Media Markt retail chain is set to become the first retail chain in Russia to introduce the smart store technology in its operations.

The technology has been there for quite some time now, but largely ignored by the industry because of the high costs and complexity of implementation.

It's based on radio frequency identification, or RFID, which helps to track any item throughout its life cycle – from the time it's produced and ready to be shipped to the moment when consumers leave the shop with their basket or trolley, enabling easy self-checkout. It’s also been argued that RFID has serious advantages over existing barcodes allowing products not to be in sight to be counted.

It has, however, raised privacy concerns with some saying corporations will now be able to spy on its buyers, but there is still no conclusive evidence that smart tags could be read far beyond the scanners’ reach inside the store.

So far, the technology has been employed for inventory purposes by libraries, medical institutions, museums, and some others. RFID tags are also part of our security ID badges at work.

Wal-Mart is widely considered to be the first in the retail industry to adopt the electronic product code, with studies suggesting the chain can save up to $8.4 billion per year and reduce Out-of-Stocks by 30 percent for products selling between 0.1 and 15 units a day.

The Media Markt will launch their pilot project in mid-November for accessories (keyboards, earphones, cases) and multimedia (music, game and video CDs, software, books) categories, Bjorn Graiff, IT and BPM director at Media Saturn Russia, told the Vedomosti daily.

"We picked the categories that are difficult to handle and have a high theft rate," he said.

12,000 SKUs, or stock-keeping units, will be tagged as part of the pioneer project, which is 30 percent of the total stock. RFID scanners will be installed in the warehouse, on trade floor, and at the exit so that the retailer can track the movement of their stock at any time and have accurate figures of the items on the shelves to reduce the out-of-stock time.

The introduction of RFID tags in one store has cost Media Markt 164,000 euros, but further expansion will bring down the costs to 100,000 euros per store.

X5 Retail Group, which pledged its commitment to the ‘stores of the future’ back in 2010, has worked with Russia's Rusnano and Sitronics companies on elaborating the project plans to catch up with Media Markt in mid-December.

"The cost of the RFID tags is the greatest barrier to their broad use. Once RFID in retail trade begins on a large scale, the cost of the tags will decline and RFID will be extended to other economic sectors. With project success, Russia will become another large market for RFID tags, and that will give Russian microelectronics producers the opportunity to enter an arena where sales are forecast at up to 50 billion tags per year,” Rusnano Deputy CEO Andrey Malyshev explains.

More info on this joint project can be found here.

A TV report about privacy concerns related with the RFID technology.