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

Happy 60th Birthday to the First Barcode Patent Filing!

This week marks the 60th birthday of the first patent filing for a technology that is very close to our hearts here in the VDC AutoID practice: barcode. To most people, a barcode is nothing but a bunch of black and white lines on the products they purchase at the store, but for us—the AutoID professionals and enthusiasts of the world—the barcode is an efficient, elegant and cost-effective way of storing and accessing data that has stood the test of time.

In the technology world, 60 years is an eternity. Reflect briefly on the devices/ technologies that seemed cutting edge just 10 or 15 years ago, and we bet you will smile reminiscing about the simpler days of dial-up modems, Zack Morris-style cell phones and good old PDAs. Now consider that barcode existed for decades before all of these things, and that it is still alive and well today. In many ways, it is a notable achievement. While barcode is certainly a mature technology, we see a strong future ahead for the barcode market, thanks to its ongoing evolution and the development of vertical- and application-specific uses. VDC sees a other indicators of barcode’s vitality:

• Increased consumer use of mobile barcode for a range of commerce-related applications including couponing, loyalty, information access and even payment. Demonstrated consumer interest in scanning barcodes via their smartphones is driving retailers, hospitality providers, CPG brands and other consumer-facing enterprises to invest in solutions that engage these shoppers.
• The US FDA’s Unique Device Identifier (UDI) mandate will increase barcode adoption (and other AutoID solutions) in healthcare: The federal UDI mandate, set to take effect in 2014 for high-risk (i.e., implantable) medical devices (and subsequently for lower-risk categories) requires all medical devices to be marked with a unique code containing critical information including manufacturer, model number and expiration date. While we expect barcode will not be the only solution used to comply with this regulation, it is highly likely to play a prominent role.
• New symbologies have recently emerged, and others are in development. Han Xin Code and Ultracode, for example, are two of the most recently introduced barcode types. Han Xin codes were developed to encode large numbers of Chinese, numeric and ASCII characters, and can be printed in multiple sizes, while Ultracode was designed for printing on uneven surfaces that are poorly-suited to standard symbologies. We expect additional symbologies could emerge in the future to address specific requirements, particularly for consumer-facing applications.

Some NFC and RFID evangelists claim these technologies will ultimately lead to the demise of the barcode. VDC does not expect that to happen, nor do we expect any major market shift away from barcode to occur anytime soon. Barcode has a lot of momentum and will be extremely difficult to displace:  it is universally supported, highly cost-effective (from both a printing and hardware/solution perspective), familiar to consumers and enterprises and boasts 40 years of proven experience in retail—barcode was first tested by Kroger Supermarkets in 1972, 20 years after its invention. The “scanless”/contactless future NFC and RFID promise could very well become reality someday far from now, but for the time being, we expect barcode to remain dominant in most applications. Happy birthday, barcode…

A Quick Scan of the 2012 AIM Summit Conference

Last week the VDC Auto ID team visited Chicago for the 2012 AIM Summit. AIM (Association for Automatic Identification and Mobility) is an industry standards and education organization dedicated to all AutoID and Mobility technologies—including barcode, RFID, RTLS and mobile devices. VDC was pleased to participate in this year’s event—both as attendees and presenters. AutoID VP Mike Liard delivered the opening keynote address during which he discussed current trends impacting the barcode and RFID markets. With a broad focus encompassing all AutoID technologies, there was a lot to take in during the event. Here are some of the key highlights:

• We believe the US FDA’s Unique Device Identifier (UDI) initiative could have a major impact on adoption and usage of Auto ID solutions in the healthcare vertical: Essentially, UDI is a federal mandate that will eventually require all medical devices to be individually marked with a code containing important information including manufacturer, model number and expiration date. Complex, high-risk (i.e., implantable) medical devices will be the first class of product to be effected by this new regulation (in 2014), but over the course of the following 5 years, the mandate will extend to other device classes as well. While the major objective driving the UDI legislation is improving patient safety and the effectiveness of medical device recalls, VDC believes the initiative could benefit healthcare enterprises by improving insight to their supply chains and supply inventory levels as well. Of course, realizing these adjacent UDI benefits may necessitate healthcare enterprises to augment current AutoID systems, but if the opportunity for strong ROI is there, we expect investment to follow.
• The barcode market is no longer just about linear and standard 2D barcodes: New 2D symbologies such as Han Xin code are emerging, and could have an impact on certain segments of the market. Han Xin code, introduced about a year ago, is a new two-dimensional matrix symbology. Han Xin codes are particularly effective at encoding large numbers of Chinese, numeric and ASCII characters, and can be printed in 84 different sizes. However, since this symbology is largely designed to encode Chinese characters, we expect its impact to be mostly limited to China and other parts of the Asia-Pacific region.
• Another relatively new symbology, called Ultracode, is also gaining traction: Ultracode was designed for printing on uneven surfaces/materials that are generally poorly suited to printing standard symbologies (e.g., stone, fiberboard, wood and other irregular surfaces). Also, thanks to its ability to be read even when damaged, Ultracode is also favored for applications where barcodes are highly susceptible to being damaged, such as supply chain and T&L.

