ABI Research is another group that faced up to the disappointing year that 2006 was for retail mandates and supply chain uses of RFID. ABI Research makes the observation that some consumer goods manufacturers had trouble making the business case and justifying the cost of RFID.

The market for passive radio frequency identification (RFID) labels -- particularly UHF labels -- has not yet grown as stakeholders in the industry had hoped. According to a new study from ABI Research, the reason these core components of RFID tags have failed to achieve their expected potential is the relationship between prices, volumes, and the business case for RFID.

In a classic "vicious circle" dynamic, production costs for UHF labels (hence for Gen 2 passive labels) are still at levels tending to inhibit the high-volume deployments that would provide economies of scale. Research analyst Robert Foppiani says, "At current prices, many end-user companies in the retail/CPG supply chain struggle to determine a compelling business case for RFID. Those companies that have high value, high risk goods are often able to find a business case to justify the investment in RFID passive labels at current prices. But many members of the value chain are operating on thin margins, and most are unwilling to drop prices any further until there is much greater volume."

Likewise, ABI suggests that some vendors have underpriced their products, and we can expect to see some vendors drop out of the market or adjust their focus on niche segments:

A number of EPC Gen 2 RFID vendors are engaged in "loss-leader" activities, offering labels at unsustainable prices in an effort to gain market share. Eventually, some will drop out of the running, or will find niche markets where their products can find a role.

At a basic level, the ABI Research report agrees with the fundamental conclusion of all other commentators I have been following in this series. In essence, they all agree that the volumes for retail mandates did not reach the high expectations.

Read the ABI Research RFID press release.

Read the previous four RFID 2006 Year in Review posts containing other takes on 2006, also, to see similarities and differences:

RFID 2006 Year in Review - A Challenging Year

RFID 2006 Year in Review - Volumes Lower Than Anticipated

RFID 2006 Year in Review - Some Lost Their Shirts

RFID 2006 Year in Review - Retail Mandates Disappoint