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

Reposition RTLS … in Real-time

This is a call to all Real Time Location Systems (RTLS) solution providers … You’re markets don’t fully understand your solutions and their value.  Based on our recently completed global survey of 350 enterprises, the vast majority of enterprises using or planning to use RTLS systems have:

• Limited knowledge of what RTLS is and what it can do – beyond what they are using it for now
• Routinely confused the technology with other solutions (i.e.: asset tracking, time/attendance)
• Misperceptions on the benefits and value RTLS can add to their enterprise AND value chain
• Challenges justifying investment

Simply stated, most deploying enterprises perceive RTLS as a vertically-centric tracking solution that provides continual and automatic data streams on an object(s) and its environment(s).  With the exception of the health care market (which is typically more advanced than other verticals and has been cultivated aggressively for years), when these users are thinking of solution expansion, they are primarily thinking of tagging more objects (scale), as opposed to true expansion of the RTLS platform to be leveraged for other applications (i.e.: compliance), operations and value chains beyond track/trace and location based services.   

We believe the market needs to better understand the technology, its capabilities, limitations, value propositions, etc., before broader adoption can occur.  The ability of suppliers to grow their accounts will be largely tied to their individual and collective abilities to educate the market on RTLS.   RTLS providers need to reposition their messaging on RTLS as more than just another track and trace solution - continued market development hinges on it.

For more information on our recently completed RTLS Enterprise End User survey, click here.

Voice of the Customer: 3 Things an RTLS Supplier Needs to Know

We just completed a global study of enterprise end users of Real-Time Location Systems (RTLS) and it revealed some interesting insights about what companies that are using or adopting RTLS are/will be looking for from their vendors.   Although there is a wide array of requirements enterprises are placing on their RTLS solution providers, the following three are critical for RTLS vendors to address:

• Be a one-stop shop:  Nearly ¾ of all respondents indicated a preference to deal with one company for their solution –not only because they want someone to assume responsibility for the entire implementation, but because they want their vendor to be a long-term partner with whom they can grow.   This will become more critical as RTLS solutions become more pervasive in indoor and outdoor environments and need to leverage a host of technologies.  Piece-meal is not the right go-to-market strategy (remember TimeDomain?). 
• Be Prepared to Start Your Customers With Small, Focused Deployments:  The vast majority of respondents’ initial deployments were relatively small and focused on one or two very specific business issues in which the vendor was intimately involved with the design, integration and deployment of the solution.  Within 12 months of attaining their required ROI, however, most of these “start-small” customers were already looking to expand their RTLS solutions within the enterprise and, in some instances, the value chain … with the same vendor.   The early success of their less complex deployments became instrumental to their ability to justify further investment.  Early successes are critical – they not only offer proof of concept and facilitate solution expansion and scale, but they also provide a level of knowledge based on real world experience that becomes a critical foundation for future solution innovation and evolution.  End users that had more complex initial deployments often struggled to achieve a successful implementation and had lower ROI.  As a result, they were notably slower to expand/scale their systems, more reluctant to increase their RTLS budgets, and indicated a lower level of commitment to the technology.   We encourage vendors to focus on helping their clients achieve successful pilot projects before pursuing enterprise-scale initiatives.
• Enhance your Software and Service offerings:  Increased commoditization, competition and price sensitivity for RTLS hardware, along with a more diverse product mix (i.e.: EPC Gen2 Passive RFID) are expected to not only decrease hardware margins, but they will also make it more difficult for RTLS vendors to differentiate.  Software and services are critical to a solution’s success, and are expected to become even more so as RTLS systems become increasingly complex, more deeply integrated and more broadly deployed. The end user is becoming increasingly aware of this.  In fact, more than half of the respondent population stated that they would be allocating more of their RTLS budget to software and services, particularly as they continue to integrate, expand and scale their solutions throughout their enterprise and value chain.  Based on the responses to this survey and how RTLS solutions continue to evolve, we see increasing demand for the following software and service offerings:
  • Solution performance (i.e.: accuracy, precision)
  • Data management (i.e.: monitoring, analytics, distribution/porting)
  • Device management (i.e.: device health, maintenance)
  • Application development (i.e.: expanding RTLS platform within enterprise/value chain)
  • Integration and Scale (i.e.: seamless, facilitated, convergence with other systems)

All indicators are pointing to increasing year-over-year growth and significant opportunity for RTLS vendors who are prepared to be total solution providers, willing to invest in their accounts, and develop competency and expertise related to software and sevcies.

RFID End Users Cite Significant Operational Improvements

In a survey conducted in Q4 2010, we asked over 300 RFID end users about the operational benefits they associate with the technology.  They were asked a series of questions pertaining to pre- and post-RFID operational topics such as resource allocation, increased asset utilization, quality improvements, labor management, error reduction and process efficiencies/time on task.  The respondents had all been using their solutions for at least 12 months and the average operational improvement for each primary vertical is provided in the chart below.
 

Noteworthy Data and Observations

• The average improvement in operations for the entire user population was approximately 30%.
• Those using RFID in a broader/more advanced capacity (supporting more than 2 applications/product types or being used in more than 1 group/division) achieved average benefits in the range of 35-40%.
• These benefits resulted in significant positive improvements to the respondents’ companies’ bottom lines, with some larger firms citing hundreds of thousands to millions of dollars saved.
• Based on these results, more than 70% of the more advanced users indicated that they will be significantly scaling and/or expanding their solutions over the next 24 months.

Customer Empowerment: Rising Star in 2011 Retail Automation Technology Market

During yesterday's webcast, we discussed retailer technology investment priorities and plans.

