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

Company Spotlight: Datalogic Shifts to Acquisition-Based Growth Strategy

Datalogic has historically been the European share leader in the stationary industrial scanning market, relying on revenues derived from sales in the region to maintain its position on the global leaderboard. The company’s presence in the US – one of the biggest markets for these products – has, however, been fairly low following marginally successful attempts to effectively penetrate the region via organic growth strategies. The company is now employing an acquisition-driven strategy to ensure it is able to capture and grow share within the region. This strategy is designed to achieve the following goals pertaining to the US market:

• Increase presence and share
• Broaden product portfolios that enable the company to compete in adjacent markets
• Establish strong partnerships with distribution channel organizations

Over the past couple of months, Datalogic has made two acquisitions – Accu-Sort (Industrial Scanning/ Imaging) and PPT Vision – in support of meeting the stated objectives, having declared their intentions to investors over the course of 2011. This will significantly increase Datalogic’s presence in the US market (based on VDC data), enhance and expand its patent and product portfolio, and give it access to well-entrenched distribution channels. In fact, with the acquisition of Accu-Sort, Datalogic should now be the region’s stationary industrial barcode scanner share leader. The following table highlights some of the key drivers, from VDC’s perspective, for each of these acquisitions:

In our opinion, it was time for Datalogic to change course with regard to its expansion and growth strategy in the US, and we are bullish on its two most recent acquisitions. In one fell swoop, they become a share leader, expand their technology portfolio, inherit well-established distribution channels and gain access to new markets.

Despite immediate gains in the region, we believe that Datalogic’s ability to continue to grow in the US will be dependent upon whether it can:

• Seamlessly and efficiently integrate the acquisitions
• Reassure their ‘acquired’ clients and partners that being part of the Datalogic family will only improve upon and add more value to their existing relationship
• Overhaul existing channel strategy in the US, which has only met with limited success
• Educate these new channels about Datalogic-branded products to realize full potential of acquisitions
• Employ effective regionally-specific growth and defensive strategies
• Build upon the momentum generated by these acquisitions
• Maintain a high rate of innovation

Datalogic has learned over the years that the success that they have enjoyed in Europe does not necessarily translate into the same in the US – primarily because of limited channel and marketing resources in the region. With these recent acquisitions – which we believe are not the company’s last – they do have a promising new product, technology and distribution platform to build on.

Reposition RTLS … in Real-time

This is a call to all Real Time Location Systems (RTLS) solution providers … You’re markets don’t fully understand your solutions and their value.  Based on our recently completed global survey of 350 enterprises, the vast majority of enterprises using or planning to use RTLS systems have:

• Limited knowledge of what RTLS is and what it can do – beyond what they are using it for now
• Routinely confused the technology with other solutions (i.e.: asset tracking, time/attendance)
• Misperceptions on the benefits and value RTLS can add to their enterprise AND value chain
• Challenges justifying investment

Simply stated, most deploying enterprises perceive RTLS as a vertically-centric tracking solution that provides continual and automatic data streams on an object(s) and its environment(s).  With the exception of the health care market (which is typically more advanced than other verticals and has been cultivated aggressively for years), when these users are thinking of solution expansion, they are primarily thinking of tagging more objects (scale), as opposed to true expansion of the RTLS platform to be leveraged for other applications (i.e.: compliance), operations and value chains beyond track/trace and location based services.   

We believe the market needs to better understand the technology, its capabilities, limitations, value propositions, etc., before broader adoption can occur.  The ability of suppliers to grow their accounts will be largely tied to their individual and collective abilities to educate the market on RTLS.   RTLS providers need to reposition their messaging on RTLS as more than just another track and trace solution - continued market development hinges on it.

For more information on our recently completed RTLS Enterprise End User survey, click here.

Voice of the Customer: 3 Things an RTLS Supplier Needs to Know

We just completed a global study of enterprise end users of Real-Time Location Systems (RTLS) and it revealed some interesting insights about what companies that are using or adopting RTLS are/will be looking for from their vendors.   Although there is a wide array of requirements enterprises are placing on their RTLS solution providers, the following three are critical for RTLS vendors to address:

• Be a one-stop shop:  Nearly ¾ of all respondents indicated a preference to deal with one company for their solution –not only because they want someone to assume responsibility for the entire implementation, but because they want their vendor to be a long-term partner with whom they can grow.   This will become more critical as RTLS solutions become more pervasive in indoor and outdoor environments and need to leverage a host of technologies.  Piece-meal is not the right go-to-market strategy (remember TimeDomain?). 
• Be Prepared to Start Your Customers With Small, Focused Deployments:  The vast majority of respondents’ initial deployments were relatively small and focused on one or two very specific business issues in which the vendor was intimately involved with the design, integration and deployment of the solution.  Within 12 months of attaining their required ROI, however, most of these “start-small” customers were already looking to expand their RTLS solutions within the enterprise and, in some instances, the value chain … with the same vendor.   The early success of their less complex deployments became instrumental to their ability to justify further investment.  Early successes are critical – they not only offer proof of concept and facilitate solution expansion and scale, but they also provide a level of knowledge based on real world experience that becomes a critical foundation for future solution innovation and evolution.  End users that had more complex initial deployments often struggled to achieve a successful implementation and had lower ROI.  As a result, they were notably slower to expand/scale their systems, more reluctant to increase their RTLS budgets, and indicated a lower level of commitment to the technology.   We encourage vendors to focus on helping their clients achieve successful pilot projects before pursuing enterprise-scale initiatives.
• Enhance your Software and Service offerings:  Increased commoditization, competition and price sensitivity for RTLS hardware, along with a more diverse product mix (i.e.: EPC Gen2 Passive RFID) are expected to not only decrease hardware margins, but they will also make it more difficult for RTLS vendors to differentiate.  Software and services are critical to a solution’s success, and are expected to become even more so as RTLS systems become increasingly complex, more deeply integrated and more broadly deployed. The end user is becoming increasingly aware of this.  In fact, more than half of the respondent population stated that they would be allocating more of their RTLS budget to software and services, particularly as they continue to integrate, expand and scale their solutions throughout their enterprise and value chain.  Based on the responses to this survey and how RTLS solutions continue to evolve, we see increasing demand for the following software and service offerings:
  • Solution performance (i.e.: accuracy, precision)
  • Data management (i.e.: monitoring, analytics, distribution/porting)
  • Device management (i.e.: device health, maintenance)
  • Application development (i.e.: expanding RTLS platform within enterprise/value chain)
  • Integration and Scale (i.e.: seamless, facilitated, convergence with other systems)

All indicators are pointing to increasing year-over-year growth and significant opportunity for RTLS vendors who are prepared to be total solution providers, willing to invest in their accounts, and develop competency and expertise related to software and sevcies.

NFC at NRF

NFC was a pervasive theme at the 2012 NRF show held this week in New York City. Technology vendors of all types were talking about their plans for integrating NFC into their product portfolios and, in many cases, displaying their latest NFC-enabled solutions. Whereas NFC is a nascent, still-developing technology, its presence remains somewhat confined to a few key product categories, but as consumer adoption of NFC smartphones scales in 2012 and beyond, we expect to see an increasingly broad range of customer engagement/retail automation solutions incorporate NFC into their design. What follows is an overview of some of the notable NFC activity at this year’s NRF.

• ViVOtech introduced its ViVOtouch NFC solution, which is mobile marketing software platform that allows merchants to deliver targeted/personalized content, offers and loyalty programs to customers via their NFC-enabled mobile devices. This solution also allows for interactive shopping and NFC-enabled information retrieval on the store floor, further enhancing the shopping experience. Contactless payment is certainly a hot topic, but as a standalone application its ROI potential probably is not strong enough for most enterprises to justify investment. We believe solutions such as this will drive the adoption of contactless payment NFC solutions in retail.

• NFC payment terminal leader VeriFone introduced its PAYware Mobile Enterprise for Tablets, a secure payment acceptance solution that is compatible with the company’s GlobalBay Mobile POS solution. The solution is designed to run on Apple’s iPad 2, and provides the same functionality offered by the original iPod-touch based PAYware solution. PAYware for Tablets has the same fully secure encryption as previous versions of the solution, and enables the acceptance of traditional payment cards, PIN/EMV smartcards and NFC contactless payments. The solution adds further utility for merchants via a built-in 2D barcode scanner for item scanning, coupon acceptance and inventory management.

• INSIDE Secure demonstrated its NFC-based solutions for consumer and product authentication in retail. The solution enables shoppers to verify the authenticity of high-end/luxury goods and allows merchants to confirm the identity of customers. Whereas mobile devices, particularly smartphones, are becoming an increasingly prevalent element of retail marketing strategies and consumer shopping behavior, we expect that solutions leveraging NFC for brand and user authentication will become increasingly popular among retailers of luxury and other high-end goods.

Mobility and customer engagement have been pervasive themes with retail for some time now. NFC offers retailers a way to achieve both of these strategic objectives in a manner that is reliable, fast and easily-scalable. As consumer adoption of NFC gains momentum, we expect to see an increasingly diverse range of retail technology solutions support this technology.

