How many hidden industries like the pallets one are out there, waiting for software (or hardware) aid or disruption? I mean, 3.5 billion in pallet-related revenues :) , and millions in losses due to lack of tracking... is RFID really the best solution?
I used to run a 10,000 sqft logistics facility (really tiny in that world) and we kept a stock of about 20 pallets. I seem to remember the wooden ones costing $2-$5 used and the plastic ones less than $50 new. The most expensive pallets I could find from U-Line are $100 or so. http://www.uline.com/BL_8204/Rackable-Pallets
Figure that adding an armored place to put a lo-jack would cost $5-$10 (gotta protect it) and that the actual lo-jack would cost at least $50. It would need to be metal encased with a way to sneak an antenna out, have a "lifetime" battery (lithium-thionyl-chloride, not cheap http://www.all-battery.com/lithiumprimarybatteries.aspx) and the whole thing would have to be molded in to the pallet lest someone get clever and remove them cheaply. The batteries MUST be an integral part of the lo-jack so that someone couldn't just remove the batteries and neuter the device.
Then the data plan to keep it connected up to the world via the internet would cost at least a buck or two every month (in HUGE bulk purchases, individually it's something like $10/mo/device). Worse is that if someone puts them inside a metal building or metal shipping container or metal truck they're going to have a hell of a time getting a GPS fix and/or communicating with the cellular network.
So now that you've done all this your $40 to $100 (max) pallet now costs at least $50 and perhaps even $100 more PLUS it costs you something monthly whether people are renting it or not. What do you get to charge for this? From when I can tell, about $5 per trip. http://www.palletforum.com/tm.asp?m=26458 That's on a nominal $20 pallet cost although they may cost more now, the forum post is 2 years old.
I can't see how building a lo-jack into a pallet is going to be a compelling value proposition given all the limitations.
A GPS car tracker costs a lot less than what you're quoting, when purchased in bulk from China (I don't know about reliability figures though :) ). I think it was in the U$ 15 range for the entire thing. Certainly not the armored thing you're describing, which sounds pretty expensive.
And the cell phone data plan could be negotiated way down (I think your estimate is correct, about U$ 1 or 2 per month). What I pay here as a consumer in Uruguay is less than U$ 5/month for 384 megabytes. Getting a fix is definitely a problem, but you can track it until it gets inside wherever it lost the signal (hopefully it's a warehouse).
That said, there's a lot of low-hanging fruit to start putting GPS trackers on pallets :) (I still don't see them being ubiquitous with pets and other higher-value items to track).
If it wasn't feasible for cars (MUCH more expensive than pallets), then I agree with your estimate that it won't happen soon, but it's going to be possible sometime in the near future (and somebody is going to be ready for that, and make a killing).
Worse is that even if the ENTIRE lo-jack is built into a single monolithic chip (which will take millions to engineer) you still have to power the thing. The transistors might be getting exponentially cheaper but the batteries aren't. And you need quite a bit of batteries to make this happen.
If you can get a fix to a warehouse you're OK but once the pallets go into an intermodal shipping container and stacked, you're SOL. Shipping container bottoms are made out of wood, not steel so sitting up on a truck they can still get signals. But once they're stacked you're in a world of hurt. Sure the containers might pop back onto the grid once they get unstacked but that might happen once they're out of the country, potentially to countries where you don't have subsidiaries who can go get them back.
So you have two fixed costs: batteries and data/cellular. You have to buy these and you have to pay for them on an ongoing basis. I think what would end up happening is that your battery and data (and plastic recycling and lo-jack refurbishing) costs will end up eating whatever profits you might manage to eke out such that it's not that great of a business to be in.
The palettes are cheap enough that they actually don't need the exact location of each of them. All they need is the ability to track pallets at certain points in the supply chain, which will give them a good indication of global pallet movements.
RFID tag readers are also quite cheap so you could potentially fit a lot of them at relatively small expense. They could be embedded into the flooring of trucks, the entrances of warehouses and the arms of forklifts.
Without that free enforcement, these $5-$50 items would not be worth fighting over.
I don't believe that police protection should be a fee-for-service business, but are there no checks and balances on the use of public services for private gain?
In your hypothetical example, I believe you are referring to a physical storefront where the primary revenue generating activity is to sell merchandise.
If your hypothetical shopkeeper had a shop that made more money from forcing shoplifters to pay a fine for scaling, then... perhaps. I don't think your hypothetical shop exists, so it's tough for me to answer.
First, the RF properties of inserting RFID tags into wooden pallets just doesn't work well; it is far better to stick a label on the outside of the pallet. But then you get into durability issues, etc. So iGPS really had the right idea here, with molding the tags into the actual plastic pallet itself. Great read range.
The other problem is the hugely distributed nature of the supply chain. Pallet poolers like CHEP just don't have the resources to stick an RFID reader at every location that can possibly accept pallets, and distributors / store locations have no incentive to help CHEP out with returning accidentally-delivered CHEP pallets. RFID readers are unfortunately not cheap enough for CHEP to start parking readers everywhere to see where their pallets go.
Trust me, as a manufacturer of RFID readers, our company would absolutely love a scenario where RFID readers start being embedded in every trailer and on every forklift, however realistically that solution is still at least a few years out, and the cost needs to come down probably another order of magnitude to be practical for use in the pallet industry. iGPS was just too early to the game.
Within one standard deviation of the mean, all of them.
Most hackers trying to 'disrupt' things naturally only work on what they know. So a lot of solutions are developed for industries everyone knows about: restaurants, travel, education, etc.
But most of the world's industries are not conducting business out in the open. They are operating inside factories, warehouses, labs, shipyards, trainyards, depots, private buildings, on the road, and in the field.
This is why a little niche knowledge is so powerful. Many industries only see innovation from people within the industry. But they usually have the same technical background as everyone else there, and the same blind spots. The hacker who has (or can get) enough domain knowledge to apply hardware and software in the right places is basically a Wizard.