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.

NFC Payments … Good Things Will Come to Those Who Wait

Near Field Communication (NFC) is the focus of much media attention these days, but most of this coverage is concerned more with future opportunities rather than what is happening in the present.  Evangelism and media hype have resulted in consumers who are aware of the technology perceiving it almost exclusively as a contactless payment solution that enables mobile phones to function as a credit/debit card. And with recent announcements, media coverage, and overall activity levels (pertaining to NFC payments) it’s hard not to think of it as such.  For example:

• Leading payment terminal suppliers shipped record numbers of NFC-enabled terminals during 2011.
• Credit/debit card issuers such as MasterCard. VISA and AMEX are committed to the solution and are now issuing NFC-enabled cards. 
• MNOs (Mobile Network Operators) such as Verizon, AT&T and T-Mobile are investing in and collaborating on contactless payment solutions (i.e.: ISIS)
• 2H 2011 yielded more NFC-enabled device announcements from leading smartphone and tablet suppliers than we have ever seen previously, including Motorola, Samsung, Nokia, RIM and LG (though notably, not Apple).

Although contactless payment is expected to be a significant opportunity for NFC, we believe it will likely be several years before this application is broadly embraced by merchants worldwide, and that several other applications will take hold first.  But If NFC is expected to play a major role in mobile payments and has significant forward momentum, why are contactless payments years away from broad adoption?  Based on research we just completed, there are five key reasons:

1. NFC payment solutions are expensive and offer no clear ROI at this time – they are difficult to justify.
2. Many leading retailers went through expensive post-recession refresh cycles of their core systems, and are not allocating significant budgets for new in-store technology (particularly given persistent economic uncertainty).
3. The percent of consumers with NFC enabled devices remains limited.
4. Mobile payment application development is limited, suppliers’ mobile-payment product portfolios are slim, there is a lack of a universal platform/high levels  of proprietary platforms and significant customization and integration requirements
5. The enablement of mobile payments requires extensive cooperation across a complex payment processing landscape, and many of the required relationships are still at their formative stages.

Our comprehensive study of the NFC market makes us more confident than ever that NFC will have a role in the future mobile payment landscape, but we are equally confident that it will take time for its role to be fully realized. Although we absolutely expect contactless payment to be a blockbuster application, NFC’s immediate opportunity lies outside the realm of contactless payment solutions.  To learn more about NFC and our recommendations for suppliers, download the executive brief.

 

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.

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.

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.

EAS Gets a Boost from RFID

Checkpoint Systems recently introduced its Overhead RFID EAS system, a packaged solution that combines EAS with RFID.

Checkpoint, a market leader in loss prevention solutions for retail, just introduced its first EAS/RFID system.  The solution, which includes a low-profile, concealable overhead reader, satellite antennas, software and an alarm box, is targeted at most retail installations, particularly image-conscious fashion/clothing retailers who desire an unobtrusive and smart EAS solution.  

The new system leverages Checkpoint’s Wirama reader, the first reader fully manufactured by the company and a result of its 2009 acquisition of Wirama.  It is further differentiated by its use of hard tags, as opposed to consumable hang tags. Hard tags—which account for the vast majority of item-level tags in retail—were chosen to increase security (hang tags are relatively easy to remove) and to maintain consistency with current EAS form factors used in apparel. 

The performance of this solution still has some limitations (for example, no add-ons for metal detection to combat foil bags), however, the value it offers is significant and is expected to simplify cost-justification.  This system offers EAS that performs similarly to traditional solutions, but is enhanced with RFID capabilities. As a result, instead of simply alerting associates that an item is leaving the store without authorization, the Checkpoint solution is capable of identifying what specific item(s) were taken and directing that information to ensure the most appropriate and timely response. Furthermore, the system is capable of identifying potentially suspicious merchandise movement, enabling associates to take preemptive measures.

Specifications are provided on the Checkpoint website (http://www.checkpointsystems.com/) – look into the location, merchandise direction and inventory control capabilities to see further differentiation points and value add capabilities.

The press release for this product can be downloaded on the Checkpoint website or by clicking the following link: press release.

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).

 

Webcast on Remote Device Management for Barcode Scanners

We will be discussing the results of a North American survey on the use of Remote Device Management (RDM) for barcode scanning solutions. RDM enables the ability to obtain, aggregate and distribute information pertaining to the status of scanning devices from a remote or centralized location.  This information can be used for a diversity of applications such as configuration, troubleshooting, commissioning software/firmware upgrades, analyzing usage requirements and maintenance – all of which provide increased visibility, operational efficiencies and cost savings.  In this webcast, we will provide insight into the end user’s value perception of RMD for barcode scanners as well as the following:

• Current usage of RMD for scanning
• AIDC devices expected to be supported by RMD solutions
• Preferred RMD capabilities
• Adoption Drivers

You can register for this webcast here.