NFC Payments … Good Things Will Come to Those Who Wait

Near Field Communication (NFC) is the focus of much media attention these days, but most of this coverage is concerned more with future opportunities rather than what is happening in the present.  Evangelism and media hype have resulted in consumers who are aware of the technology perceiving it almost exclusively as a contactless payment solution that enables mobile phones to function as a credit/debit card. And with recent announcements, media coverage, and overall activity levels (pertaining to NFC payments) it’s hard not to think of it as such.  For example:

• Leading payment terminal suppliers shipped record numbers of NFC-enabled terminals during 2011.
• Credit/debit card issuers such as MasterCard. VISA and AMEX are committed to the solution and are now issuing NFC-enabled cards. 
• MNOs (Mobile Network Operators) such as Verizon, AT&T and T-Mobile are investing in and collaborating on contactless payment solutions (i.e.: ISIS)
• 2H 2011 yielded more NFC-enabled device announcements from leading smartphone and tablet suppliers than we have ever seen previously, including Motorola, Samsung, Nokia, RIM and LG (though notably, not Apple).

Although contactless payment is expected to be a significant opportunity for NFC, we believe it will likely be several years before this application is broadly embraced by merchants worldwide, and that several other applications will take hold first.  But If NFC is expected to play a major role in mobile payments and has significant forward momentum, why are contactless payments years away from broad adoption?  Based on research we just completed, there are five key reasons:

1. NFC payment solutions are expensive and offer no clear ROI at this time – they are difficult to justify.
2. Many leading retailers went through expensive post-recession refresh cycles of their core systems, and are not allocating significant budgets for new in-store technology (particularly given persistent economic uncertainty).
3. The percent of consumers with NFC enabled devices remains limited.
4. Mobile payment application development is limited, suppliers’ mobile-payment product portfolios are slim, there is a lack of a universal platform/high levels  of proprietary platforms and significant customization and integration requirements
5. The enablement of mobile payments requires extensive cooperation across a complex payment processing landscape, and many of the required relationships are still at their formative stages.

Our comprehensive study of the NFC market makes us more confident than ever that NFC will have a role in the future mobile payment landscape, but we are equally confident that it will take time for its role to be fully realized. Although we absolutely expect contactless payment to be a blockbuster application, NFC’s immediate opportunity lies outside the realm of contactless payment solutions.  To learn more about NFC and our recommendations for suppliers, download the executive brief.

 

VDC Research’s RFID Takeaways from NRF Big Show 2012

At this year’s NRF show, RFID technology made the strongest showing VDC Research has seen yet.  From RFID vendors and their solution partners showcasing innovative end-to-end application offerings to big retailers and brands reaffirming their  RFID adoption plans, rollouts and program extensions it was clear that RFID is increasingly being positioned as a core technology that enables enterprises to “engage and evolve” (the theme of this year’s show).    

Here are a few highlights we picked up during the course of the event:

• RFID-tagged Apparel Items are the 1% – 200 billion apparel items. This was the estimated total number of apparel pieces globally that was communicated to VDC by several vendors and retailers attending NRF. So, assuming roughly 2 billion RFID tags, that translates to approximately 1% penetration.  The good news is that the percentage (penetration rate) will only increase in 2012 and beyond.
• RFID is Fashion Forward, but Going Backward (a good thing) – Retailers and brands using RFID consider themselves early innovators, positioning them as “fashion forward” versus their peers; however, RFID tagging is most meaningful when you tag at the source, or further “backward” in the supply chain.  Some exhibitors at NRF were predicting a surge in apparel source tagging by the end of 2012 and into early 2013. As a result, source tagging was major theme being identified by vendors this year.  This included strong messaging from Tyco Retail Solutions and Avery Dennison’s RBIS team on RFID source tagging solutions (including offerings that combine RFID with EAS/LP capabilities/functionality) and the announcement of a new solution called ViziT™ from SML Group Ltd.  SML works along with the Impinj STP™ source tagging platform and is able to offer high-speed RFID chip encoding and label printing through SML’s own global network of service bureaus.
• The Magic of Macy’s RFID Message – Macy’s leadership was very vocal once again about its RFID program and plans, offering highlights during a panel. Macy’s Chief Administrative Officer, Tom Cole, reportedly stated that it will only be a matter of time before RFID tags become as common as barcodes, especially for apparel.  He also indicated that while Macy’s, their competitors’ and their suppliers’/brands’ approaches may vary, it is important that we move RFID forward as an industry. We agree with Mr. Cole that RFID will be a competitive advantage and differentiator in the beginning for those that support it, but it will come down to which retailers and brands can put the technology to the best use – just like with barcodes today. 

While most NRF attendees come for what’s new in “traditional” retail solutions, many left this year’s conference with a greater appreciation for the “modernizing” retail solutions (including both RFID and NFC technologies). We expect the 2013 NRF event to carry this trend forward, showing us the next wave of innovative solutions and users of RFID and its related technologies. In fact, we think it would be interesting to see an “RFID Pavilion” or "RFID Showcase" of sorts at a future NRF conference - a dedicated area in which attendees can see how RFID, contactless and NFC technologies can be leveraged to enhance retail operations and the customer experience.

Barcoding at the NRF

I’m back from spending an interesting day at the NRF Expo in New York City. The booths were teeming with activity, and an extensive array of products was on display – mobility, of course, continued to be the raging theme dominating the in-store customer engagement technologies market. 

The barcode scanners and printers showcased at this show set the tone for what we can expect to see from the supplier community in 2012 – tweaks to existing product lines based on internal assessment and customer feedback, as opposed to radical product innovations.

Barcode Scanners

• Motorola has marked its entry into the general-purpose linear imaging space with the cordless LI4278 (which can be mounted on the cradle used by its popular Laser Scanner LS4278), featuring high angular & motion tolerance, a fairly snappy decode performance and also capable of scanning 1D mobile barcodes. While not a low cost device, the company expects this to potentially upstage laser scanners in the long run. It’ll be interesting to see how Motorola pitches this product against its extensive 2D array imager portfolio, especially given the relatively low price differential between the two. For now, it looks like retailers with an exclusive focus on 1D barcodes (for their loyalty and marketing programs, for instance) might choose this product over 2D imagers.
• HP released its very first presentation scanner, with the ability to read both 1D and 2D barcodes, placing it in direct competition with the likes of Honeywell’s Genesis 7580, Motorola’s DS9208 and Datalogic’s Magellan series. The company’s products are targeted exclusively at the retail environment, and the introduction of this scanner plays well with setting HP up to be a one-stop shop for all of the retailer’s in-store technology needs. Retailers, particularly among the lower revenue tiers, are increasingly looking to source all their in-store technology solution requirements from a single vendor.
• Code Corp has decided to move away from its fairly exclusive focus on the healthcare vertical, with an aim to largely capitalize on the mobile barcode scanning opportunity. Their new low cost, entry-level area imager offering, CR900FD, comes out-of-the-box ready to scan standard 1D barcodes with retailers having the option to upgrade to support 2D barcode scanning functionalities at a later date, when the need arises. This concept was floated around by Honeywell in 2011, allowing end-users to pay for & unlock latent 2D capabilities post-purchase, future-proofing (and securing) their barcode scanning investments. VDC expects features such as these to enable a smooth & rapid transition to 2D imagers without significantly interrupting business processes and also minimizing the need to overhaul existing infrastructure.

Barcode Printers

• Source Technologies continues to be fairly aggressive with its strategy to expand and extend its product portfolio and stay competitive with barcode printing industry behemoths including Zebra and Datamax O’Neil. At the NRF, the company announced 2 new printer models – STp.1115 and STp.1125 – highlighting features including durability, ease of use/loading and print speeds. The company has a long way to go in establishing a name for itself in the thermal barcode printer market but seems to be headed in the right direction, establishing strategic partnerships with the channel community and actively marketing its new solution offerings.
• Brother Mobile Solutions officially released its 4” Motorola-certified, industrial-grade RuggedJet mobile printer (Bluetooth and Wi-Fi models). VDC’s end-user survey respondents have, over the past 12 months, continually highlighted the importance of multi-application support with their barcode printers and these models certainly address this need with the capability to print both barcode labels & small forms/documents, and featuring an add-on payment capture ‘sled’.

The key takeaway from this show is how suppliers are increasingly enabling retailers to look beyond the traditional track-and-trace & inventory control (back-office) applications, and leverage barcodes to support and strengthen their marketing initiatives, with an emphasis on enhancing overall customer experience.

Why the Zebra and OATSystems/Checkpoint Partnership is a Good Fit

Zebra and OAT/Checkpoint – two established leaders in their respective markets - announced that they entered into a “cooperative relationship and licensing agreement”.  The non-exclusive arrangement affords Zebra with an OEM license for OATxpress™, a middleware platform used for capturing, filtering and managing data from AutoID systems.  I say AutoID here – not RFID – because the OAT product is a true AutoID platform, not only capable of supporting a host of AutoID and sensor solutions, but also capable of supporting further application development.

