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.

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 
• 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.

Personal Shopping Systems-There's an app for that, too...

Stop & Shop is scaling its Scan-It Mobile initiative, an Android/iPhone-based version of its original handheld Personal Shopping System (PSS). At the end of October, the supermarket extended the app to 42 more stores throughout Massachusetts, Rhode Island and Connecticut. Leveraging a smartphone’s embedded camera as a scanner, the Scan-It app allows customers to scan & bag their groceries as they shop, thereby expediting the checkout process. As a regular Stop & Shop customer and iPhone user (not to mention analyst covering PSS), I was interested to test the Scan-It app first hand. I got that opportunity this past weekend while doing my weekly grocery shopping.

Overall, the performance of the Scan-It app on my “old” iPhone 3GS is impressive. In most cases, the camera scanned with approximately 90-95% of the efficiency as compared to the dedicated Scan-It solution, which I have been using on a weekly basis since it was introduced several years ago.

The app is not flawless, however. On several occasions I noticed the camera struggling to focus, delaying the scan. That said, I also experienced scans that occurred with the same speed as the purpose-built Scan-It solution. The only other shortcomings I noticed were the ergonomics of using the iPhone as a scanner and the hassle (relative to the dedicated Scan-It solution) of repeatedly scanning multiple purchases of the same item. I suspect this latter issue could be addressed through the addition of some kind of quantity-input feature in an updated version.

Considering the solid performance of the Scan-It Mobile solution, PSS apps such as Scan-It could represent a threat to the business of dedicated, purpose-built PSS hardware suppliers. By offering PSS via a smartphone app, retailers essentially eliminate the hardware investment required to deploy PSS, thereby enabling PSS to be deployed across a store chain with relatively little added expense. While ensuring data security—both for the customer and the enterprise—remains a critical issue, we expect more retailers seeking PSS will evaluate smartphone apps in addition to dedicated solutions.

Intermec’s First Foray into the Value-Priced Scanning Category

Intermec, a global market leader for AIDC solutions including barcode printers and scanners, recently released a general purpose handheld linear imager, SG10T, targeting the small- and medium-sized business segment across multiple vertical markets and installation environments. The solution has been designed for non-industrial use, which marks a shift from the company’s traditional stronghold. While classifying it as a low cost, easy-to-use barcode imager, Intermec is also offering a 3-year warranty with the product that has a list price of $140 (€108).

At VDC, we expect to see the global market for handheld linear imagers (both industrial and non-ruggedized) to grow at a robust 7.9% CAGR from 2010-2015. This growth is, however, expected to plateau as 2D imagers become largely disruptive to laser scanners and linear imagers over time, as enterprises increasingly develop and execute their migration paths to the same. By featuring an “out-of-the-box ready” experience at an attractive price point, however, Intermec has an advantage of being highly appealing to lower revenue tier organizations who largely invest in 1D barcode scanning technologies while waiting on the continued price erosion of 2D imagers.

The biggest challenge for Intermec with this product launch, marking the company’s first foray into the value-priced scanning category, might just be communicating the value propositions to its distribution channel partners. With such a broad portfolio of AIDC offerings across product categories, however, this industry behemoth can expect to cater to an extremely wide spectrum of end-user enterprises.

The press release for this product is available here.

VDC’s 2012 Barcode Solutions Market Coverage

We recently published the research outline for our 2012 coverage of the barcode solutions market (available here), with a focus on each of the following technology types – Barcode Printers, Scanners and Software solutions. 

We are expanding our coverage to include analysis on the Barcode Software solutions market with an aim to answer some of the primary questions about growth drivers for software investment, budgets allocated, supplier competitive landscape, etc. We expect to focus our coverage on building market estimates & forecasts for the following 3 areas:

1. Barcode Label Generation – maintaining compliance with industry, government and consumer standards
2. Remote Device Management – increasing uptime, and reducing downtime response
3. 2D Imaging Applications – enabling multi-application support on more robust development platforms

VDC is most excited to be offering “FastForward” reports, which will provide executive leaders with deep-dive commentary & analysis on the most important issues affecting the global barcode solutions market each quarter. Along with our continued focus on preparing supply- and demand-side focused barcode solutions reports, we will be providing insight on the following FastForward topics in the upcoming service year:

• Mobile Barcodes & the Consumer
• Imaging Applications – Beyond the Barcode

Given that 2012 is now almost upon us, what do we expect to keep an eye out for in the barcode solutions space? While we’ve discussed this extensively in our Webcast, here are some of the key trends that we expect will shape the marketplace over the course of the next 12 months:

• The barcode solutions markets has been considerably impacted by economic volatility and pushing back of refresh cycles over the past year
• Intensified competition from suppliers in APAC
• Increased interest in AutoID technology convergence (Barcode, RFID, RTLS, NFC) to extend platforms & provide unprecedented value
• Growing partnerships with the ISV community in response to increased demand for convergence, integration, and application development & support

We look forward to having extensive discussions with the barcode supplier community as we continue with our research initiatives and explore new & emerging trends in the marketplace for 2012.

