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

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.

What Themes Dominated the CET Market in 2011

In 2011, there were 3 themes that dominated the customer engagement technology (CET) landscape - Mobility, Convergence and Application Development.

The need to take the store (or the checkout environment, in the least) to the customers at the point-of-decision, as opposed to drawing them to siloed touchpoints, is contributing to this growing demand for a seamless & consistent shopping experience across multiple customer-facing technology solutions.

A whole host of retail organizations have announced consumer handheld deployments within their installation environments in order to elevate customer service levels and drive loyalty over the past 12 months. VDC expects to see continued investment by retailers in these devices in 2012, especially given their relatively low upfront costs, intuitive user interface and high consumer appeal. While the verdict is not out yet on the success of these installations, it has become fairly commonplace to read about chain-wide deployments of Apple products.

Enterprise mobile device vendors have also been investing heavily in partnerships with the Independent Software Vendor (ISV) community to offer customized application sets that enable end-users to seamlessly integrate mobile solutions into their installation environments, ensuring consistency in service delivery and customer experience. As adoption of mobile devices scales, development of applications with varying degrees of configuration and control seems to be a very distinct possibility.

Finding Success in 2012

VDC expects the most successful suppliers in 2012 will be those who enable end-users to extend the value of their initial hardware investments and reduce TCO by supporting multiple applications with a single (mobile) device.

At the NRF later this month, we look forward to seeing CET vendors’ product roadmaps for 2012. We expect they will showcase their ability to effectively engage consumers and elevate service levels by way of immersive and interactive technology solutions – in alignment with today’s consumer handhelds featuring highly responsive, intuitive UIs and visually appealing image quality.

Multi-touch displays for kiosks and digital signage solutions anyone?

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.

The Truly Interactive Digital Signage Solution

Earlier this year, there was considerable interest generated around supermarket giant Tesco’s deployment of large screen billboards in a South Korean subway station. These featured displays designed to look like supermarket shelves, allowing consumers to purchase products online with their smartphones by scanning corresponding QR codes. This further exemplified how the balance-of-power has been shifting from the retailer to the consumer, as businesses increasingly look to take the shopping experience to wherever the consumer may be, as opposed to drawing them toward distinct ‘choke points’ – both online and in the traditional ‘brick-and-mortar’ stores.

What has prompted us to write about this technology deployment in December then? Well, Toys'R'Us is in the news this week for having enabled a virtual QR code store, quite like Tesco in S. Korea, in subway transit stations and airports in the New York metro area – in time for the holiday season. We think it is highly refreshing to see early adoption of this nascent solution here in the US. And it definitely makes more sense to have successful online retailers choose to go this route. The primary question with such a deployment, however, is how organizations expect to continually use and update the content on such displays. Do these warrant ‘permanent’ as opposed to seasonal installations? 

VDC has been extensively covering the global markets for Interactive Displays and Digital Signage, and we have consistently emphasized the need for converging mobile device solutions with digital signage displays in order to extend the reach and value offered by these installations. Interactivity, such as that afforded by these Toys’R’Us displays, is expected to elevate the levels of customer engagement & experience, leading to a favorable ROI. As end-users experience returns that justify investment in this next-generation solution, leading vendors expect to derive significant revenues from sales of digital signage solutions into the Retail vertical – growing at a robust CAGR of 17.6% from 2010-2015, as evidenced in VDC’s recently published report on the Digital Signage space.

We have closed out our 2011 coverage of the markets for Customer Engagement Technologies. Click here to download complimentary research and insights from the same.

Personal Shopping Systems-There's an app for that, too...

Stop & Shop is scaling its Scan-It Mobile initiative, an Android/iPhone-based version of its original handheld Personal Shopping System (PSS). At the end of October, the supermarket extended the app to 42 more stores throughout Massachusetts, Rhode Island and Connecticut. Leveraging a smartphone’s embedded camera as a scanner, the Scan-It app allows customers to scan & bag their groceries as they shop, thereby expediting the checkout process. As a regular Stop & Shop customer and iPhone user (not to mention analyst covering PSS), I was interested to test the Scan-It app first hand. I got that opportunity this past weekend while doing my weekly grocery shopping.

