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.

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.

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.

Where RTLS will be in 2012

2008-2010 were challenging years for RTLS due to economic conditions, unmanaged expectations and the market’s lack of understanding of the solution and all its supporting technologies, its capabilities and its value propositions.  During this timeframe several companies closed down or left the market, budgets plateaued or contracted, and existing deployments saw limited scaling.  Not only did the economic environment create an additional barrier to adoption, but the end user community was becoming more familiar and comfortable with RTLS, yet still struggling to comprehend its value propositions.  Aside from a handful of innovators and early adopters, the end user community for RTLS was simply not ready yet.

The activity experienced in 2011 indicates that this market is beginning to grow in both green- and brown-field accounts … but not in every vertical.  More mature verticals such as Health Care, Government and Transportation/Logistics – accounts and markets that have been cultivated and nurtured for several years – now have a greater understanding of the solution’s value proposition and business models, have become more committed and are increasing investment.  However, adoption in other verticals such as Retail, Manufacturing and Commercial services remained limited or stagnant as the solution continues to be refined for these markets and value propositions and benchmarks are developed and proven.

VDC predicts that 2012, although anticipated to be challenged by continued global economic volatility, will be another year of growth and scale in the RTLS market – more so than 2011.  Trends to watch in 2012 include: broader adoption, convergence, analytics and deeper integration.  RTLS solutions will not only be used to track more objects assets, and people, they will also become more widely deployed throughout the enterprise and its value chains.  As it becomes more broadly deployed, RTLS solutions will increasingly converge with other technologies and systems (i.e., barcode, sensors) as a means to further extend the platform and provide greater visibility.  These systems will generate an unprecedented amount of “true real-time” data and will require advanced analytics and information distribution mechanism to ensure that this business intelligence becomes operational intelligence.  As the information becomes more operational and RTLS continues to be broadly deployed and converged throughout the enterprise and value chain, these systems will need to be deeply integrated in order to maximize value and potential.

All indicators are pointing toward a more prosperous 2012 for the RTLS industry, particularly for those companies that have weathered the storm, pressed ahead with market messaging and nurtured their installed base over the past few years.

Getting Ready For Item-Level RFID: Making the Business Case for Apparel

VDC will be participating in a webcast, hosted by Apparel magazine, with representatives from VICS and Checkpoint on RFID Item-level tracking (ILT) of apparel/fashion in Retail on December 1^st at 2pm EST.  We’ll be providing market intelligence pertaining to sizing and growth of the RFID ILT opportunity in retail and discussing some of the leading/emerging trends that are impacting this rapidly evolving market. 

To register for this webcast, click here

Limited Capacity for Thermal Ribbons to Create Opportunity for Direct Thermal Solutions

Leading suppliers of thermal transfer ribbons are facing raw material constraints, which means they will be raising their prices and placing their largest vendors on allocation by establishing fixed volume commitments for 2011.  Why? Thin film PET suppliers have shifted capacity to meet increased demand for thicker films used in support of more profitable applications, such as the production of flat screen displays.  This shift in capacity, coupled with other raw material price increases (wax, resin, solvents, etc.), has left thermal transfer ribbon converters scrambling to meet the demands of an increasingly price sensitive market. 

While most leading converters believe the raw material capacity issue will be resolved in 2013, many are thinking about what a thermal transfer ribbon shortage might mean for their business.  At VDC, we’ve witnessed a gradual, but persistent migration from thermal transfer to direct thermal printing technology over the past decade, and data collected in Q4 of 2010 suggests that this trend will continue throughout 2011. 
 
 
In 2010, direct thermal and thermal transfer label material shipments were virtually the same; however, now that capacity and raw materials pricing pressures are plaguing the ribbon supply community, we are predicting an accelerated migration, particularly in markets with a high use of wax ribbon printing on common substrates and where today’s direct thermal media represents a viable alternative to thermal transfer.  Which applications?  Those 4X6 compliance shipping labels that have been bread and butter for thermal transfer solution providers for decades will certainly receive increased scrutiny, as will other applications as deploying enterprises take another look at direct thermal media and its capabilities.

Application-specific Deployments Driving Kiosks Market Growth

Suppliers experienced strong growth in kiosk installations across a variety of vertical market segments as end-user enterprises embraced a number of applications targeted at enhancing customer engagement and loyalty. Vendors are expected to derive maximum revenues from product vending kiosks & pedestal kiosk installations in big box retail chains (including department stores and mass merchandisers) and supermarkets/grocery stores.