In addition to being a great forum for engaging with the entire AutoID community, this year’s AIM Summit also provided a special opportunity to remember Bert Moore, a longtime industry advocate and AIM member, who passed away earlier in the year. Bert was given a heartfelt tribute during the post conference dinner and awards program—a fitting gesture considering his contributions to both the AIM organization and the broader AutoID industry for many years. VDC thanks AIM and its constituents for another great event and we look forward to next year’s show.

Walmart Could Bring Self-Scanning to the Mainstream

Self-scanning adoption remains very low among US merchants, but Walmart could singlehandedly change that in the near term. The retailing giant recently announced it is currently testing its own self-scanning app, called “Scan and Go,” exclusively among employees at one of its Arkansas stores.

Self-scanning solutions, which are comprised of a barcode-reading app deployed either on a dedicated store-owned Personal Shopping device (e.g., Motorola’s MC 17, Datalogic’s Joya) or a customer’s personal smartphone, enable shoppers to scan and bag items in-aisle rather than do so en-masse at the checkout lane. Self-scanning has benefits for both merchants and consumers.

Merchant benefits include:

• Insight into customer purchasing behavior
• Visibility into store utilization/traffic patterns
• Opportunity to influence shoppers at the point of decision via targeted offers
• Larger average basket sizes (resulting, in part, from the above point)

Consumers enjoy:

• Faster check-out
• Receiving personalized/targeted offers (based on purchase history)
• The ability to monitor spending in real-time as they shop

But, despite these benefits, self-scanning solutions generally have been challenged to gain adoption within the US. Other than a couple of notable exceptions—for example, Stop & Shop and Giant supermarkets (both subsidiaries of the Dutch retailing group Ahold), there are few merchants in the US that have invested heavily in self-scanning technology.

Walmart, with over 600 US store locations, could change that dynamic quickly and decisively if its pilot goes well. VDC believes it is unlikely that the retailer will move from its current, highly-restricted pilot test directly to a large-scale rollout, but if this early self-scanning experiment is well-received, it is reasonable to expect Walmart could take steps towards a moderate- to large-scale deployment in the next 12-18 months. Even if Walmart only deployed the app at select store locations, it would provide a material lift to the US self-scanning market—and could have a greater longer-term impact if other merchants follow suit.

Assuming Walmart fully embraces self-scanning, VDC believes the Company ultimately will integrate its “Scan and Go” self-scanning app with the recently announced Merchant Customer Exchange (MCX) mobile wallet initiative, created by a consortium of merchants, among which Walmart is a founding member. Whereas the MCX m.wallet will operate across multiple retailers, any integration of the “Scan and Go” app and m.wallet would need to maintain a certain degree of separation between the two.  But, to provide consumers with the most convenient shopping experience possible, we think some level of interoperability between self-scanning and the MCX m.wallet will be inevitable.

Tier 1 Merchants Want You to Open Your (Mobile) Wallet

If you thought there was no room for yet another m.wallet competitor, think again. More than a dozen of the largest Tier 1 retailers in the US have joined forces to create the Merchant Customer Exchange (MCX), which will develop a mobile wallet app that enables consumers to pay, redeem coupons and receive personalized offers via smartphone at participating merchants. Founding members of the MCX consortium include Wal-Mart, Target, 7-Eleven, Best Buy, CVS, Lowes, Shell and Sunoco (among others), but if the MCX m.wallet is well received among consumers, we expect other merchants will be likely to join in the future.

