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

Competing and Complementary Frequencies Changing Global RFID Landscape

 
Technologies (i.e.: Active, Passive, BAP) and Frequencies for several core solutions are migrating to HF or EPC UHF solutions due to cost efficiencies, increased performance and the desire to have more ubiquitous solutions. For example, LF security/access control and ID systems are migrating to HF 14443, LF animal tracking solutions are competing with HF and EPC UHF systems, and passive EPC is now a viable option for many traditional active UHF and MW systems for asset tracking, location-based services (LBS) and vehicle identification systems. 

Even HF and EPC are beginning to compete in the same markets.  Although most EPC UHF activity pertains to supply chain, shop-floor and asset tracking solutions, innovation, attractive price-performance levels and a highly knowledgeable service community have positioned these solutions to compete in many core HF markets, such as library, laundry, access control, AVI/EVR, animal tracking, authentication and more recently, card-based systems.

Active solutions in the UHF and MW frequency are increasingly being perceived as complementary solutions in many core passive markets due to their performance in harsh RF environments, their ability to receive and transmit data independently, their memory capacities and their longer read ranges.  An example would be the use of passive and active UHF solutions within the supply chain as a means to provide tracking, sensing/monitoring and RTLS.

Demand for 2D Imagers Outpacing Forecasted Growth (again!)

If we’ve learned one thing following the barcode hardware and consumables markets for the past several decades it’s this: these niche technology markets are stable and predictable.  The B2B nature of these markets insulates suppliers from fickle consumers, and the dramatic gains and losses that seem to play out on a quarterly basis in consumer technology markets.  And we like it that way. 

But one technology segment we follow began swimming against long established growth trajectories in the 2008/2009 timeframe, when investments in virtually all of the technologies we cover contracted significantly.  Demand for 2D imagers, in virtually every form factor, vertical market and use environment we follow, outpaced competing data capture technologies during this challenging period.
We all knew there was a story there, and suppliers were likening the market conditions driving demand for 2D imagers to a perfect storm.  Declining prices, enhanced scanning performance, the proliferation of 2D symbologies throughout the supply-chain (and increasingly embedded in personal ID’s), not to mention mobile barcodes made us all pretty comfortable forecasting 2010 growth rates in the 20% range. 

Now that we have collected and aggregated 2010 unit shipment data from the suppliers, we’re finding that demand for 2D imaging technology has met or exceeded our guidance in virtually every segment we follow.  Further, we expect 2D imaging will continue to garner a growing portion of the data capture technology spend as the illustration below suggests.

Clearly, displacement of competing data capture technologies is part of the story, but laser scanners and linear imagers will also grow throughout the forecast period, albeit at a slower rate. So where’s the rest of this demand expected to come from?  
 
 
• Application extensions at the point of sale and upstream that extend the value of an imaging investment? 
• Convergence with other AIDC technologies ranging from vision systems to RFID, ultimately enhancing imaging’s value proposition? 
• Field upgradable products that enable deploying enterprises to support their current and future requirements?       

Absolutely.  All of these factors are in play, and we’re excited by all the innovation we’re seeing in the market place as hardware suppliers, ISV’s and system integrators continue to find new applications for this promising technology.    

NCR Acquiring Radiant Systems, Inc.

On July 11, NCR (NYSE: NCR), one of the largest global technology vendors for assisted- and self-service solutions, announced its intention to acquire Radiant Systems, Inc. (NASDAQ: RADS), a leading technology solutions provider to hospitality and specialty retail establishments. NCR extended a cash tender offer of $28.00 per Radiant Systems share, with the equity purchase price of $1.2 billion having been approved by the boards of directors of both companies. Subject to regulatory approval, this transaction is expected to close during the 3rd quarter of 2011.

NCR’s traditional stronghold has been on the Financial Services and Retail vertical markets. This acquisition gives the company an immediate leadership position in the hospitality and specialty retail verticals, with a well-known, highly regarded and broadly installed brand.  Radiant expands NCR’s total-available-market by approximately $8 billion – this large expansion of addressable market for both organizations has led them to set a long-term business model goal of more than $7 billion in revenue and growth margins in the mid-30s.

