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

Dissecting Honeywell’s Intermec Acquisition: The Potential Road Ahead

Yes, it has been a few weeks since Honeywell announced that it had signed a definitive agreement to acquire Intermec. While this continues to be subject to regulatory approvals, in this blog post I share some thoughts on how this deal may shape up and impact the barcode vendor landscape. Intermec is an active participant in two barcode technology hardware markets – Barcode Printers and Handheld Barcode Scanners. The company has a relatively small presence in the barcode scanning market, with a recent entry into the general purpose scanner space. However, in this category Intermec is up against industry behemoths including Motorola Solutions, Datalogic and Honeywell. I expect Honeywell to fully integrate this part of Intermec’s business into their own; especially given how closely aligned it is with one of Honeywell’s core AIDC competencies. Barcode printing is, however, a whole other conversation.

Intermec is one of the leading barcode printer vendors, according to our research. They rank 5th in our global vendor share chart and are considered to be among the most innovative and resilient brands in the space. Intermec has, over the past 12-18 months, introduced several new barcode printers to the market across all form factors – desktop, industrial and portable. Backed by its strong IP in the space, the organization is well-respected and has a strong presence in each of the regional markets. Is this a business that Honeywell has experience in and is entirely comfortable with? Now this is pure speculation, but I would think not. In my opinion, Intermec’s real value for Honeywell lies in its following areas of expertise – rugged mobile devices, voice technology, barcode scanners and RFID. The barcode printing and media/consumables business is quite possibly one that Honeywell would look to sell to a suitable candidate with an inherent knowledge of this fragmented market and its competitive dynamics, particularly as this doesn’t necessarily fit in with Honeywell’s growth strategy.

To determine the likely contenders vying for Intermec’s barcode printer and consumables business is challenging, but here are my two top picks:

1. ZEBRA TECHNOLOGIES – the undisputed global leader in the barcode printing market. Zebra has a long history of innovation, credibility and dominance in this space. By acquiring this part of Intermec’s broad product portfolio, the company would gain considerable share in each of the regional markets while also successfully leveraging Intermec’s significant presence in the Manufacturing and Transportation & Logistics verticals. Intermec’s strong printer consumables sales would only work to sweeten the pot.
2. SATO CORPORATION – barcode printer market leader in Asia-Pacific, with a much smaller presence in other regions. SATO is a billion-dollar AIDC organization with a business model that is a little different from that of its competitors – a much heavier contribution of consumables sales to overall revenues as opposed to hardware. SATO could significantly benefit from Intermec’s strong barcode printer sales into the Americas and Europe, growing its market presence and share in these regions via a single acquisition.

While it is all pure speculation at this time, I will certainly be keeping an ear out for any such market developments. Stay tuned.

(You can read my other post on this acquisition here)

Datalogic Reaffirms Stationary Point-of-Sale Leadership Position with Launch of Magellan 9800i

Vendors and users have long compared and contrasted the speed and performance of laser-based scanning with camera-based imaging solutions. Improved functionality, lower costs and enhanced barcode scanning speeds have all contributed to the widespread installation and integration of imagers to support several applications in varied markets. Successful penetration in high transaction volume environments has been non-existent, particularly given concerns surrounding their relative inability to maintain high throughput without compromising on features including, say, image quality. Until now.

At NRF 2013, VDC witnessed live demonstrations of two multi-plane bioptic scanner-scale products – by Motorola Solutions Inc. (MSI) and Datalogic – featuring a 100% digital, camera-based imaging data capture solution. Seeing these scanners in action highlighted all the attributes and characteristics that make them viable contenders to replace laser-based bioptic scanners in high-volume retail settings. Since we wrote about MSI’s MP6000 here, the focus of this post is going to be the Magellan 9800i, Datalogic’s latest bioptic scanner-scale.

The top-down scanner design of this imager enables attendants and cashiers to scan items at any angle without resorting to manual orientation. Like with MSI’s product, this Magellan version also provides support to a customer-facing mobile reader enabling customers to scan their mobile coupons, loyalty cards and others without disrupting the transaction and/or scanning process. Datalogic is the undisputed leader in the Stationary Point-of-Sale Scanning market with an extensive product line encompassing several different form factors – Bioptic, Presentation and Mini-Slot – while maintaining a sizable lead over the rest of its competitors in the space. The company has, over the years, fostered strong ties with leading retailers and integrator partners (including NCR and Wincor Nixdorf), pushing out its diverse scanning line to support multiple applications on the retail store-front. With the Magellan 9800i, the company is offering a migration path for its installed base to move from laser-based high-speed scanning to imaging solutions.
 
In VDC’s perspective, it will be interesting to see how the company makes use of its unique position in the industry with an extensive in-house expertise deploying imagers in industrial environments – in manufacturing and logistics verticals – to provide it with a distinct competitive advantage in retail. Will Datalogic be among the first vendors to bring “machine vision” from factory automation to retail applications?

NRF 2013: The Big Show Day 2 in Review

The VDC AutoID team’s second day at NRF was just as busy as the first, and was packed with vendor meetings, new product briefings and walking the show floor. Since our previous post focused on broader trends and observations gleaned from NRF 2013, this blog is dedicated to sharing some of the key vendor announcements and product introductions made during the event:

• NCR and PayPal announced a partnership whereby NCR will leverage PayPal’s leading cloud-based payment technology to augment the functionality of its mobile solutions targeted at hospitality enterprises, particularly restaurant/dining operators. Initially, NCR will integrate PayPal with its NCR Mobile Pay and NCR Aloha Online Ordering applications, giving customers an alternative to using credit/debit cards via enabling smartphone-based online (i.e., PayPal) payment. Besides the convenience and security benefits, PayPal will also bring social commerce features to the apps, including online check-in and reviews. Eventually, NCR also plans to integrate PayPal into its Convenience-Go (C-Go) and Endless Aisle applications. The NCR-PayPal partnership demonstrates NCR’s commitment to “making everyday transactions easier” for the consumer and merchant as well as PayPal’s leadership in the digital payment ecosystem.
• Zebra announced a new line of mobile receipt printers targeted at retailers and other B2C merchants that increasingly leverage consumer grade i-Devices (i.e., iPhone, iPad and iPod touch) as mPOS platforms. The new iMZ220 and iMZ320 are designed for easy integration with mPOS devices (including consumer grade offerings, such as those from Apple) and are among the first Link-OS-enabled products the Company plans to launch during 2013. Link-OS is a new operating system designed for use with Zebra devices which includes a SDK and core software applications that the company believes will make its hardware easier to integrate, manage and maintain from any location.
• HP debuted several new retail-focused POS products that address merchants’ increasingly strong interest in sleek, aesthetically-pleasing stationary terminals and rapidly growing demand for tablet-based mPOS solutions. For retailers seeking a more attractive alternative to clunky, traditional stationary POS terminals, HP introduced its RP7 and RP3 Retail Systems, both of which combine a sleek, modern appearance with the robust connectivity and build quality retail and hospitality operators require. HP also showed its new ElitePad along with a line of peripherals designed specifically for use with the tablet.

As usual, NRF delivered again in 2013 with many great exhibitors, vendor briefings and new product announcements. We look forward to attending next year’s edition, but until then, stay tuned to this blog for more AutoID-related news and opinions. Also be sure to listen to our upcoming NRF Quickcast, in which we will further discuss key takeaways from this year’s Big Show.

NRF 2013: The Big Show Day 1 Recap

The VDC AutoID team attended this year’s NRF in full force. With vendors representing all of the core AutoID markets, including MCET, RFID and Barcode, there were many new and innovative retail-targeted products to see relevant to each of the practice’s coverage areas. The following are a few broader observations from day 1 in the Big Apple:

• Hardware is becoming increasingly less important, and more vendors realize it. Conversely, software, and, more importantly, the functionality it enables, is the critical issue for retailers. Some hardware and solution vendors have been aware of this dynamic for some time now. Others, we think, have only recently awakened to this reality. This is more often (but not always) true in the case of large-scale, enterprise-focused vendors of retail automation and customer engagement solutions that have historically pursued differentiation via hardware ruggedness, lifecycle, and so forth rather than ease-of-use, intuitive functionality and application innovation. During conversations throughout the show, it was evident that several large-scale, traditionally hardware-focused vendors have pivoted to a broader focused strategy—one that seeks to differentiate on innovative software and functionality in addition to hardware.
• Traditional POS terminal refreshes contribute to mPOS growth. The common strategic drivers behind the recent explosion in retailers’ mPOS investment are well documented, and include improved labor utilization and efficiency, better customer service and employee empowerment. However, during our time at NRF 2013, we validated another, more pragmatic factor playing a role in mPOS’ rapid growth: stationary POS terminal refreshes. As merchants update traditional POS systems, vendors indicated that mobile terminals are usually included in their next-generation solution evaluation process. The stationary vs. mobile conversation is different for every retailer, and depends on variables including store format, sub-vertical and strategic/operational objectives, but increasingly the final solution is comprised at least in part by mPOS. While we expect this trend to continue throughout 2013 and well into the future, at the same time we believe stationary POS will remain relevant for many types of retailers as well. 
• The m.Wallet war rages on with no end in sight: The struggle to establish broader adoption in the m.Wallet and contactless payment ecosystem is as highly contested as ever, both in the context of which stakeholder(s) own the m.Wallet (a single retailer, a multi-retailer consortium, the MNOs, etc.) and in regards to enabling technology (mobile barcode, NFC, cloud-based). At this point in time, there is no certainty as to which of these entities and enabling technologies will be successful in the long term. Valid arguments exist both for and against these prospective m.Wallet owners as well as each enabling technology, and all were represented on the NRF show floor. Ultimately, consumers have the final say as to which stakeholders and enabling technologies win. Without consumers’ approval—i.e., their adoption and ongoing use—no m.Wallet or contactless payment technology will be successful in the long term. 

That concludes our recap from the first day at NRF. Stay tuned to this blog for another post highlighting some of the key vendor announcements and observations from day two.

Motorola Solutions Looks to Capture Retail POS Share with New Bioptic Imager

By all accounts, 2013 seems very eager to live up to its promise of being an interesting year for the barcode technology market. To start off, Motorola Solutions Inc. (MSI) made a new product announcement today – the multi-plane 100% camera-based bioptic imager/scale MP6000 – the company’s first foray into the high-volume stationary POS scanning market. What makes this particularly interesting is that up until today, Motorola was the only player from among the BIG THREE in the overall barcode scanner market (the others being Datalogic and Honeywell) with no stationary POS offering for high-throughput retail environments. We expect MSI to sell this product into grocery stores, supermarkets, hypermarkets, mass merchandisers and other such big box retailers. MSI credits its customer-side scanner to be one of its biggest competitive differentiators in an “almost exclusive” bioptic scanner market essentially governed by 3 players – Datalogic, Honeywell and NCR. Motorola’s scanner enables customers to simultaneously scan their own coupons, gift cards and loyalty cards, including those displayed on smartphone screens, with the attendant/cashier facilitating the POS checkout process.

Motorola has established a strong presence for itself in the camera-based, 2D imaging solutions market, particularly with the handheld form factor. VDC’s research covering the space indicates that the company has made significant strides in capitalizing on the explosive growth opportunities that this 2D solution configuration has to offer, especially given end users’ critical requirement to future-proof their technology investments. With continued advancements in 2D performance, Motorola considers the high transaction volume retail market to be primed for a switch from a laser- to a fully camera-based bioptic scanning solution - one that can lower operational costs and enhance data capture efficiencies.

While this is all great news for retailers and the barcode industry doing away with triopoly in this specific technology segment, it will be interesting to see how Motorola prices its newly introduced product. Although the performance of camera-based imaging solutions has improved drastically versus laser technology, pricing is not an apples-to-apples comparison given the increased complexity and high cost of underlying solution components. Will the company’s success with imaging on the handheld side translate to an equivalent achievement with the stationary form factor? This remains to be seen. In our opinion, Motorola will initially target large, Tier-1 retail chains with this product; small-and-medium sized businesses still have to wait their turn, particularly with the (anticipated) pricing structure. My expectation is that Motorola’s success mantra in this market just might be an increased focus on profitability over sales volume – due to the higher associated margins for this brand new product in its portfolio – positioning the company as a one-stop shop to fulfill their retail customers’ barcode scanning as well as future EAS and/or RFID requirements.