The retail and transaction automation market is evoloving—customers are more powerful than ever before, forcing B2C operators to realign with a rapidly changing customer base and their ever-expanding scope of demands. Customer empowerment, along with cost savings and operations improvement, will drive more technology investment in 2011; this strategic requirement barely registered in our survey returns five years ago.

This investment trend is the trend we believe all retail and transaction automation suppliers will need to address in the coming years. Customer empowerment is leading to rapidly growing investment in self-service and mobility solutions. The next generation of these solutions is requiring more complex planning and integration support.

To learn more about our thoughts and expectations on the retail automation technology market and customer engagement technologies, we encourage you to listen to the webcast recording and scroll through the slides below.

Keeping Pace in the Retail Automation Technology Market Through 2011 and Beyond

View more presentations from VDC Research Group.

Transponders as consumables - A signal event for the RFID markets?

Since I began studying the market, I’ve been saying that RFID will evolve similarly to barcode and will undergo broad adoption throughout global value chains.  I’ve also been saying that in order to attain broad adoption for many RFID solutions, a consumable tag would be required – a tag that would need to meet user performance and price expectations, as well as supplier community gross margin requirements.  The market has been moving in this direction for a while …

• What if we could not get to that performance? That would be RFID in 2001.
• What if we could not get to that pricing? That would be RFID in 2004.
• What if we get there, but not at margin? That would be RFID in 2007.
• What if we did get there, with margin? That would be the RFID market in 2010.

A consumable is defined as a required product or component that is depleted or disposed of after use and has recurring demand.  An example of a consumable is a printer cartridge or label.  An industry that uses a consumables model is typically highly price sensitive, more mature, commoditized and competitive. 

Translation:  If you are going to make money in this market, you better have extraordinary volume or another source of profit. 

This idea of transponder as consumable has been a dominant industry and market development theme since we first observed it over a decade ago, and recent information from our 2010 RFID Business Planning Service end user survey reinforces the notion. 

There are many data points that support our statement, but what I’d like to talk about in this blog is how the transponder market is showing signs of shifting toward a consumables-based model. 

So … is the RFID transponder market shifting toward a consumables model?

According to our latest research, nearly 50% of end users who responded to our survey (N=342) cited use of transponders that are disposed of after use.  In addition, respondents citing an installed base of transponders in excess of 250,000 stated that at least half of their transponder volumes were considered to be a recurring consumable.

For larger users of RFID transponders, the answer would be yes. 

Ok … so what does this mean to the RFID community?

1. A shift to a consumables based market indicates that certain segments of the RFID market are showing signs of advancement to more stable growth phases; it denotes lots of volume on a recurring basis.
2. This also implies that respondents with larger installed bases (primarily passive users) are scaling and expanding their solutions – finally.
3. A consumables market will drive a split in distribution channels. With transponders migrating away from service providers to channels such as distributors and OEMs. Value-add services don’t mean as much as price in the standard/commodity portions of a consumable market.
4. Tag price sensitivity will increase and bargain hunting will become a common practice. The buyer may even accrue more purchasing power and let suppliers ‘battle’ for their business (i.e.: reverse auctions).
5. These consumable/commodity markets will not make up the entirety of the RFID opportunity, just some of the fastest growing.

When will this shift occur? 

Gradually, unevenly, and over an extended period of time - not unlike the bar code label market. 

If you have not already taken our 2010 RFID user survey, or if you would like your customers’ voices to be heard, please go to, or send others to http://vdcresearch.com/survey/10_rfid_eu.html

Retail Automation Industry Expert Opinions Needed

VDC is conducting its semi-annual survey of companies deploying retail automation systems.  If you are involved in the selection of the retail automation systems deployed by your company, this is your chance to have your voice heard by the supplier community. 
 
Our research covers traditional retail automation solutions (POS terminals and peripheral technologies) self-service technologies (kiosks, SCO and more) and multi-channel marketing platforms (including digital signage and m-marketing and commerce platforms). Your perspective will improve the insights we deliver to the supplier community and help to influence next generation solutions.
 
Every respondent who completes the survey will receive:

• Instant access to a summary of the 2009 Customer Interaction Management (CIM) survey findings;
• Entry into a drawing for one of five (5) $100 Amazon.com gift certificates (drawing to be held August 30th, 2010); and
• An executive summary of our 2010 survey findings once the results have been tabulated

 
To begin the survey, go to: http://vdcresearch.com/survey/10raps_user.html
 
Thank you very much for your assistance.
 
 
Best Regards,
 
The VDC AutoID and Transaction Automation Research Team

Industry Expert Opinions Needed

VDC is conducting its semi-annual survey of companies using, deploying, or evaluating the following systems:

• Retail Automation (i.e.: POS terminals & workstations, Kiosks, Self-Check Out, Digital Signage, ESL, Imaging, Payment Terminals, etc.)
• Bar Code (i.e.: All bar code scanning and printing solutions)
• RFID (i.e.: All RFID related hardware, software, and services)

If you are involved in the evaluation, purchasing, use or maintenance of any of the above solutions at your company, this is your chance to have your voice heard.  Your perspective will improve the insights we deliver to the supplier community and help influence next generation solutions.

Every respondent who completes a survey will receive:

• Instant access to a summary of the 2009 survey findings;
• Entry into a drawing for one of five (5) $100 Amazon.com gift certificates (drawing to be held August 30th, 2010) ; and
• An executive summary of our 2010 survey findings once the results have been tabulated

To begin the Retail Automation survey, go to: http://vdcresearch.com/survey/10raps_user.html
To begin the Bar Code survey, go to:http://vdcresearch.com/survey/10_aidc_eu.html
To begin the RFID survey, go to: http://vdcresearch.com/survey/10_rfid_eu.html