Overall, the performance of the Scan-It app on my “old” iPhone 3GS is impressive. In most cases, the camera scanned with approximately 90-95% of the efficiency as compared to the dedicated Scan-It solution, which I have been using on a weekly basis since it was introduced several years ago.

The app is not flawless, however. On several occasions I noticed the camera struggling to focus, delaying the scan. That said, I also experienced scans that occurred with the same speed as the purpose-built Scan-It solution. The only other shortcomings I noticed were the ergonomics of using the iPhone as a scanner and the hassle (relative to the dedicated Scan-It solution) of repeatedly scanning multiple purchases of the same item. I suspect this latter issue could be addressed through the addition of some kind of quantity-input feature in an updated version.

Considering the solid performance of the Scan-It Mobile solution, PSS apps such as Scan-It could represent a threat to the business of dedicated, purpose-built PSS hardware suppliers. By offering PSS via a smartphone app, retailers essentially eliminate the hardware investment required to deploy PSS, thereby enabling PSS to be deployed across a store chain with relatively little added expense. While ensuring data security—both for the customer and the enterprise—remains a critical issue, we expect more retailers seeking PSS will evaluate smartphone apps in addition to dedicated solutions.

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.

 

A "Cool" New Application for NFC Technology

New NFC applications for use in specific enterprise operations continue to emerge. American Thermal Instruments (ATI) recently introduced a NFC-based temperature monitoring solution, which combines a smartphone application with the company’s LOG-IC NFC data logger to scan, review, and communicate real-time temperature monitoring data. The ATI smartphone application is the first of its kind that enables fully functional end-to-end temperature monitoring in real-time.

The ATI solution is inherently mobile (since its software component is deployed on smartphones) and has the added benefit of reducing the upfront hardware investment costs by leveraging a device that many cold chain management workers already carry. As a result, this temperature monitoring solution is more affordable to deploy relative to competing solutions that require dedicated readers and other hardware.

While the ATI solution is an interesting and innovative use of NFC, it will be interesting to see how well the technology performs in this application. Given the relatively short read distance that is associated with NFC technology, placement options for the tag will be limited to the perimeter of pallets/boxes.

Temperature monitoring solutions that leverage other forms of RF technology with longer read distances, on the other hand, typically enable sensors to be placed in the center of a container, giving a more accurate temperature reading. It will be interesting to see if these limited placement options negatively impact the accuracy of the ATI solution.

As fans of NFC technology we are excited to see it gaining acceptance for a broader range of operational applications. We look forward to seeing what other types of innovative enterprise NFC applications continue to emerge.

Smartphones Meet Smart Posters

Proxama, a global Near Field Communication (NFC) solutions provider, has launched a smart poster marketing campaign in New York and Los Angeles advertising the upcoming new season of VH1’s hit show Basketball Wives. There are several partners working on this campaign, including Hyperspace, a firm specializing in out-of-home communications, Nokia, a leader in NFC-enabled mobile devices and marketing media distribution specialists JCDecaux and Cemusa. Proxama led a similar, well-received campaign earlier this year in London to promote the latest X-Men movie.

The smart posters are straightforward: By tapping an NFC-enabled phone on the poster, passersby  can access an exclusive trailer and link to the show’s Facebook page. Given the low penetration of NFC phones in the US, the campaign is intended to be more of a demonstration of the technology’s potential in the rapidly emerging mobile marketing industry.  

NFC offers opportunities for mobile marketing that reach beyond basic smart poster interactivity. As consumer-level NFC adoption scales in the US, advertising applications leveraging this technology will evolve rapidly. Potential marketing applications include location-based messaging, personalized/targeted offers, mobile couponing and loyalty.  NFC is a versatile technology that will enable direct, immediate access to consumers through which personalized, targeted content can be delivered. Mobile and interactive marketing is just one of the NFC applications we’ll be exploring in our upcoming NFC report—stay tuned for more details.

Special acknowledgement: Dan Mandell, Research Associate, co-authored this blog post.

Smartphone-based Personal Shopping Solutions-Threat to the Dedicated PSS Market?

The concept of delivering PSS functionality to shoppers via their personal devices continues to gain momentum with retailers, as evidenced by Stop & Shop’s recent introduction of an iPhone-based version of its “ScanIt!” PSS.

This development is particularly noteworthy for Stop & Shop. To date, the company has been one of the most aggressive deployers of PSS solutions in the US. Prior to the introduction of its iPhone application, Stop & Shop delivered PSS to its customers exclusively via company-owned and managed devices.