Epson Mobilizes to Address Rapidly Growing mPOS Opportunity

Still questioning whether consumer-grade mobile POS (mPOS) devices are a short-lived trend or a here-to-stay expansion of the broader front-end technology solutions at many leading mainstream merchants? Here is another strong point in favor of the latter: Epson, the global market leader in POS receipt printers, recently announced its Mobilink P60 mobile receipt and label printer supports Bluetooth connectivity to facilitate wireless pairing with all Apple i-devices and a diversity of other Bluetooth-equipped consumer-grade devices. The Company simultaneously introduced a new software development kit (SDK) for iOS, Android and Windows operating systems that is intended to expedite the development of mPOS and label printing applications that leverage the Bluetooth-enabled Mobilink printer.

As mPOS solutions gain stronger adoption among retailers and hospitality operators—sometimes as an enterprise’s exclusive POS system—the demand for reliable, easy-to-use printing solutions that complement the mobility and empowerment mPOS provides workers is growing increasingly strong. In response, a number of POS receipt printer vendors—including Epson—have been swift to launch portable versions of their standard, stationary POS printers. These portable printers are certainly smaller than their stationary counterparts and are “mobile” in the sense that they can be easily transported. However, while smaller in relative terms, they are not ideally sized to be wearable for the average worker.

For this reason, we believe a Bluetooth-enabled printer such as Epson’s offering will­­­­ be well-received by many mPOS deploying merchants, especially those using mPOS “within the four walls,” as opposed to in field-sales or other remote applications. The deployment of Bluetooth-enabled stationary and portable printers enables mPOS-equipped associates to fulfill any printing requirements encountered during their shift while freeing them from the burden of carrying another device on their person. Furthermore, enabling on-the-go, mobile printing via shared Bluetooth-enabled (or other wirelessly accessible) devices allows enterprises to reduce printing hardware investment by eliminating the need to equip every associate with their own mobile printer. Accordingly, in the case of many mPOS deployments, we expect this approach to mobile printing will be favored both for its lower investment costs and freeing employees from carrying additional equipment.

VeriFone Furls its SAIL

Less than a year after launching its SAIL m.payment solution, payment terminal giant VeriFone has essentially pulled the plug on the product, which is its version of a Square-style card reader dongle. Citing a number of major challenges, including fierce competition in this nascent, but rapidly-growing market and the razor-thin margins on SAIL-based payments, the Company’s CEO officially disclosed SAIL would cease operations (save for continuing to service current users) in its recent Q4 earnings call.

While it is somewhat surprising that a well-established company like VeriFone is bailing out on a new product so quickly, the closure of SAIL clearly demonstrates the cutthroat competition in this market and could portend further consolidation or business failures of other similar ventures in the near-term. Certainly there is no shortage of Square-like solutions, with numerous hardware- and software-based competitors in the consumer-grade device mobile payment market (including Intuit, Paypal, Dwolla, iZettle and Groupon, just to name some high-profile players). Perhaps even more problematic for these m.payment service providers is that the business model on which they are founded is generally a race-to-the-bottom in regards to profit margins, with the major differentiator between each competitor often being the percentage fee charged for processing payments.

Looking ahead to the future, we believe the mobile payment competitors that will be viable for the long-term will be those that successfully layer value-added applications/services such as loyalty, coupons/offers and other mobile commerce functionality on top of their basic payment processing service. To the extent that these adjacent applications drive stronger customer loyalty, larger average ticket sizes and increased footfall for merchants, m.payment service providers can leverage them to generate additional revenue streams, differentiate their offering and attract new merchant partners. Conversely, we expect m.payment providers that remain reliant on processing fees for the majority of their revenues will see fiercer competition, shrinking margins and increasingly stronger chances of failure as payment processing service becomes more commoditized.