My Experience at the AIM and PACK Expos

I spent two days at the AIM and PACK Expos in Las Vegas this past week.  Although light on enterprise end user foot traffic on the show floor, the AIM Expo was chock full of great sessions and presentations and turned out to be a decent peer networking event.  Most exhibitors I spoke with were expecting more of a carryover from the mammoth PACK Expo; however, the general consensus was that the sessions on various AIDC and Mobility technologies and applications made up for the shortcoming.  Personally, the slower-than-expected traffic worked in my favor as I was able to spend more time talking to the highly knowledgeable individuals manning their booths.  Special thanks to Citizens, Seiko, Datamax-O’neil, Datalogic, Intermec, Seagull Scientific, MetalCraft, DAP Technologies, Feig, Infineon, Source Tech, Flexcon and Bluestar.

The Pack Expo was huge!  Word on the street was that there were more than 30,000 attendees walking a show floor that seemed to never end.  There were impressive displays of automation, robotics, packaging and labeling, but surprisingly, there was little about AIDC solutions.  Sure, barcodes were being printed and applied at many booths, but with the exception of a few vendors, I did not get to see every booth.  Vendors such as Intermec, ITW and Videojet, track/trace solutions were severely underrepresented.  Now I know that this is a packaging and automation show, but I really expected to see more AIDC solutions represented, especially since it is a critical part of the packaging solution for most vendors (and since nearly every box being prepared or packed had a barcode on it!)

The lack of AIDC solutions at the Pack Expo was most likely the reason for the limited traffic flow to the AIM conference.  Regardless, I enjoyed both shows and very much appreciated the time and attention the vendors afforded me.  Even though I’m immersed in the AIDC market on a daily basis, I gained an enormous amount of knowledge, particularly from the AIM sessions. 

A few highlights include:

• Bluestar’s ‘In a Box’ solutions.  What a novel concept - packaging a complete, application specific solution together … in a box.  Easy to set up via basic directions and a comprehensive configuration by Bluestar leveraging their diverse portfolio of products, software and services.   Talk about an out-of-box experience.  Check it out on their website http://us.bluestarinc.com/in_a_box
• Source Tech’s new thermal printers.  Very user friendly and offering additional functionality (i.e.: USB and open software platform) while still meeting customer preferences and remaining highly price competitive.  Check them out on their website http://www.sourcetech.com/

Imaging Solutions - Market Overview

Imaging vendors’ experienced strong growth in 2010 as end-users loosened their purse strings to re-invest in AutoID solutions – suppliers derived more than $417 million via sales of Linear and 2D Imagers, corresponding to a year-over-year growth of over 29%. End-user enterprises across vertical market segments (Retail and Transportation, in particular) have been allocating a greater percentage of their technology budgets toward investments in imaging solutions due to rapidly declining prices, proven ROI, improved performance and an increasing number of applications that extend barcode platforms such as signature capture, auto-forms population, age verification, mobile marketing, track-and-trace, etc. 

While increased adoption of PDF417 in logistics operations and GS1 DataBar at the grocery POS and health care, will continue to spur demand for linear imagers in the near-term, customers will increasingly turn to 2D imagers for their image capture capability and native support for more barcode symbologies. Not only is the price of these 2D devices becoming more competitive (and less cost-prohibitive), they also offer benefits such as omni-directional scanning, no moving parts (less fragile), enhanced ability to read damaged barcodes, 1D & 2D decoding and image capture.  Price is not as big a factor for businesses if they are able to future-proof and extend existing platforms.

Imager vendors are benefiting greatly from growing interest in & proliferation of 2D barcodes and are increasingly collaborating with software developers to build applications that cater to specific requirements of deploying organizations across a variety of vertical markets. VDC expects continued investment in this technology solution – the global market for Linear and 2D Imagers is slated to grow to $679.1 million by 2015 – while value-added support services help vendors differentiate their offerings in an otherwise highly commoditized marketplace.

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.

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.    

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.