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

Intelleflex and The Hartford – A Partnership that Makes a Lot of Sense

The recent announcement on the partnership between Intelleflex and the Hartford to offer cold chain tracking and monitoring systems (i.e.: sensing/monitoring of food & pharmaceuticals) is the first of its kind in RFID and further demonstrates that the technology is providing real-world benefits. 

For those not familiar with these firms, Intelleflex is a venerable Battery Assisted Passive (BAP) solution provider that has pioneered the use of BAP technology in the cold chain and The Hartford is a leading insurance provider with a strong focus and long history of success with loss control services.   The Hartford not only insures companies and products, but also helps their customers manage and control risk.   

The solution the two companies are offering provides much more visibility and accuracy than most commonly used systems.  Aside from the benefits associated with RFID track/trace, this added functionality, delivered via Intelleflex and their existing partner network, will enable enterprises to:

• Further refine shelf life and product life expectancy (based on environmental conditions throughout the value chain)
• Optimize product distribution – at the pallet level - based on product condition data. 

If Intelleflex is providing the solution and is able to market it to The Hartford’s customer base, what’s in it for The Hartford?  A lot!  Not only is The Hartford able to expand upon their goals to help their customers manage and control risk, they are also expected to obtain and leverage extensive data from the field to further tailor underwriting (based on the enhanced business intelligence gathered), minimize risk and strengthen customer relationships.   After all, insurance is a data/statistics driven industry – the more accurate the data, the more predictability there is.

We’ve been saying for years that RFID is really about the data and how the business intelligence generated  can be leveraged throughout the value chain to provide operational and financial benefits.   This partnership is a classic example of this notion and I think it makes a lot of sense.

Current Economic Volatility has Limited Impact on AIDC Markets … for now

About 2 weeks ago, we did a quick survey to a select group of companies to find out how the recent economic volatility is impacting the AIDC industry.  We spoke with leading firms from the component, device manufacturer, channel and end user communities to ascertain the market’s health and identify where (if any) the impact is occurring within the value chain.  What we found out was that there was very little change; most remain cautiously optimistic about the near-term future.  The following are some key takeaways:

Components:

Speaking with leading IC, Inlay, Ticket, Tag, Label, Card and Printer Ink suppliers, we noted that although there has been a slowdown of sales, growth is still occurring at a healthy pace.   Most suppliers attributed this slowdown to high inventory levels within their channels – a trend VDC has been tracking since mid-last year (i.e.: silicon in RFID, Petroleum related printing products) – and correlate only a very small portion of this slowdown with the current economic conditions. 

Device Manufacturers:

The scanner, reader and printer manufacturers are seeing a tremendous amount of activity in nearly every market, with several claiming growth in excess of market and internal expectations.  There were no reports of cancelled or delayed deployments and, for most, growth from new accounts remains stronger than the same time last year.  This community also indicated that it is their perception that the majority of the end user population is more prepared for economic volatility and that enterprises will not need to significantly curtail technology investments.

Channel:

Although growth remains strong and is exceeding expectations in many device markets, this community – SIs, VARs, Dealers, Distributors and OEMs - remains a bit skittish.  Most firms cited robust sales; however several indicated that they were lagging in the development of their opportunity pipelines and are considering implementing programs to stimulate demand, such as cutting prices and increasing incentives to package services and consumables.  This reaction has been deemed premature and not necessary by the supplier and component communities.  No channel company interviewed had knowledge of end user budget reductions, hiring freezes or deployment delays.

End Users:

Speaking with some of the larger end user accounts in retail, manufacturing, healthcare, transportation, commercial services and government, only the government community stated that the economic conditions were impacting their business.  Most companies interviewed expect demand to wane and the level of volatility to remain high, which they expect will result in a moderate impact on their business; however, they also feel they are more insulated than previous periods of economic uncertainty and do not expect to delay or retract technology investments.  With that said, nearly every company interviewed from this community felt that continued economic downturn and uncertainty will have a significant and incremental negative impact on their business.

So … on a scale of 1 to 5, where a 1 means that the demand is ‘falling off a cliff’ and a 5 correlates to demand exceeding expectations, it seems that the AIDC market is currently a 3.5 – a slight slowdown in growth expectations mixed with a sentiment of cautious optimism.

Imaging Solutions – Applications Beyond the Retail POS

A fair amount has been written about how retail POS applications including mobile couponing and gift/ loyalty cards are driving growth in adoption of 2D Imagers. These solutions have also been deployed extensively across various other vertical markets for applications including:

• BCBP (bar coded boarding pass) – Transportation:
  • Businesses in the Transportation vertical stand to benefit significantly from the move to bar coded boarding passes by enhancing operational efficiency, reducing labor cost savings and in effect, gearing up the industry (& its passengers) for the inevitable move to contactless technology.
  • IATA’s mandate requiring all its member carriers to migrate from mag-stripe to the 2D barcode standard for boarding passes by the end of 2010, is expected to lead to industry savings of around $1.5 billion a year, effective 2011.

• Track and trace – Healthcare: 
  • In order to effectively challenge the ongoing issue of counterfeit pharmaceuticals, emerging country markets are mandating strict labeling regulations to enhance traceability over the entire supply chain – with 2D barcodes encoding unique product identification code, batch number, expiry date & serial number. This is driving significant demand for imaging solutions in these markets.
  • Additional advantages that enabling this feature offers the industry include enhanced QA/QC, Reverse Logistics and reduction in reimbursement fraud.

• Identity management – Government:
  • This application is designed to help governments build comprehensive citizen databases, easing out the ID certificates and documentation services – for law enforcement, public safety and military purposes.
  • By integrating the imaging solution with biometrics, enterprises can ensure maximum level of security possible, using it to identify both items and people.

