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

Nintendo Makes NFC Technology Vendors Say "Wiiiiii!!"

Nintendo’s Wii platform revolutionized the home videogame console with its motion-sensing controller, thereby enabling a more interactive gaming experience.  With its latest version of this platform, the Wii U, Nintendo is looking to push the envelope once again…and this time, NFC (Near Field Communication) is positioned as the big differentiator.  The Wii U features a NFC-enabled touch-screen controller, and will initially leverage its NFC capability for payment, player profile creation, game card management, and/or avatar/character creation and storage.  For example, a player can use NFC to pay for access to new game levels/features and save their progress. Provided the NFC concept is intelligently designed and executed, and well-supported from the developer community perspective, we view this as a very positive development for the overall NFC market for four reasons:

• The integration of NFC into the Wii U will introduce more consumers to the technology—resulting in increased awareness and market growth. The opportunities for growth and exposure are significant—Nintendo sold approximately 20 million Wii consoles in 2010 (4 years after its introduction). For many customers, the Wii U console will be their first exposure to NFC applications.  Furthermore, based on our end user research, the demographics of videogamers are well-aligned with those of early adopters of NFC. We think a positive experience with NFC gaming will pique consumer interest in other NFC devices and applications, thereby driving growth in the broader market.

• Nintendo offers application developers an entirely new platform for innovation and experimentation. We believe one of the keys to NFC market growth is a robust and engaged developer community that creates the applications that bring NFC technology to life. The emergence of NFC in videogames brings a large and experienced group of developers into the broader NFC ecosystem.

• If the Wii U follows the successful path of its predecessor, we expect competing platforms (namely, Playstation and Xbox) to follow suit with NFC integration. The video game market is highly competitive, and success is defined by innovation and technology advancement. If Nintendo’s integration of NFC is well-received, we think its competitors will be quick to embrace the technology as well—thus driving further awareness and demand for NFC hardware.

• A positive reception for NFC in videogames will pave the way for the technology to be integrated into other consumer electronics. Time and again, an innovation that takes root in one type of device soon spreads to others—consider gesture recognition and touchscreen technology, for example.

Unless something goes very wrong with Nintendo’s NFC implementation, we see it as a big step forward in NFC adoption, sowing the seeds for future NFC market growth.

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.

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.

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.

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.

Verifone on Point with Recent Acquisition

Payment terminal solution supplier Verifone continues to pursue accretive growth. On January 3rd, the company completed its acquisition of Point, a leading provider of payment solutions in northern Europe. Point, headquartered in Stockholm, will continue operations under the same name, but as a wholly owned subsidiary of Verifone. Point represents the latest addition to the list of Verifone’s acquisitions over the recent past, which also includes WAY Systems, Gemalto’s payment terminal operations, Hypercom’s non-US operations and Global Bay.

The acquisition of Point has significant strategic importance for Verifone. The transaction rapidly increases Verifone’s presence in EMEA, particularly in Northern Europe, where the company has historically lagged behind the regional share leader, Ingenico. Combined with Verifone’s previous acquisition of Hypercom’s EMEA operations and Gemalto’s payment terminal business, Point further solidifies the company’s status as a serious threat to Ingenico’s market-leading position.

Furthermore, the addition of Point further extends Verifone’s portfolio of alternative payment solutions, including those for supporting NFC contactless payments and mobile commerce. EMEA is a particularly important regional market in the context of NFC payments, as historically stronger availability of NFC-enabled devices and a more robust installed base of contactless infrastructure could drive faster adoption of more advanced NFC solutions in this region.

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.

VeriFone's Acquisition of Global Bay Technologies

On November 1^st VeriFone announced its acquisition of Global Bay Technologies, a mobile retail solutions provider behind some recent mobile POS deployments including Guess and PacSun. This is in line with VeriFone’s strategy to invest heavily on inorganic growth strategies (to the tune of $1 Billion), as the company looks to expand its presence in key vertical segments & emerging country markets.

Global Bay has focused heavily on developing mobile POS applications, particularly for the iOS platform, to support a variety of applications including (but not limited to):

• Queue busting, speedier checkout
• Scalable POS bandwidth for peak hours
• Targeted sales, personalized promotions
• Enhanced labor efficiency – enabling product information lookup

What makes this acquisition interesting is that both VeriFone and Ingenico (with its iPA280) have, over the past few months, broadened their solutions offerings beyond payment and made an entry into the mobile POS market. VDC sees the market for enterprise mobile POS hardware growing at a CAGR of 11.4% over the next 5 years to around $230 million, and expects payment terminal vendors to offer stiff competition to the other suppliers in the space.

This acquisition by VeriFone is also in line with VDC’s assessment of the customer engagement technology market back in May (here), where we discussed how this universal mobile form factor is causing convergence in the supplier ecosystem for key product types, having them compete for tighter retail IT budgets.

Is VeriFone looking to extensively leverage Global Bay’s POS application platform to drive traction for its PAYware Mobile devices or its dedicated mobile payment terminals? Will consumer devices make an even bigger push into the retail in-store environment with this acquisition? These are some of the questions we expect to get an answer to in the coming months, going into 2012, as the concept of ‘mobility’ yet again redefines the competitive landscape for some of the traditional point-of-sale solutions.

 

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.