Wal-Mart (NYSE: WMT) shoppers, are you being tracked? Some privacy advocates are alarmed at the giant retailer's plans to test out new, sophisticated radio frequency identification tags in its apparel.

According to The Wall Street Journal, the newfangled smart-tag sensors will help Wal-Mart keep better tabs on the state of its clothing inventory. Experiments with the technology have helped retailers such as J.C. Penney (NYSE: JCP) and Macy's (NYSE: M) Bloomingdale's stores keep their sales floors stocked with the sizes and colors selling best. Since customers can't buy what isn't there, knowing exactly when it's time to restock can result in far more robust sales,

Such tags could also help reduce employee theft, although the tags will supplement the bigger sensors meant to bust shoplifters. Surprisingly, employee theft appears to be a worse financial problem for retailers than shoplifting. A report from Global Retail Theft Barometer last year said that workers pinched $18.7 billion worth of goods from retailers, versus shoplifters' $15 billion haul.

Despite the benefits to retailers, privacy advocates are worried about the RFID tags. These tiny sensors, made by companies such as Avery Dennison (NYSE: AVY), have no "off" switch, and they're readily trackable. Consumers are afraid that their consumption habits will be tracked by criminals or marketers through clothing. Wal-Mart denies that these smart tags will be in the clothes themselves; instead, the retailer says, they'll be implanted in removable labels or packaging. Supporters of the technology also say that the tags won't include anyone's personal information.

It's good to at least hear out the privacy critics, since Wal-Mart's decision to use these tags is expected to ultimately make them the industry standard. Wal-Mart's size and influence can make huge differences in the ways things are done in retail; for example, its sustainability index could change the way retailers and suppliers do business. Wal-Mart is a force to be reckoned with in many ways, and therefore one to watch.

Meanwhile, social networking sites like Facebook and huge Internet companies like Google (Nasdaq: GOOG) are changing the way we think about privacy (and what private information we want widely available in the digital realm). And businesses such as Amazon.com (Nasdaq: AMZN) and Netflix (Nasdaq: NFLX) thrive by tracking our tastes and habits. The power of their business models relies on knowing what consumers are likely to purchase in the future, based on past purchases or other interests.

Shareholders should cheer Wal-Mart's efforts to better manage its inventory and boost sales. But hopefully, the tags won't unsettle customers. What do you think: constructive or creepy? Sound off in the comment box below.