 

 

 

AutoID Market Shakeup - VDC's Thoughts on Honeywell Acquiring Intermec

At VDC, we have now, in a way, come to expect big acquisition-related news towards the end of calendar years – case in point, Datalogic’s acquisition of Accu-Sort and SMARTRAC N.V.’s acquisitions of UPM, KSW and Neology in Q4, 2011. Throughout 2012, VDC has talked about how we expect to see leading players in the space – for both barcode scanners and printers – to consider consolidating their competitive landscape and strengthen their leadership position in existing markets while also tapping into adjacent high-growth market opportunities. On December 10th, 2012, Honeywell International Inc. (NYS: HON) did just that – announcing its acquisition of one of the global leaders of AIDC solutions, Intermec (NYS: IN), for approximately $600 million in an all-cash transaction. Intermec is the only company involved in the development, manufacture, sale and integration of all core AIDC technologies (barcode scanners, barcode printers, RFID, rugged mobile computers, etc.), thereby giving enterprises with AIDC solution requirements a “one stop shop” alternative. Our focus in this blog post will be on highlighting the impact of the company’s acquisition on the barcode and RFID markets.

From a strategic perspective, some of the key benefits that Honeywell can leverage via this acquisition include:

1. Honeywell has registered strong performance in the barcode scanning market since its acquisitions of Metrologic Instruments and Hand Held Products in the last decade. The company, however, has had an extremely limited presence, if at all, in other AIDC markets. It is only in May 2012, for example, that Honeywell’s AIDC division launched its first RFID-enabled device – the Optimus™ 5900 RFID mobile computer – capable of reading EPC Gen2 and ISO 18000-6B RFID tags. With this deal, the company has bought an immediate entry into several adjacent technology markets given Intermec’s relatively strong play in barcode and receipt printers, consumables, RFID printer/encoders, RFID readers, and other hardware. VDC considers Intermec’s strong IP (intellectual property) in the RFID market to have been a crucial decision driver for Honeywell especially as the company looks to capitalize on new, high-growth opportunities in this multi-billion dollar market – most notably in the Manufacturing and T&L verticals.
2. Intermec’s value proposition as a “one stop shop” for AIDC resonates, in particular, with warehouse and manufacturing IT professionals looking to standardize on one branded platform. The company has also been investing resources towards building out its presence in the health care services market – with new product introductions and channel alliances. This acquisition thus gives Honeywell significant leverage in these vertical markets.

Despite all these synergies, VDC expects Honeywell to face stiff challenges as it looks to revive Intermec’s financial performance in its key markets – across regions, verticals and technology segments – and minimize the revenue impact of economic volatility in Europe. The company has, however, been very active with new product introductions across its barcode scanning and printing portfolios over the past 6-12 months, showcasing a continued focus on research and development initiatives.

The deal is a very strategic move by Honeywell and certainly shakes up the competitive landscape in the AutoID market. The addition of Intermec’s large installed base of customers and channel partners to its own positions the company for continued success in increasingly difficult and demanding operating conditions. Questions remain on what this means for Intermec’s employees, product lines and channel. And we will have the answers for you once this acquisition closes out in 2013.

NCR Continues to Diversify with Acquisition of Retalix

NCR formally announced this past Wednesday an agreement to acquire Retalix, an Israeli vendor of retail, marketing, supply chain and logistics software solutions. The transaction is valued at $30 per share, or approximately $650 million and is expected to close sometime during Q1 2013. NCR intends to finance the acquisition via a combination of cash and an existing debt facility. Via the acquisition of Retalix, NCR strengthens its competitive position in several respects:

• Expanding its retail automation and customer engagement hardware offerings to include a more diversified range of software solutions, both for customer- and employee-facing applications
• Broadening its services portfolio to include additional professional/integration and managed services options
• Solidifying its status as a go-to vendor for end-to-end solutions that meet the specific, unique requirements of retail end users

We view the Retalix acquisition as a well-advised strategic move that furthers NCR’s diversification into the enterprise software market. While it has historically been known for high-end customer engagement and retail automation hardware (in addition to kiosks, ATMs, etc.), during the past 18 months, NCR has made a concerted effort to broaden its software portfolios—especially those geared towards retail and hospitality end users—via strategic acquisition and organic development.

