Word about Digimarc’s digital watermark for consumer products or the “invisible barcode” as they’re calling it, is starting to get around. A technology company based in Oregon, Digimarc is renowned for its digital watermarking and identification solutions used in global currency, government IDs, television, and publishing. The company is now focused on expanding its presence into the retail front-of-store with its barcode alternative. Without getting too technical, Digimarc takes a traditional UPC barcode, makes it invisible to the naked eye, and puts it all over the packaging of a product. The camera-based imager being used to scan the items at the front-end of a retail store quickly picks up this imperceptible digital information and allows the check-out process to be completed in record breaking times. Digimarc claims that this new technology not only clears up space on the product label, but also increases check-out efficiency thereby enabling retailers to significantly increase revenues and enhance operational efficiencies at the front-of-store. Digimarc is committed to transforming customer experience at the retail front-of-store. At the starting price of $400 per SKU (with an additional maintenance fee of $50 per year), they look to provide outstanding ROI to any retailer deciding to use this new technology.
At the 2014 NRF event, Digimarc announced its partnership with Datalogic, the global market leader in the stationary point-of-sale scanner segment. Datalogic first integrated the technology to scan Digimarc’s invisible barcodes into their Magellan 9800i multi-plane imager. Since then, Datalogic has extended the ability to capture information off Digimarc barcodes onto every imager they currently sell across both stationary as well as handheld form factors. When retail companies purchase these imagers from Datalogic, utilizing the features to scan Digimarc barcodes will be as easy as “flipping a switch.”
Wegmans, a popular large-scale grocery store chain, was Digimarc’s first retail customer. Being a Datalogic customer, Wegmans has started by incorporating the Digimarc barcode onto its private label brands, which its in-store imagers are now fully equipped to read. Although the retailer won’t release specific statistical performance data, it claims that it has added “a lot of value” to its front-of-store operations. At the 2015 NRF convention, the Digimarc booth had a representative from Wegmans endorsing Digimarc’s technology – a clear indication that Wegmans is satisfied with the performance of these invisible barcodes, and that it is adding value to the grocery stores.
From a quick glance at Digimarc, it looks like the company is on its way to success and profitability. However, VDC sees the company facing some challenges as well along the road. A sharp decline in one of their largest sources of revenue (licenses) has had a significant impact on Digimarc’s financial performance. 2014 was also the year when Digimarc spent more than 50% of its overall revenues on R&D to enhance and the support the launch of its Digimarc Barcode product, among others. This had a material impact on the company’s share price, which has gone down more than 30% from a year-ago period. VDC believes the company will alleviate these financial challenges in time as revenues from Digimarc Barcode and other products offset the decline in licensing sales. In the near-term, a bigger challenge for the company is the relative under-penetration of camera-based imagers at the retail POS for facilitating check-out within high-volume environments. For the moment, Digimarc has only one large scale retail customer, which brings to the forefront the challenges associated with bringing to market a potentially revolutionary product identification solution. In addition, VDC also expects numerous retailers to ask the question “Is there a need for this technology?” Sure, it has been proven that this technology will offer a good ROI overtime but large retail and CPG companies, and even packagers have to run their own cost benefit analysis to figure out if the invisible barcode is worth the investment.
As with anything, it is definitely possible to overcome these above-mentioned challenges. Digimarc has to continue to prove that their technology is revolutionary and that it will transform, perhaps forever, the front-of-store experience. It will gain increased consideration once retailers and CPG companies (and their packagers) are able to quantify the value that the Digimarc Barcode will add to their business. Until then, Digimarc has to continue to play the waiting game.
Stay tuned for VDC’s deeper dive on Digimarc and its Invisible Barcode, which will be published next month.
With Alex Bailey, Research Assistant