The robustness of the 2D platform – and rapidly falling price point - is enticing end-users enterprises to skip over the linear imager generation and move to the 2D imaging technology. The solutions’ share of the barcode scanner market ‘pie’ is expected to grow significantly over the next 5 years, with the technology also having consistently demonstrated its efficacy and versatility with vertical-specific application deployments.

NFC-based Mobile Payments Gain Visa's Support, but are Far from Reality

Visa recently reaffirmed its commitment to support NFC-based payments by announcing measures that will increasingly move U.S. merchants and consumers away from magnetic-stripe based cards to next-generation payment types, including EMV/chip and pin and NFC.  This is an exciting development for the NFC community, as the transition of NFC-based mobile payments from concept to reality will create significant demand for NFC-based payment solutions.

In order for this transition to mobile payments to occur, there are a number of stakeholders that must cooperate, including banks, merchants, payment processors, mobile device manufacturers and cellular network operators. Card issuers such as Visa are also among this critical mass.

While other card issuers, including Mastercard and AMEX, also are embracing NFC technology, having signed on to various mobile payment networks, the transition from magnetic stripe cards to NFC-enabled mobile payments will not happen overnight.

There are many other pieces to the NFC mobile payment puzzle beyond gaining the support of card issuers. Merchants, banks, and wireless network companies will also need to buy-in to the idea of mobile payments and work through potentially sticky issues including interchange fees, security, and which stakeholder bears responsibility in the event of fraud. Equally as important, mobile device manufacturers will need to facilitate consumers’ adoption of this technology through broader offerings of NFC-enabled smartphones. At present, a limited number of smartphones available in the US market support NFC.

Limited Capacity for Thermal Ribbons to Create Opportunity for Direct Thermal Solutions

Leading suppliers of thermal transfer ribbons are facing raw material constraints, which means they will be raising their prices and placing their largest vendors on allocation by establishing fixed volume commitments for 2011.  Why? Thin film PET suppliers have shifted capacity to meet increased demand for thicker films used in support of more profitable applications, such as the production of flat screen displays.  This shift in capacity, coupled with other raw material price increases (wax, resin, solvents, etc.), has left thermal transfer ribbon converters scrambling to meet the demands of an increasingly price sensitive market. 

While most leading converters believe the raw material capacity issue will be resolved in 2013, many are thinking about what a thermal transfer ribbon shortage might mean for their business.  At VDC, we’ve witnessed a gradual, but persistent migration from thermal transfer to direct thermal printing technology over the past decade, and data collected in Q4 of 2010 suggests that this trend will continue throughout 2011. 
 
 
In 2010, direct thermal and thermal transfer label material shipments were virtually the same; however, now that capacity and raw materials pricing pressures are plaguing the ribbon supply community, we are predicting an accelerated migration, particularly in markets with a high use of wax ribbon printing on common substrates and where today’s direct thermal media represents a viable alternative to thermal transfer.  Which applications?  Those 4X6 compliance shipping labels that have been bread and butter for thermal transfer solution providers for decades will certainly receive increased scrutiny, as will other applications as deploying enterprises take another look at direct thermal media and its capabilities.

Smartphones Meet Smart Posters

Proxama, a global Near Field Communication (NFC) solutions provider, has launched a smart poster marketing campaign in New York and Los Angeles advertising the upcoming new season of VH1’s hit show Basketball Wives. There are several partners working on this campaign, including Hyperspace, a firm specializing in out-of-home communications, Nokia, a leader in NFC-enabled mobile devices and marketing media distribution specialists JCDecaux and Cemusa. Proxama led a similar, well-received campaign earlier this year in London to promote the latest X-Men movie.

The smart posters are straightforward: By tapping an NFC-enabled phone on the poster, passersby  can access an exclusive trailer and link to the show’s Facebook page. Given the low penetration of NFC phones in the US, the campaign is intended to be more of a demonstration of the technology’s potential in the rapidly emerging mobile marketing industry.  

NFC offers opportunities for mobile marketing that reach beyond basic smart poster interactivity. As consumer-level NFC adoption scales in the US, advertising applications leveraging this technology will evolve rapidly. Potential marketing applications include location-based messaging, personalized/targeted offers, mobile couponing and loyalty.  NFC is a versatile technology that will enable direct, immediate access to consumers through which personalized, targeted content can be delivered. Mobile and interactive marketing is just one of the NFC applications we’ll be exploring in our upcoming NFC report—stay tuned for more details.

Special acknowledgement: Dan Mandell, Research Associate, co-authored this blog post.

Application-specific Deployments Driving Kiosks Market Growth

Suppliers experienced strong growth in kiosk installations across a variety of vertical market segments as end-user enterprises embraced a number of applications targeted at enhancing customer engagement and loyalty. Vendors are expected to derive maximum revenues from product vending kiosks & pedestal kiosk installations in big box retail chains (including department stores and mass merchandisers) and supermarkets/grocery stores.

Kiosk sales into the Government and Healthcare vertical markets tend to be highly application-specific, necessitating partnerships with the ISV community, whose domain expertise and systems integration capabilities enable vendors to adequately address the highly targeted solution specifications posed by end-user organizations.

Deployments are also seen gaining traction within the transportation vertical as airports, bus and rail stations increasingly rely on kiosks to ease congestion, lower employee headcount and reduce costs for rendering basic services. Globally, this segment is expected to register a CAGR over 9%, with suppliers generating over $100 million in kiosk sales to the transportation vertical by 2015.

VDC expects to see those vendors devoting resources toward building systems integration capabilities (in-house or via strategic partnerships) to create a compelling competitive advantage as they address & assuage enterprise end-users’ concerns regarding ROI, compatibility with existing in-store infrastructure, and overall installation/deployment costs.

To learn more about our coverage of the Self-Service Kiosks market, click here.