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

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.

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

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.

The Market for Read-on-Metal Ruggedized Gen2 UHF Tags

We’ve been getting a lot of requests recently about the read-on-metal ruggedized UHF tag market.  These tags have been gaining more attention not only due to their ability to perform on or in ‘harsh RF’ environments (i.e.: metals, liquids that distort the RF signal), but also due to their durability.  Typically housed in a durable plastic casing designed to ‘take a knocking and keep on working’, these Gen2 transponders typically offer read ranges in excess of 10 ft in some of the most hostile RF environments. 

They are primarily used for tracking assets such as containers, equipment, vehicles and more recently, IT assets.  In addition, recent innovations around performance and footprint reduction are enabling companies to embed RFID tags in a diverse array of products and materials such as piping, concrete, instruments and tools and consumer electronics.  Although these are not the 10¢ tags (they are typically greater than $1) most commonly associated with EPC Gen2 solutions, they are a cost effective solution for tracking an increasing number of objects in real world installation environments. 

Leading manufacturers of these ruggedized Gen2 UHF read on metal tags include Confidex, Omni ID, Xerafy, RCD, Intermec and Emerson & Cuming.

VDC estimates that the total global market for these tags in 2010 was $36.5 million and is expected to grow at a Compounded Annual Growth Rate (CAGR) of 48% through 2012 when global revenues are anticipated to exceed $80 million.  Preliminary longer-term forecasts indicate a significant increase in activity starting as early as 2013, particularly as supply chain and IT asset tracking applications begin to scale.

Imaging Solutions - Market Overview

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

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

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

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.

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.

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

Why We Are Updating Our EPC Tag Numbers

As part of our ongoing research into the RFID communities, we have noted a delay in several high profile retailers’ deployment plans. 

These delays have caused us to revise our estimates and forecasts for the EPC UHF market downward in 2011 as well as adjust the growth rates in 2012 and 2013.  These changes were limited primarily to transponders in the retail sector.  Passive EPC applications outside of retail remain on par with our earlier expectations.   We strongly feel that these delays should be considered a temporary ‘bump in the road’. 

Reasons behind the revisions include:

• Wal-Mart’s deployment for women’s apparel has been delayed by approximately 2 quarters, shifting this demand toward Q4/Q1 2012.  Reasons for the delay pertain to ensuring that the supply chain has adequate support, time and resources for a success deployment.  It appears Wal-Mart does not want to repeat the previous issues/challenges they encountered when implementing RFID in their supply chain.
• Macy’s piloting has been slower than expected due to technical and process related issues and challenges.  Scaling is now expected to occur in Q2 2012
• American Apparel, which filed for bankruptcy last quarter, appears to remain flat (in tag consumption) despite announcements of installing RFID solutions in more stores.  This is most likely attributed to a focus on internal restructuring as a result of their bankruptcy.
• Several other Tier I and II retailers have also indicated they are delaying deployments by 2-3 quarters, stating that more time is needed to prepare their supply chain, further develop processes and refine what and how the data will be used, leveraged, distributed and protected.
• The conversion of the Marks & Spencer passive UHF tag to EPC Gen2 has been significantly delayed due to infrastructure-related issues pertaining to compatibility with their proprietary and EPC protocols.  Full conversion was expected to begin in 2010 – it’s now expected to start this year.

These factors correlate to a 51% reduction in expected tag volumes in 2011 to 2.1 billion units and about a 10% reduction (to 40 billion units) by 2015. 

EPC reader and printer estimates and forecasts were not significantly impacted by these revisions.

Although the near-term estimates and forecasts for EPC transponders in retail have changed significantly, we do not consider these updates a representation of decreased interest or commitment in EPC solutions.  Retail has experienced a delay, but there is no indication from any retailer that they are pulling back from RFID and there is a tremendous amount of activity occurring outside of retail.  Examples include:

In Retail:

• Although Wal-Mart is delaying their women’s apparel deployment, their plans to tag more SKUs and product types are on track and the company does not expect to encounter similar supply chain issues (as with women’s apparel).
• There are more retailers committing to deploying RFID than those experiencing delays.  For example, JC Penney, Gerry Webber, Hudson Bay and Liverpool are all increasing their investments in RFID and tagging more products. 
• There are numerous other Tier I and II retailers (we are bound by NDAs) that are scaling pilots in the U.S. and Eastern Europe – they are just ‘flying under the radar’ as a means to protect an increasing competitive advantage.

Outside Retail

• Several very large, high tag volume EPC projects that are wrapping up their piloting phases in China and are expected to scale over the next few years, including applications pertaining to supply chain and authentication of tobacco and liquor, as well as courier and transportation applications.
• Korea continues to show significant gains in a diversity of applications, such as pharmaceuticals (mandated by the government), authentication and location-based services.  The country is expected to consume more than 350 million tags in 2011 for pharmaceuticals alone.
• High volume Automatic Vehicle Identification (AVI) and Electronic Vehicle Registration (EVR) applications are blossoming, with new high-volume, government driven (and funded) installations expected in the APAC, Latin-American and European markets.  These deployments are substantial and can represent tens-of-millions of tag consumption for the initial phase with high volume recurring demand for new issues and replacements.
• Postal and courier applications continue to scale in Europe and there is increasing demand for these solutions in APAC (i.e.: China Post, Saudi Post)
• Approximately 5 more airports are expected to adopt RFID baggage handling and asset tracking solutions, primarily in Europe and APAC.  Although the tag volumes for this application have been lagging expectations, they are continually increasing and each airport can consume tens-of-millions of tags annually.

The following chart provides our updated thinking on the EPC hardware market: