax Planning, Business Tax Planning, Estate Planning, Investments, Retirement Planning,Elder Law, International Trade, Business Law, and Wills, Trusts and Estates. Additional articles, case studies, and a free email newsletter are available at http://www.marcjlane.com." target="_blank">www.marcjlane.com.

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