Kiosk sales into the Government and Healthcare vertical markets tend to be highly application-specific, necessitating partnerships with the ISV community, whose domain expertise and systems integration capabilities enable vendors to adequately address the highly targeted solution specifications posed by end-user organizations.

Deployments are also seen gaining traction within the transportation vertical as airports, bus and rail stations increasingly rely on kiosks to ease congestion, lower employee headcount and reduce costs for rendering basic services. Globally, this segment is expected to register a CAGR over 9%, with suppliers generating over $100 million in kiosk sales to the transportation vertical by 2015.

VDC expects to see those vendors devoting resources toward building systems integration capabilities (in-house or via strategic partnerships) to create a compelling competitive advantage as they address & assuage enterprise end-users’ concerns regarding ROI, compatibility with existing in-store infrastructure, and overall installation/deployment costs.

To learn more about our coverage of the Self-Service Kiosks market, click here.

Competing and Complementary Frequencies Changing Global RFID Landscape

 
Technologies (i.e.: Active, Passive, BAP) and Frequencies for several core solutions are migrating to HF or EPC UHF solutions due to cost efficiencies, increased performance and the desire to have more ubiquitous solutions. For example, LF security/access control and ID systems are migrating to HF 14443, LF animal tracking solutions are competing with HF and EPC UHF systems, and passive EPC is now a viable option for many traditional active UHF and MW systems for asset tracking, location-based services (LBS) and vehicle identification systems. 

Even HF and EPC are beginning to compete in the same markets.  Although most EPC UHF activity pertains to supply chain, shop-floor and asset tracking solutions, innovation, attractive price-performance levels and a highly knowledgeable service community have positioned these solutions to compete in many core HF markets, such as library, laundry, access control, AVI/EVR, animal tracking, authentication and more recently, card-based systems.

Active solutions in the UHF and MW frequency are increasingly being perceived as complementary solutions in many core passive markets due to their performance in harsh RF environments, their ability to receive and transmit data independently, their memory capacities and their longer read ranges.  An example would be the use of passive and active UHF solutions within the supply chain as a means to provide tracking, sensing/monitoring and RTLS.

RFID in 2011: The Vertical Market Story

VDC is in the process of publishing its 2011 RFID vertical market estimates/forecasts for all regions, products, frequencies, verticals and applications.  The following are a few higher-level trends for some of the primary RFID verticals:

• Significant gains were noted within the retail vertical, particularly for in-store and distribution center applications where most product tagging is currently occurring.  As item level tagging grows, RFID will continue to be pushed down the value chain to the point of manufacture since tagging at the source will enable the use of the same tag throughout the value chain, enabling retailers and their channel partners to further leverage the solution’s value.  As tagging moves from the retail store or the DC to the source of manufacture, shifts in vertical demand are expected.  For example, the warehouse/DC market within the transportation sector will see increased activity as RFID tagging shifts away from the store; however, the manufacturing sector will see a longer-term increase in demand once source-tagging becomes more commonplace.

• The transportation market – which includes product movement from the point of manufacture through the store floor, as well as travel and logistics – not only continues to account for the majority of reader consumption, but remains a leading adopter of hybrid (i.e.: more than 1 frequency or technology) solutions. Primary applications within transportation include supply chain management, asset tracking, ticketing, baggage handling and security/access control.
• The pharmaceutical vertical is gaining significant traction in the APAC region, largely due to the Korean mandate to have 50% of pharmaceutical products RFID tagged by the end of 2012. It is expected that more than 320 million tags will be consumed in Korea in 2011 for this application alone.
• Despite high-profile e-Government programs (i.e.: China ID, U.S. Passports) winding down (becoming limited to new issues and replacements), there is still significant activity occurring within the Government sector. ID programs, document management, government-driven AVI/EVR, supply chain and asset tracking. RTLS/LBS and other security/access control projects continue to exhibit significant activity and continue to deploy infrastructure as these applications scale.
• Healthcare is also exhibiting strong growth, despite longer technology adoption cycles and budget constraints.  RFID has expanded beyond asset tracking in this market to include more advanced and deeper integration applications such as embedded tags in medical implants and prosthetics, compliance with cleaning/sanitizing protocols, sample and document management, patient and employee tracking, asset and human association, and surgical tool and supply tracking.

The following is VDC’s most recent vertical market perspective of the global RFID market

 

More trends and much more granular estimates/forecasts are available as part of our 2011 RFID Business Planning Service at http://vdcresearch.com/market_research/autoid/research_reports.aspx