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

The Global Market for EPC RFID Hardware

The market for EPC RFID hardware exceeded $354 Million in 2010, an increase of more than 140% over 2009.  We anticipate that the market will continue to experience rapid growth in 2011, with global revenues growing more than 104% (over 2010).  Our latest thinking on this market is provided in the chart below.

 
 
The following are a couple of additional highlights on the EPC RFID hardware market:

• More than 1.6 Billion tags were shipped in 2010; a number expected to exceed 4 Billion in 2011 … and retail accounted for about 50%.  There are several emerging markets that will account for increasingly higher volumes over the next few years, such as AVI, EVR, Asset Tracking, People Tracking/Management, Authentication (to name a few).
• Reader volumes increased more than 75% in 2010 and are anticipated to grow approximately 60% this year; however, large orders that drove significant growth in 2010 (e.g., Wal-Mart) are not expected to be a common occurrence.
• Although significant tagging and infrastructure deployment is occurring within the retail environment, end users are indicating that the point of tagging – mainly done in-store or 1 step removed from the store – will be shifting further down the value chain.  This will mean that tagging-related revenues will most likely be a shifting toward the Transportation and Manufacturing markets as value chains and solutions continue to evolve.  VDC expects this shift to begin occurring as early as Q4 2012.

Smartphone-based Personal Shopping Solutions-Threat to the Dedicated PSS Market?

The concept of delivering PSS functionality to shoppers via their personal devices continues to gain momentum with retailers, as evidenced by Stop & Shop’s recent introduction of an iPhone-based version of its “ScanIt!” PSS.

This development is particularly noteworthy for Stop & Shop. To date, the company has been one of the most aggressive deployers of PSS solutions in the US. Prior to the introduction of its iPhone application, Stop & Shop delivered PSS to its customers exclusively via company-owned and managed devices.

Eventually, smartphone-enabled PSS may present a serious competitive threat to dedicated device PSS solutions.  However, in the immediate term, we do not expect smartphone platforms to displace installed PSS solutions, or severly limit PSS opportunities. 

Any major disruption driven by smartphone platforms will be at least a couple of years in the making. Smartphone-enabled PSS is still in its nascent stages. The development of this technology—and exploration of its potential—has barely yet begun.

At present, dedicated, purpose-specific PSS have several important advantages over smartphone-based solutions:

• Whereas smartphones rely on embedded cameras for scanning, PSS are built around actual barcode scanners. Adapting smartphone cameras for scanning reduces the speed, accuracy, and reliability with which customers are able to scan their purchases. For a technology whose primary value proposition to the customer is saving time, scanning related issues are the major drawback to smartphone-based PSS.

• Some customers simply will not want to use their personal devices for scanning. Their reasons will vary from the practical (low battery, expecting a phone call, forgot to bring the device) to the more complex (security concerns).
  
  
• Retailers will be concerned with the increased software demands associated with supporting smartphone-based PSS. Technology lifecycles with personal devices are extremely short—often 12 months or less—which will drive requirements for frequent and regular software updates, both for the customer-facing and enterprise-level solutions.
  
  
• Security issues will be a prominent concern, particularly for retailers, who will need to ensure their enterprise data is entirely secure, and that customer information is absolutely protected. In regards to wireless connectivity, deploying organizations will need to consider carefully how they will grant the necessary network and data access to customers, while protecting sensitive enterprise information.From a customer perspective, security concerns may also be a potential barrier to adoption.

In the near term, the biggest threat smartphone-based solutions present to PSS suppliers is giving potential deploying retailers another reason to delay their PSS investment, as these organizations weigh costs, benefits, ROI potential, and alternative technologies.

Until smartphone scanning issues are fully resolved, we expect dedicated and smartphone-based PSS will coexist. The role of mobile devices in the PSS market is an issue we have discussed in depth with both hardware suppliers and ISVs as part of our research for Volume 3 of our Customer Engagement Technologies. We will cover this topic in detail in that report—contact us for more information.

Retail Technology Convergence

Consumers today are increasingly leveraging the incredible depth of information available to them and exercising total control over the purchase process. By necessity, retailers are embracing this shift in control, taking the checkout to wherever the customer may be (case in point: large-scale mobile device deployments in Home Depot and Nordstrom). Suppliers of customer engagement technologies have, similarly, had to be agile and learn the importance of channeling their customers’ input into device functionality and solutions set. A recurring theme across many, if not all, of the technologies that we cover here at VDC has thus been mobility. Be it a mobile POS, transaction terminal, receipt printer or a personal shopping device. 

The need to expedite the check-out process and effectively engage today’s increasingly mobile customer while also presenting a technology-forward image in order to strengthen loyalty seems to be the driving factors for growing adoption across all strata of technologies. What is even more interesting is the degree to which the form factor is being patterned according to consumers’ personal handhelds – never before have consumer products influenced enterprise-grade technologies to such an extent.

This new universal form factor is blurring the lines between some of these customer engagement technologies, which have in the past had their suppliers enjoy distinct boundaries encompassing target markets/verticals, feature & functionality sets, and expectations that were more or less set in stone. For instance, POS Terminal bellwethers such as NCR, IBM and Wincor Nixdorf are today directly competing for tighter retail IT budgets with vendors such as Motorola, Honeywell, VeriFone and Ingenico who have each, to varying extents, expanded their portfolios or device functionalities to include mobile POS solutions. Consumer-grade Apple products with integrated barcode scanners and card readers are also in very high demand especially amongst fashion retailers. While these are currently complementary to their stationary counterparts, VDC’s latest research on the POS market indicates a much higher annual growth rate for mobile devices which will eventually come at the expense of this traditional form factor.

At what pace is investment on these mobile devices taking place? How is this tussle between traditional and next-generation form factors shaping up? How are suppliers enhancing their software solutions portfolio to run seamlessly across a plethora of disparate technologies? For answers to all of these questions and more, stay tuned to our continued coverage of Customer Engagement Technologies (CET).

 

POS Terminals — Commoditization, Disaggregation, and the Importance of Software Solutions

Point-of-sale (POS) hardware continues to be commoditized, and is driving the disaggregation of the traditional POS hardware-software bundle.

This trend is evidenced—and being accelerated—by intensifying competition from IT vendors such as Dell and Intuit.  These suppliers, along with other budget-oriented competitors, offer low-cost POS hardware platforms that support a number of technical standards.  So, too do the software packages from a growing community of independent POS software vendors. 

As a result, opportunities for hardware-driven differentiation are few, and the importance of vertical-specific, feature-rich software POS offerings—or partnerships with ISVs who can provide the same—is increasing.

In a recent VDC study examining the usage of POS terminals, over 68% of end users reported software functionality as the primary consideration when evaluating a new POS solution. Software-oriented focus was particularly prevalent among larger, more sophisticated tier 1 and tier 2 organizations, which generally have more specific and extensive functionality requirements for their POS systems relative to smaller scale users.

The message this trend sends to POS terminal suppliers is clear:  Defending market share on hardware alone is becoming an increasingly difficult proposition—and will only get harder.

Today’s POS terminal market leaders—companies such as IBM, NCR, and Wincor Nixdorf, for example—have the capability, either in-house or through partner organizations, to deliver fully integrated end-to-end POS solutions. As hardware commoditization continues, suppliers of all tiers that wish to remain competitive will need to develop similar capabilities, either organically or via strategic partnerships.

For POS solutions, there is no one-type-fits-all system.  Each vertical and tier level has unique and particular functionality and integration requirements.

While this ongoing shift in POS solution development and deployment will challenge suppliers—particularly those whose business models are based entirely on the aggregated hardware/software paradigm—it also will present opportunities for differentiation on more defensible software-based functionality.

The increasingly important role of software in POS terminals and other retail automation technology will be explored in VDC’s CET coverage—contact us for more details.