Eventually, smartphone-enabled PSS may present a serious competitive threat to dedicated device PSS solutions.  However, in the immediate term, we do not expect smartphone platforms to displace installed PSS solutions, or severly limit PSS opportunities. 

Any major disruption driven by smartphone platforms will be at least a couple of years in the making. Smartphone-enabled PSS is still in its nascent stages. The development of this technology—and exploration of its potential—has barely yet begun.

At present, dedicated, purpose-specific PSS have several important advantages over smartphone-based solutions:

• Whereas smartphones rely on embedded cameras for scanning, PSS are built around actual barcode scanners. Adapting smartphone cameras for scanning reduces the speed, accuracy, and reliability with which customers are able to scan their purchases. For a technology whose primary value proposition to the customer is saving time, scanning related issues are the major drawback to smartphone-based PSS.

• Some customers simply will not want to use their personal devices for scanning. Their reasons will vary from the practical (low battery, expecting a phone call, forgot to bring the device) to the more complex (security concerns).
  
  
• Retailers will be concerned with the increased software demands associated with supporting smartphone-based PSS. Technology lifecycles with personal devices are extremely short—often 12 months or less—which will drive requirements for frequent and regular software updates, both for the customer-facing and enterprise-level solutions.
  
  
• Security issues will be a prominent concern, particularly for retailers, who will need to ensure their enterprise data is entirely secure, and that customer information is absolutely protected. In regards to wireless connectivity, deploying organizations will need to consider carefully how they will grant the necessary network and data access to customers, while protecting sensitive enterprise information.From a customer perspective, security concerns may also be a potential barrier to adoption.

In the near term, the biggest threat smartphone-based solutions present to PSS suppliers is giving potential deploying retailers another reason to delay their PSS investment, as these organizations weigh costs, benefits, ROI potential, and alternative technologies.

Until smartphone scanning issues are fully resolved, we expect dedicated and smartphone-based PSS will coexist. The role of mobile devices in the PSS market is an issue we have discussed in depth with both hardware suppliers and ISVs as part of our research for Volume 3 of our Customer Engagement Technologies. We will cover this topic in detail in that report—contact us for more information.

Retail Technology Convergence

Consumers today are increasingly leveraging the incredible depth of information available to them and exercising total control over the purchase process. By necessity, retailers are embracing this shift in control, taking the checkout to wherever the customer may be (case in point: large-scale mobile device deployments in Home Depot and Nordstrom). Suppliers of customer engagement technologies have, similarly, had to be agile and learn the importance of channeling their customers’ input into device functionality and solutions set. A recurring theme across many, if not all, of the technologies that we cover here at VDC has thus been mobility. Be it a mobile POS, transaction terminal, receipt printer or a personal shopping device. 

The need to expedite the check-out process and effectively engage today’s increasingly mobile customer while also presenting a technology-forward image in order to strengthen loyalty seems to be the driving factors for growing adoption across all strata of technologies. What is even more interesting is the degree to which the form factor is being patterned according to consumers’ personal handhelds – never before have consumer products influenced enterprise-grade technologies to such an extent.

This new universal form factor is blurring the lines between some of these customer engagement technologies, which have in the past had their suppliers enjoy distinct boundaries encompassing target markets/verticals, feature & functionality sets, and expectations that were more or less set in stone. For instance, POS Terminal bellwethers such as NCR, IBM and Wincor Nixdorf are today directly competing for tighter retail IT budgets with vendors such as Motorola, Honeywell, VeriFone and Ingenico who have each, to varying extents, expanded their portfolios or device functionalities to include mobile POS solutions. Consumer-grade Apple products with integrated barcode scanners and card readers are also in very high demand especially amongst fashion retailers. While these are currently complementary to their stationary counterparts, VDC’s latest research on the POS market indicates a much higher annual growth rate for mobile devices which will eventually come at the expense of this traditional form factor.

At what pace is investment on these mobile devices taking place? How is this tussle between traditional and next-generation form factors shaping up? How are suppliers enhancing their software solutions portfolio to run seamlessly across a plethora of disparate technologies? For answers to all of these questions and more, stay tuned to our continued coverage of Customer Engagement Technologies (CET).