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.

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.

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.

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.

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.

 

RFID Market Development to Date in 2011: The Treats/The Tricks (Part II)

Happy Halloween from VDC Research!  As a follow-up to Part I posted on Friday, VDC Research is continuing its brief take on the RFID market to date in 2011.  In the spirit of Halloween, this time we highlight a few of the “RFID tricks” we have come across so far this year.    

RFID Tricks:

• NFC: Is it a hype or ripe market?  We have been talking about NFC for more than a decade. Over the course of that period, we have experienced a few hype cycles.  We do agree there is a lot of hype, and the hype can be likened to what we saw in 2000 – albeit a bit more practical in its implementation today. But something useful will come out of it in the short term. Most of the hype surrounding NFC is about payments. The core issue is that this proposition only works when there is a critical mass of contactless terminals in place, and this is not happening at a break-neck pace, or if the terminals are there, then they do not seem to be used much, especially for NFC. VDC Research, however, believes that what will turn NFC from promise to reality in the short-term is real-time personal marketing, merchandising and loyalty (aka “smart marketing”). We advise industry observers to stop thinking “mobile payments” alone when you hear NFC, because payments are just the tip of the iceberg. Start thinking about a totally new medium and different paradigm – NFC-enabled mobile advertising, shopping, infotainment, loyalty and verification/access platforms for mobile devices. Then you will understand why NFC is here and happening.
• Wal-Mart retail apparel tagging slowed after a strong start in 2010.  The world’s largest retailer captured lots of headlines last year when it declared it would begin tagging several lines of apparel with RFID. Tag volumes in the billions were cited, along with aggressive timelines that have become all too familiar when it comes to Wal-Mart and RFID (recall the case and pallet tagging program volumes and timelines?). At this point Wal-Mart’s retail apparel “push” is being delayed to at least mid-2012, but this is not a big surprise to VDC Research and somewhat expected given the massive undertaking. And, Wal-Mart’s RFID stutter-steps have not deterred scores of retailers from moving forward with RFID tagging of apparel items (see Macy’s, Bloomingdale’s, JC Penney, American Apparel and others). Some would argue that the “trick” from Wal-Mart is a “treat” for other retailers who are now capturing the headlines today.
• The economy: enough said. The weakened economy is a “trick” for most industries today and the RFID market has not been immune. However, the RFID market is not contracting and VDC Research argues that the forecasted flat-to-slight growth in RFID markets is better than a decline, especially in down economy. Like many, we wish the economy would provide more treats than tricks in more sectors these days, including the RFID market.

RFID Market Development to Date in 2011: The Treats/The Tricks

In the spirit of Halloween, it is time to ask ourselves: “Is the RFID market in 2011 full of tricks or treats?”  With the market racing toward the end of 2011, we are already being asked to give our take on the RFID market this year. There are still two full months left for action, but if I look into my analyst bag of goodies this Halloween, I see lots of RFID treats, but there are a few “tricks,” too.  Part I will look at the “RFID treats,” while Monday’s Part II will highlight a few “RFID tricks.”

RFID Treats:

• The RFID market continues to penetrate a broad range of application areas and industries.  There are the RFID stalwart applications such as access control, electronic toll collection (ETC), contactless ticketing, e-ID, library management and others that continue to generate solid revenues and opportunities for vendors and solutions providers targeting those markets.  Then there are the burgeoning areas of RFID in application areas such as supply chain management (e.g., item-level tracking in fashion apparel as well as anti-counterfeiting and brand protection in pharmaceuticals), asset management (most notably using passive UHF), RF-enabled sensing and monitoring (e.g., food safety and traceability, biologics) and electronic vehicle registration (EVR) as an extension of AVI (automatic vehicle identification) to name a few. 
• Innovation continues unabated in the industry. From new NFC inlays/tags to new passive UHF RFID readers, chipsets and modules to new RFID tag ICs to new software packages (including cloud-based solutions), many innovative products and solutions have been introduced in 2011.  Avery Dennison, Identive NFC, UPM RFID and others launched new lines of NFC inlays and tags. Alien Technology, Motorola, Nordic ID and others unveiled new finished, dedicated reader offerings.  New passive UHF EPC ICs from Impinj (Monza 5), Alien Technology (Higgs-4), NXP (UCODE I2C), Tego (TegoChip 2000), and CEITEC (CTC 13000) have also been released.  New cloud-based software and services from IGear, InSync, Queralt, RFID Global Solution, Terso and others were also announced this year.  Again, innovation has been on full display and we expect the trend to continue in 2012 and beyond.
• Mobility plays an increasing role in RFID product, solution and market development each year, and 2011 was no exception.  New RFID handhelds, cloud-based solutions and NFC initiatives have taken center stage as vendors, integrators and end-users embrace the simple fact that mobility matters – especially among an increasingly mobile workforce and consumer base.

We invite you to come back to this Blog on Monday to see what “RFID tricks” VDC Research has identified so far in 2011.

NCR Acquiring Radiant Systems, Inc.

On July 11, NCR (NYSE: NCR), one of the largest global technology vendors for assisted- and self-service solutions, announced its intention to acquire Radiant Systems, Inc. (NASDAQ: RADS), a leading technology solutions provider to hospitality and specialty retail establishments. NCR extended a cash tender offer of $28.00 per Radiant Systems share, with the equity purchase price of $1.2 billion having been approved by the boards of directors of both companies. Subject to regulatory approval, this transaction is expected to close during the 3rd quarter of 2011.

NCR’s traditional stronghold has been on the Financial Services and Retail vertical markets. This acquisition gives the company an immediate leadership position in the hospitality and specialty retail verticals, with a well-known, highly regarded and broadly installed brand.  Radiant expands NCR’s total-available-market by approximately $8 billion – this large expansion of addressable market for both organizations has led them to set a long-term business model goal of more than $7 billion in revenue and growth margins in the mid-30s.

In VDC’s opinion, this deal is a very strategic move by NCR to expand into core industry verticals – horizontal integration in order to enhance market share, increase revenue growth rates and improve margins by expanding mix of software & services – offering more complementary adjacency than the Entertainment vertical. While both companies offer software and solutions, Radiant’s growing subscription-based offering will enable NCR to build more software into the overall revenue mix resulting in substantial financial benefits.

To learn more about VDC’s analysis of the deal and the implications that we expect this acquisition to have on the global competitive landscape for retail automation solutions, click here.

EAS Gets a Boost from RFID

Checkpoint Systems recently introduced its Overhead RFID EAS system, a packaged solution that combines EAS with RFID.

Checkpoint, a market leader in loss prevention solutions for retail, just introduced its first EAS/RFID system.  The solution, which includes a low-profile, concealable overhead reader, satellite antennas, software and an alarm box, is targeted at most retail installations, particularly image-conscious fashion/clothing retailers who desire an unobtrusive and smart EAS solution.  

The new system leverages Checkpoint’s Wirama reader, the first reader fully manufactured by the company and a result of its 2009 acquisition of Wirama.  It is further differentiated by its use of hard tags, as opposed to consumable hang tags. Hard tags—which account for the vast majority of item-level tags in retail—were chosen to increase security (hang tags are relatively easy to remove) and to maintain consistency with current EAS form factors used in apparel. 

The performance of this solution still has some limitations (for example, no add-ons for metal detection to combat foil bags), however, the value it offers is significant and is expected to simplify cost-justification.  This system offers EAS that performs similarly to traditional solutions, but is enhanced with RFID capabilities. As a result, instead of simply alerting associates that an item is leaving the store without authorization, the Checkpoint solution is capable of identifying what specific item(s) were taken and directing that information to ensure the most appropriate and timely response. Furthermore, the system is capable of identifying potentially suspicious merchandise movement, enabling associates to take preemptive measures.

Specifications are provided on the Checkpoint website (http://www.checkpointsystems.com/) – look into the location, merchandise direction and inventory control capabilities to see further differentiation points and value add capabilities.

The press release for this product can be downloaded on the Checkpoint website or by clicking the following link: press release.