Why this is a good fit:

• Zebra adds a proven middleware solution that complements its industry leading location, RFID and barcode solutions, enabling the company to add more value and contribute more to their customers’ installations … as well as the evolution of that deployment.
• Zebra adds a tool to their portfolio that adds functionality, promotes future proofing and supports controlled migration to other/emerging AutoID solutions.
• OAT/Checkpoint gains a ‘heavy weight’ partner in the AutoID industry that not only has one of the strongest brand names in its core markets, but also has a very strong channel that can/will be leveraged to extend footprint and capitalize on emerging opportunities.
• Both companies have overlapping footprints in their target markets (i.e., Asset tracking in Manufacturing), thus each offers the other further reach in core markets with a bigger ‘tool box’.
• The OAT/Checkpoint platform is built on Java which makes it a highly flexible, forward looking platform with a complete set of APIs for distributed applications, enables programs to run anywhere on networks, and runs on top of existing platforms. These and other Java-based capabilities made the OAT/Checkpoint software very attractive to Zebra.   

While the early focus of the OEM relationship will be in Zebra’s and Zebra channel partners’ location products and solutions that leverage the OAT/Checkpoint software platform, we expect rapid integration into other application and technology solutions. This will enable Zebra’s customers (users and partners) to mix and match AutoID technologies based on business process improvement requirements (which drive technology selection/change). 

The complementary nature of this relationship along with the benefits for each firm makes this a win-win in our book.  VDC will be monitoring the maturation of this relationship, the resulting bundled solutions and watching to see if other companies collaborate in a similar fashion.   

Intel gets Involved with NFC

Intel has joined the ranks of companies looking to profit from the rapid growth expected in the NFC market during 2012. In Q4 2011, the company announced a partnership with INSIDE Secure, whereby it will license several of INSIDE’s NFC offerings for use in its own products. Today, Intel revealed at CES 2012 that its new Ivy Bridge chipset supports NFC, particularly for payment and e-commerce applications. The company further disclosed that Ivy Bridge will be featured in up to 75 ultrabook devices that are expected to reach the market during 2012.

While ultrabooks may seem an unlikely form factor to support payment and e-commerce applications, these devices could support some potential use cases beyond the typical “tap-to-pay” functionality, such as auto-form population during online shopping as well as authentication of payment credentials in online transactions. Of course, these devices can also support other non-payment applications like pairing, peer-to-peer, info-tainment and access control, which will broaden their appeal to both consumers and enterprises.

Intel’s entry further boosts NFC’s near-term growth prospects. While exponential gains in NFC smartphone sales have been broadly expected in 2012 for some time now, opportunity for growth in other consumer electronics categories has been limited in comparison. Intel’s entry into NFC (and the numerous ultrabook initiatives using Ivy Bridge chips) rapidly expands the potential market for NFC devices in the immediate term. We expect that as Intel further integrates NFC into its offerings, the range of NFC device types and form factors available to end users will continue to expand.

What Themes Dominated the CET Market in 2011

In 2011, there were 3 themes that dominated the customer engagement technology (CET) landscape - Mobility, Convergence and Application Development.

The need to take the store (or the checkout environment, in the least) to the customers at the point-of-decision, as opposed to drawing them to siloed touchpoints, is contributing to this growing demand for a seamless & consistent shopping experience across multiple customer-facing technology solutions.

A whole host of retail organizations have announced consumer handheld deployments within their installation environments in order to elevate customer service levels and drive loyalty over the past 12 months. VDC expects to see continued investment by retailers in these devices in 2012, especially given their relatively low upfront costs, intuitive user interface and high consumer appeal. While the verdict is not out yet on the success of these installations, it has become fairly commonplace to read about chain-wide deployments of Apple products.

Enterprise mobile device vendors have also been investing heavily in partnerships with the Independent Software Vendor (ISV) community to offer customized application sets that enable end-users to seamlessly integrate mobile solutions into their installation environments, ensuring consistency in service delivery and customer experience. As adoption of mobile devices scales, development of applications with varying degrees of configuration and control seems to be a very distinct possibility.

Finding Success in 2012

VDC expects the most successful suppliers in 2012 will be those who enable end-users to extend the value of their initial hardware investments and reduce TCO by supporting multiple applications with a single (mobile) device.

At the NRF later this month, we look forward to seeing CET vendors’ product roadmaps for 2012. We expect they will showcase their ability to effectively engage consumers and elevate service levels by way of immersive and interactive technology solutions – in alignment with today’s consumer handhelds featuring highly responsive, intuitive UIs and visually appealing image quality.

Multi-touch displays for kiosks and digital signage solutions anyone?