For example, in August 2011, NCR acquired Radiant Systems, a specialized provider of hospitality POS software and solutions, for approximately $1.2 billion. The addition of Radiant materially strengthened NCR’s competitive position within hospitality, where the company had historically been weak relative to its status as a retail leader. In retail, the company recently launched its NCR Silver product—which enables merchants to integrate POS-enabled iPads, iPhones and iPod touches with stationary POS terminals—to address the rapidly growing demand for consumer-grade mobile device use in the enterprise. While Silver is geared towards SMBs, we expect the Retalix solutions that will soon be part of the NCR portfolio will appeal to a broader range of retailers, including Tier 1 leaders like Home Depot and Walmart, where the company has a well-established installed base.

Furthermore, we believe NCR’s efforts to diversify its software and service capabilities are indicative of a broader interest among end users (merchants and hospitality operators especially) to leverage technology platforms for a set of applications well beyond those with which they are traditionally associated. In the context of POS systems, for example, requirements now often include applications besides typical sales and payment functions. In hospitality, operators also need to accept/administer loyalty programs, manage digital menu boards, accept mobile payments/coupons and potentially support a range of back-of-house functions as well. Retail has similarly diverse requirements—and the acquisition of Retalix will enable NCR to meet these needs more consistently across a broader range of merchants. 

The growing importance of specialized merchant/hospitality solutions is a topic we will explore further our upcoming MCET research—contact us for details.

To NFC, or Not NFC? That Was My Personal Smartphone Question...

I admit it—I’m an Apple user. Call me whatever you want…fanboy, sheep, mindless minion worshipping at the altar of the Great Jobs. It doesn't bother me. In my experience, Apple stuff—while pricey—lasts longer, is generally easier to use for those of us who are not (and have aspirations of being) computer programmers and is usually (but not always) very well-designed and supported from UI, UX and aesthetic perspectives. Case in point: my recently deceased (cause of death: buggy “home” button) iPhone 3Gs provided nearly 4 years of trouble-free service despite the general abuse I heaped upon it.

Contrary to what one might assume, despite being a technology analyst, I do not eat, breathe and sleep tech. Certainly I appreciate technology for the conveniences and other benefits it provides me, but generally view any device as if it were an appliance. Sure, I get excited whenever it is time to look at a new laptop, smartphone or what have you—but after the initial novelty wears off, I just want the thing to function as intended—with minimal hassle and no headaches. I’m not the guy camping out in the mall for the latest i-device. I AM the guy who waited 7 years between getting a new laptop.

That being said, I have a soft spot in my heart reserved for NFC—both because I think it is a (potentially) useful technology and because I spend a significant amount of my work focuses on the market. With my iPhone having been on its last legs for the better part of this year, I (like many others) wanted a new iPhone with NFC. But, as we all know, the iPhone 5 is not NFC enabled. Thus, I had a decision to make with my new phone: stay loyal to Apple/iOS, or jump ship to Android or Windows and get a phone with NFC.

I thought long and hard about going the non-iOS/NFC route. I read many online reviews of leading Android and Windows smartphones. I tested the devices in-person at the store. I imagined what I might use NFC for in my day-to-day life—now, probably not much, but perhaps in the future, paying for lunch or a coffee with a tap of my phone. As someone who dislikes cash, contactless payment is an appealing concept.

Conversely, I envisioned the potential downsides of straying from iOS—mainly, hassles with syncing to my home computer (yes, it’s an Apple) and learning a new  mobile operating system. While both of these are relatively minor issues, I was left with wondering, why bother? What benefits does NFC offer that justify these (and other) compromises? I could not find a compelling answer to that question—and so I went with another iPhone.

Certainly, my personal technology usage, preferences and views may be unique. But, strictly in the context of NFC, I believe they are generally applicable to most consumers—and indicative of the NFC ecosystem’s shortcomings. Other than the increase in NFC smartphone availability seen in 2012, what material progress has the ecosystem made recently? Very little.

At present, in most regions, NFC cannot be used for the headline applications—payment and ticketing, for example—for which it is billed. Right now, most consumers using NFC are confined to simple, basic applications like P2P sharing and pairing.  For me—and I suspect many other consumers—these features are “nice-to-haves,” not “must-haves” when shopping for a new smartphone. Perhaps in the future, the NFC ecosystem will progress to the point where contactless payment and ticketing are broadly-accessible to the average consumer. But, until that time, it’s hard to envision NFC having a material impact on consumers’ device preferences—particularly those that are hooked on iOS.