Last June, a small book retailer in the Netherlands took the RFID industry by surprise when it opened the world's first RFID-enabled bookstore. Each of the roughly 37,000 books stocked at Boekhandels Groep's store in Almere, Holland, carries an individual RFID tag.

And that's not the end of the story. Boekhandels Groep is scheduled to open a second "smart" store in Holland this fall. Eventually, the retailer hopes to expand item-level tagging to each of its 42 stores in the Netherlands. The company expects the solution will slash labor costs, reduce inventory reconciliation costs, improve stock control, enhance visibility into supply chain operations, and increase shopper "basket size." In addition, the task of inventorying a store's contents, which used to entail closing the store for an entire day, can now be completed in less than two hours.

"The key to our success is our ability to deliver an outstanding customer experience when a customer enters one of our stores," says Jan Vink, the IT director for Boekhandels Groep Nederland (BGN). "Equally important for us is providing the tools to our marketing teams that allow them to better merchandise books."

As for the consumer privacy issue,Vink says the store has a procedure in place to disable the RFID tag at the time of purchase, and that the store has not been targeted by privacy advocates. "The RFID tag is killed by the time the customer leaves the store," he says. "Our customers have been informed about what we are doing."

BGN spent between $500,000 and $600,000 (U.S.) to get the system up and running, but says the highly scalable solution will cost much less as additional shops come on line, since most of the hardware is already in place. The firm is also piloting automated customer checkout, but says that it won't consider running a virtual store without any employees because it doesn't want to take all of the human contact out of the shopping experience. Still, since it can operate its stores much more efficiently with RFID, BGN believes it will be able to avoid adding staff as it expands its store base.

Don't expect to see anything similar in the United States any time soon. U.S. retailers generally operate much larger stores than the Almere shop, which means they would have to spend considerably more than $600,000 to get RFID-ready.

Borders, for example, carries more than 200,000 titles as well as DVDs, CDs and gifts. "The complexity of our stores and our supply chain are probably different," says Steven McAlexander, vice president of logistics and chief logistics officer at Borders Group Inc. McAlexander says tag prices would need to drop below 10 cents apiece before his company could consider such a system.