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

Get a Little Closer to your Sweetheart with AutoID

Are you a Valentine’s Day procrastinator? You are not alone and it’s not too late.  AutoID is here to save the day.  In the spirit of everyone’s ‘favorite’ Hallmark holiday, we decided to blog about how an AutoID-enabled ecosystem can help ensure a romantic, love-filled day with your significant other.

OK – you’re late to the game because you’re just coming home from a business trip, but no sweat … you’ve got your NFC-enabled smartphone (which you used as your boarding pass).  As you get off the plane and sprint toward the baggage claim, you pass a flower dispensing kiosk that has the perfect bouquet.  You quickly select the bouquet, swipe your phone near the machine, approve the transaction with a tap and voilá, instant flowers for you to hand deliver.

You grab the flowers and make your way to the baggage claim.  Although you take solace in the fact that your bag isn’t lost because the airport is using RFID, you still get there before the bags come out and know you’ll be there for at least a ‘few’ minutes. During these valuable few minutes, you call to make a dinner reservation at her favorite restaurant and are told that the only reservation they have is for 10pm and the table is next to the kitchen.  But you don’t panic, because this restaurant has a loyalty program that ensures a premium table for its members and you are a longtime member.  So you go online, transmit your loyalty card information (as a tech savvy user, you already have this scanned into your smartphone) and reserve a table for two in a dark, romantic corner.   

Surprisingly, your bag comes early – must be that RFID system – and you are quickly on your way home, speeding along the highway using your toll transponder to avoid the long lines – and added stress - at the toll booths.  You finally make it home, with flowers in hand, are greeted by your significant other with open arms, and are summarily rushed out of the house to make your dinner reservation.

Upon arriving at the restaurant, the hostess scans your loyalty card (displayed on your phone) to authenticate your reservation.  You sit down and enjoy a lovely meal.  When the bill comes, you pay with your NFC smartphone – at the table, with a quick and virtual ‘high five’ with the waiter’s device.  As you are walking out of the restaurant, your sweetheart sees a movie poster advertising the latest Rom-Com (romantic comedy) and says they want to go.  You quickly hold your NFC phone to the movie poster, watch the trailer and decide that this is not the movie for you both, but another movie playing at the same theater is.  You buy your tickets online and drive to the cinema.  At the cinema, you display your tickets on your phone, have them scanned (barcode) or read (NFC), make a quick stop to grab some soda and popcorn (again paying with your phone), and watch the movie. 

You’ve had a successful and romantic evening, but wait…we’re not done yet.  Keeping this blog post rated ‘G’, you get home and both of you slip into something more comfortable.  As you cuddle up by the fire with a glass of merlot, you use your NFC phone to pair with your Bluetooth speakers and play some smooth jazz to set the mood.  The rest is up to you – even AutoID has its limits.

Happy Valentine’s Day!

Trolling for Dollars

RFID technology and application patents have been a topic of industry debate for many years, particularly those tied to passive UHF EPC Gen 2 technology. Historically, RFID patent activity has centered on patent pooling efforts, consortium building and the occasional patent infringement suit between or among vendors. However, the industry is facing a new threat: NPEs (non-practicing entities), more commonly known as patent trolls. And, one in particular, Round Rock Research LLC (Round Rock), is capturing headlines by filing suit against major RFID users including Macy’s, GAP Inc, J.C. Penny, Hanes, Dole, Pepsi as well as passive UHF end users in a variety of industries.

Unlike what we have seen in the past, the intended targets this time around are not vendors and solutions providers. Round Rock is pursuing enterprise end users, including many with deep pockets, currently citing five patents which cover communication methods or passive UHF EPC Gen2 RFID. The specific patent numbers are: 5,500,650; 5,627,544; 5,974,078; 6,459,726 and RE 41,531 (with others under consideration).  Micron Technology Inc. sold these patents along with some 4,200 others to Round Rock founder John Desmarais.

Although the complaints filed by Round Rock differ in some ways, each claims that a specific defendant has infringed Round Rock’s patents by making, using, selling or importing products or systems that consist of or include passive UHF RFID EPC Gen2 tags and readers. The actions are the result of Round Rock allegedly having grown frustrated with the slow pace of licensing discussions and possible royalty collections in the passive UHF EPC Gen2 RFID arena. Therefore, Round Rock elected to bring these suits in order to provide a catalyst for what it dubs “stalled negotiations.” Round Rock has consistently asked the court to declare that a defendant’s infringement is “willful” and to award unspecified damages, attorneys’ fees and expenses incurred in litigation.