In VDC’s opinion, this deal is a very strategic move by NCR to expand into core industry verticals – horizontal integration in order to enhance market share, increase revenue growth rates and improve margins by expanding mix of software & services – offering more complementary adjacency than the Entertainment vertical. While both companies offer software and solutions, Radiant’s growing subscription-based offering will enable NCR to build more software into the overall revenue mix resulting in substantial financial benefits.

To learn more about VDC’s analysis of the deal and the implications that we expect this acquisition to have on the global competitive landscape for retail automation solutions, click here.

RFID in 2011: The Vertical Market Story

VDC is in the process of publishing its 2011 RFID vertical market estimates/forecasts for all regions, products, frequencies, verticals and applications.  The following are a few higher-level trends for some of the primary RFID verticals:

• Significant gains were noted within the retail vertical, particularly for in-store and distribution center applications where most product tagging is currently occurring.  As item level tagging grows, RFID will continue to be pushed down the value chain to the point of manufacture since tagging at the source will enable the use of the same tag throughout the value chain, enabling retailers and their channel partners to further leverage the solution’s value.  As tagging moves from the retail store or the DC to the source of manufacture, shifts in vertical demand are expected.  For example, the warehouse/DC market within the transportation sector will see increased activity as RFID tagging shifts away from the store; however, the manufacturing sector will see a longer-term increase in demand once source-tagging becomes more commonplace.

• The transportation market – which includes product movement from the point of manufacture through the store floor, as well as travel and logistics – not only continues to account for the majority of reader consumption, but remains a leading adopter of hybrid (i.e.: more than 1 frequency or technology) solutions. Primary applications within transportation include supply chain management, asset tracking, ticketing, baggage handling and security/access control.
• The pharmaceutical vertical is gaining significant traction in the APAC region, largely due to the Korean mandate to have 50% of pharmaceutical products RFID tagged by the end of 2012. It is expected that more than 320 million tags will be consumed in Korea in 2011 for this application alone.
• Despite high-profile e-Government programs (i.e.: China ID, U.S. Passports) winding down (becoming limited to new issues and replacements), there is still significant activity occurring within the Government sector. ID programs, document management, government-driven AVI/EVR, supply chain and asset tracking. RTLS/LBS and other security/access control projects continue to exhibit significant activity and continue to deploy infrastructure as these applications scale.
• Healthcare is also exhibiting strong growth, despite longer technology adoption cycles and budget constraints.  RFID has expanded beyond asset tracking in this market to include more advanced and deeper integration applications such as embedded tags in medical implants and prosthetics, compliance with cleaning/sanitizing protocols, sample and document management, patient and employee tracking, asset and human association, and surgical tool and supply tracking.

The following is VDC’s most recent vertical market perspective of the global RFID market

 

More trends and much more granular estimates/forecasts are available as part of our 2011 RFID Business Planning Service at http://vdcresearch.com/market_research/autoid/research_reports.aspx

Digital Menu Boards: An Increasingly Common Application for Digital Signage

Digital menu boards (DMBs) are gaining traction as an application for digital signage, particularly in QSRs and fast food chains. Although adoption of DMBs has been relatively limited to date, some forward thinking enterprises have been piloting this technology and are moving towards large-scale rollouts.

In the UK, for example, a 700 unit Burger King chain recently began replacing traditional static menu displays with DMBs. DMBs have a number of advantages over traditional static menu displays including:

• Reduced operational expenses: no need to purchase new static menu displays

• Easier item/price updates: menu changes sync automatically via integration with POS systems

• Enhanced promotions: multimedia capability adds life to static displays

• Potential for increased sales: DMBs have been shown to increase revenues by 10% or more

At present, however, key adoption barriers remain.

Upfront costs are the foremost issue, especially among bottom-line obsessed QSR franchisees.  While display prices have declined—and will continue to do so—DMBs must be integrated with back end systems to enable access to the requisite menu and pricing data. Of course, these requirements drive additional costs.

In addition, achieving ROI also may be a barrier for some enterprises, particularly those with extensive integration requirements for linking DMBs to various self-service technologies and social media.
Despite these barriers, which will be somewhat mitigated by ongoing price declines in displays, VDC expects DMBs will become an increasingly common application for digital signage during the next 3-5 years.

As enterprises realize the ROI DMBs can deliver—both in the form of reduced expenses and increased revenues—and prices of signage solutions continue to fall, the value these solutions offer will become too great to ignore for many brand managers and outlet operators.