VDC Research: RFID, Barcode, Retail Automation & Self-Service Market Blog

2011: Another Big Year for RFID Item-Level Tracking in Retail

Item-level Tracking (ILT) was the big story in RFID for 2010.  We have seen companies significantly scale, expand and integrate deployments this year; so much so that Gen2 tag volumes have increased approximately 6x over 2009.

We are confident that 2011 will be another big year for ILT in retail.  Why?

• More scaling of deployments and solution expansion within the current installed base.  The vast majority of all RFID activity in retail is currently relegated to a small number of Tier I and II retailers that leverage the technology to support a limited number of SKUs and processes.  These enterprises are planning to continue to scale their deployments by increasing the number of SKUs, expanding the solution to include more stores/facilities, further integrating and developing applications.
• Other retailers are planning on adopting and integrating the technology globally.  In addition to the early adopters, there are more accounts that anticipate to scale and expand within the next 12 months.  And those that are piloting expect to shorten their evaluation periods by up to 30%, creating an even larger pool of new accounts ready to deploy.
• The value is beginning to outweigh the risk.  RFID end users are extracting significant and measurable value from their solutions, which is resulting in more attractive and reproducible ROI and benefit models.  There is less risk involved when there is more knowledge and predictability of the outcome.  And don’t forget … the value increases the more the solution is leveraged, so as RFID continues to be broadly adopted from the start to end of a value chain, even more value will be achieved. 
• Orders have already been placed and opportunity pipelines are expanding.  A plethora of purchase orders in support of ILT solutions in retail have already been placed (many through the end of Q2 2011).  In addition, many of the leading vendors for ILT RFID solutions in retail are developing and/or reporting large and robust opportunity pipelines for 2011 (some more than 2x larger than 2010).

So, we expect more from ILT in Retail in 2011 - more scaling of deployments, more accounts, more value and more growth.

Customer Empowerment: Rising Star in 2011 Retail Automation Technology Market

During yesterday's webcast, we discussed retailer technology investment priorities and plans.

The retail and transaction automation market is evoloving—customers are more powerful than ever before, forcing B2C operators to realign with a rapidly changing customer base and their ever-expanding scope of demands. Customer empowerment, along with cost savings and operations improvement, will drive more technology investment in 2011; this strategic requirement barely registered in our survey returns five years ago.

This investment trend is the trend we believe all retail and transaction automation suppliers will need to address in the coming years. Customer empowerment is leading to rapidly growing investment in self-service and mobility solutions. The next generation of these solutions is requiring more complex planning and integration support.

To learn more about our thoughts and expectations on the retail automation technology market and customer engagement technologies, we encourage you to listen to the webcast recording and scroll through the slides below.

Keeping Pace in the Retail Automation Technology Market Through 2011 and Beyond

View more presentations from VDC Research Group.

Barcode and RFID Convergence is Not About Technology

Tom Wimmer and I gave a presentation on this topic yesterday in support of the white paper we just published for GS1/EPCGlobal US, the crux of which can be summarized by the following:

• Technologies are being integrated with each other because the end user wants to leverage the information and attain the benefits from each independent system.
• Gathering and sharing information from independent systems can be attained by creating consistency within common architectures.
• This consistency can be accomplished by developing a single, unifying platform that will ensure that the information being used is essentially the same … a standard.
• Although technologies continue to be integrated with each other and leverage a diversity of carriers, the real convergence is occurring at the data level.
• Convergence is not about technology, it’s about commonality.

The PowerPoint presentation for this webcast is provided below.  If you’d like to listen to the audio recording, it can be found on the GS1 website at:  http://www.gs1us.org/epcglobal_us/education

Barcode & RFID Convergence: Enabling Greater Visibility Through Standards

View more presentations from VDC Research Group.

Pumping Up the RFID Tag Volume

2010 turned out to be a tremendous year for RFID, with success stories coming from nearly every facet of the industry, but the underlying theme and a primary indicator of success for many of these stories is the increase in tag volume.  More tags typically means that the solution is scaling and/or expanding, the enterprise is increasingly leveraging the system and the level of commitment to the technology is rising.  

Tag volumes are expected to exceed 3.7 Billion units in 2010, a jump of more than 35% over 2009, and are anticipated to approach 12.5 Billion by the end of 2014.  Most of this growth is coming from the HF and EPC UHF markets.  These two markets accounted for approximately 78% of the total global tag volume in 2009 and are predicted to represent more than 90% of global volume by 2014.  That means that more than 30 Billion HF and EPC UHF tags will be shipped from over the next 4 years.

What applications are driving this growth?  The following table provides a few highlights of transponder volumes by leading RFID applications.

APPLICATION	HF		EPC UHF
	2009 (Millions of Units)	CAGR (2009-2014)	2009 (Millions of Units)	CAGR (2009-2014)
Animal Tracking	25.9	45.1%	0.6	121.8%
Asset Tracking	37.2	21.7%	34.6	70.2%
AVI/Toll Collection	19.4	18.3%	16.0	64.4%
Baggage Handling	N/A	N/A	104.6	36.9%
Contactless Payment	55.4	38.1%	N/A	N/A
Customer Loyalty	1.7	45.2%	N/A	N/A
Document Tracking	21.3	32.2%	3.1	90.4%
ID/e-Government	270.7	16.2%	N/A	N/A
Library	105.7	20.1%	0.1	207.9%
Rental Item Tracking	36.4	31.0%	14.5	75.3%
RTLS/LBS	23.6	17.7%	9.0	77.2%
Security/Access Control	716.3	14.5%	N/A	N/A
Sensing/Monitoring	1.6	31.2%	1.9	125.1%
Shop-floor Automation	25.9	24.6%	14.8	80.4%
Supply Chain	105.0	15.1%	276.8	73.0%
Ticketing	301.8	24.9%	1.0	82.6%
WIP	30.2	23.3%	7.9	94.1%
Other	64.6	42.2%	17.7	116.1%

So to sum it up in 1 phrase, I’d say that RFID tag volumes for HF and EPC applications appear to be cranked up to 11!

The Many Faces of Personal Shopping Systems

One of the more exciting in-store retail technologies we study as part of our Retail practice is Personal Shopping Systems (PSS), a handheld or cart-based self-scanning device that enables retailers to personalize promotions and the in-store experience while also allowing the shopper to scan-and-bag items on the go. Although suppliers have long touted the value proposition of this solution, it is only over the past couple of years that global retail conglomerates have moved from pilots to larger scale deployments, particularly in Europe.

One of the more interesting trends for the PSS market is that just as the solutions are beginning to gain traction and scale, a new threat is beginning to emerge: Smartphones and tablets. These devices have the potential to integrate many of the same functionalities and values that PSS solutions offer, primarily through applications.  For example, smartphone applications such as AisleBuyer™ (currently available on Apple and Android phones) have the potential to convert the shopper’s personal handheld device into a PCI-compliant self-checkout solution while also supporting the personalization of content and highly targeted advertising and promotions.  Retailers could potentially refrain from investing in this solution given the high upfront costs for procurement & installation, lack of an established market for personal shopping systems and the threat of early obsolescence posed by emerging mobile applications.

Suppliers of PSS solutions are increasingly embracing this trend, with market leaders such as Motorola and Datalogic offering highly functional PSS devices that resemble ergonomic, touch-enabled mobile device solutions such as a smartphone.  Not only are these devices well-aligned with the highly intuitive graphical user interfaces and applications that today’s customer base is comfortable with, but they are also increasingly resembling and being marketed as mobile kiosks or compact digital signage solutions.  

Continued evolution in this direction could eventually enable retailers to bring the advantages of an e-commerce shopping experience to their brick-and-mortar stores as well as converge the benefits of multiple technologies into one device.  

For example:

• In a recently concluded end-user survey of retail automation technology users, a primary adoption barrier for kiosk deployment was the high price of the hardware and the extensive integration required. PSS solutions could offer a more cost effective solution as well as minimize the installation/integration pains.

• Retail in-store digital signage deployments are currently transitioning from a more traditional ad-based model to a more specific and highly personalized platform – which is aligned with the multi-dimensional value propositions as offered by a PSS.

Our research indicates that hardware for personal shopping systems accounted for nearly $27.4 million in global revenues for suppliers in 2009 and has the potential to grow to more than three times that number in five years’ time.  Learn more about VDC’s coverage of the personal shopping system market at: http://vdcresearch.com/_Documents/tracks/t1v7brief-2625.pdf