Where’s the RFID Troll Patrol?

To better understand the RFID industry’s response or plan of action to address this significant issue, VDC Research reached out to several leading passive UHF EPC Gen2 component, hardware and solutions providers as well as industry associations. Responses were relatively uniform: we are doing our homework; however, there is little the RFID vendor community can do to defend or protect customers and users other than recommending they seek legal counsel and use the procedures of the courts to extend the process, including forcing Round Rock to produce documentation. The hands of most industry associations are also tied as they operate as non-partisan entities.  They, too, are suggesting end users seek independent counsel.

The harsh reality is that those being sued are apparently left to fend for themselves with no direct assistance or defense support from vendors and industry associations at this time. VDC Research believes a collaborative response is required; however, uncertainties around the best approach remain.

VDC Research supports the right of organizations to derive value from the intellectual property that they own. But, when done in this fashion, questions about blackmail and the inadequacies of our patent protection system arise.  In this particular case, passive UHF EPC Gen2 RFID end users had no knowledge, no advance warning and were essentially blindsided.  The fear is that the issue will balloon if not controlled or addressed soon, and that largest accounts – which are the most attractive to both RFID technology vendors and Round Rock – will delay further investment in RFID.

VDC Research continues to monitor the situation and will provide additional commentary and analysis as more information is gathered.

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.

VDC Research’s RFID Takeaways from NRF Big Show 2012

At this year’s NRF show, RFID technology made the strongest showing VDC Research has seen yet.  From RFID vendors and their solution partners showcasing innovative end-to-end application offerings to big retailers and brands reaffirming their  RFID adoption plans, rollouts and program extensions it was clear that RFID is increasingly being positioned as a core technology that enables enterprises to “engage and evolve” (the theme of this year’s show).    

Here are a few highlights we picked up during the course of the event:

• RFID-tagged Apparel Items are the 1% – 200 billion apparel items. This was the estimated total number of apparel pieces globally that was communicated to VDC by several vendors and retailers attending NRF. So, assuming roughly 2 billion RFID tags, that translates to approximately 1% penetration.  The good news is that the percentage (penetration rate) will only increase in 2012 and beyond.
• RFID is Fashion Forward, but Going Backward (a good thing) – Retailers and brands using RFID consider themselves early innovators, positioning them as “fashion forward” versus their peers; however, RFID tagging is most meaningful when you tag at the source, or further “backward” in the supply chain.  Some exhibitors at NRF were predicting a surge in apparel source tagging by the end of 2012 and into early 2013. As a result, source tagging was major theme being identified by vendors this year.  This included strong messaging from Tyco Retail Solutions and Avery Dennison’s RBIS team on RFID source tagging solutions (including offerings that combine RFID with EAS/LP capabilities/functionality) and the announcement of a new solution called ViziT™ from SML Group Ltd.  SML works along with the Impinj STP™ source tagging platform and is able to offer high-speed RFID chip encoding and label printing through SML’s own global network of service bureaus.
• The Magic of Macy’s RFID Message – Macy’s leadership was very vocal once again about its RFID program and plans, offering highlights during a panel. Macy’s Chief Administrative Officer, Tom Cole, reportedly stated that it will only be a matter of time before RFID tags become as common as barcodes, especially for apparel.  He also indicated that while Macy’s, their competitors’ and their suppliers’/brands’ approaches may vary, it is important that we move RFID forward as an industry. We agree with Mr. Cole that RFID will be a competitive advantage and differentiator in the beginning for those that support it, but it will come down to which retailers and brands can put the technology to the best use – just like with barcodes today. 

While most NRF attendees come for what’s new in “traditional” retail solutions, many left this year’s conference with a greater appreciation for the “modernizing” retail solutions (including both RFID and NFC technologies). We expect the 2013 NRF event to carry this trend forward, showing us the next wave of innovative solutions and users of RFID and its related technologies. In fact, we think it would be interesting to see an “RFID Pavilion” or "RFID Showcase" of sorts at a future NRF conference - a dedicated area in which attendees can see how RFID, contactless and NFC technologies can be leveraged to enhance retail operations and the customer experience.

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.   

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.

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.

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

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.

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.