No definitive statement has yet been made regarding which technology will enable transactions conducted with the MCX m.wallet, but announcements made by MCX member companies suggest the app will work on most smartphone types. While we cannot say for certain, the fact that this app will be available to most common smartphones implies that it will be 2D barcode- or QR code-based, not NFC. Although NFC is becoming increasingly common in higher-end smartphones, it is far from the level of adoption these major Tier 1 retailers would require in order to rely on it as the exclusive enabler of the MCX wallet. Perhaps the MCX app will take a dual technology approach (i.e., QR/barcode and NFC) to enabling payments, but based on early statements made by MCX member companies and the fact that US NFC adoption is extremely low, we believe it is extremely unlikely that NFC will play a significant role in the early days of MCX.

For early entrants to the m.wallet game, such as Google Wallet, we believe the emergence of the MCX could present the greatest challenge yet in building towards a critical mass of consumer and merchant users. While Google Wallet has been available for over a year now, adoption has been weak and hamstrung by various factors, including attempts by MNOs to block the app from phones using their networks, limited merchant participation (it can only be used where MasterCard PayPass is accepted), security concerns and (until version 2.0 was released earlier this month) the fact that only one payment card type could be linked to the app.

We think the most formidable challenge this new competitor will present to Google Wallet and other m.wallets (e.g., ISIS, if its alleged summer pilot ever happens) will be in their efforts to build a robust base of participating merchants. If MCX adoption ramps up more quickly than Google Wallet has to date, we expect merchants evaluating the acceptance of an m.wallet will be more inclined to join the MCX consortium instead of Google. Furthermore, several of the founding merchants behind the MCX initiative are currently involved with Google Wallet—so this new joint venture could also potentially erode what progress Google has made so far.

Remembering Bert Moore, AutoID Industry Veteran

We are deeply saddened by the passing of Bert Moore, a 25+ year veteran of the AutoID industry and a recognized expert on the subject, who passed away on July 6, 2012. His tremendous contributions to this community will be missed, but Bert will live on through the legacy of his stewardship and educational efforts on behalf of the entire AutoID ecosystem.

For many years, Bert served the AutoID community in a host of different capacities. As the director of IDAT Consulting & Education, Bert provided educational and consultative services to companies evaluating investment in/deployment of various AutoID solution types.

As the Director of AIM's (Association of Automatic Identification and Mobility) Technical Communications and Media Relations, Bert wrote and edited AIM's newsletters "RFID Connections" and "AIM Connections." In his role at AIM, he also served as the recording secretary for the Association’s Technical Symbology Committee (TSC) and RFID Experts Group (REG) and was a member of the RFID Emblem maintenance committee. 

In addition to his work with AIM, Bert also served on ANSI’s (American National Standards Institute) Data Identifier maintenance committee and chaired the CompTIA RFID+ Certification cornerstone committee.

During his years of service to the AutoID ecosystem, Bert received a number of honors and awards in recognition of his outstanding work, including the AIM USA "Industry Service Award" in 1992 and the 2010 recipient of the AIM "Excellence in Journalism" Award. In 1997, Bert was selected as a charter member of the AIDC 100 organization, an association of individuals who have made significant contributions to education within the AIDC industry. We thank Bert for his years of service to the Auto-ID community and send our thoughts to his family and loved ones.

LevelUp Levels the Payment Playing Field against NFC via Barcodes/QR Codes

Among the barriers NFC contactless payment faces on the road to broad adoption, none may be as challenging as identifying and proving sufficient value to merchants and other B2C enterprises that justifies their investment in such a solution. However, the Cambridge-based company LevelUp, an offshoot of the startup company SCVNGR, has found a way to justify merchants’ investment in a contactless payment solution. However, there is a small catch—it’s QR code-based, not NFC.

Historically, the adage “if it’s not broken, don’t fix it” certainly has applied to most merchants’ payment acceptance strategies. While credit/debit cards and good old-fashioned cash work well enough, each has material costs associated with its acceptance—namely, interchange/processing fees for cards and handling/management expenses for cash, not to mention the risk of shrinkage.

What makes LevelUp an attractive option for merchants is that the company eliminates (or, more accurately, entirely subsidizes) credit/debit card processing fees, which generally represent 2-3% of a given transaction amount. That small percentage may not sound like much, but it adds up—transaction fees are estimated to drain approximately $50 billion (that’s billion, with a B) from merchants’ bottom lines annually. LevelUp only makes money when it delivers a new customer, or generates a repeat business (i.e., loyalty) from a specific customer at a particular merchant.

Barcode/QR code based payment applications are not a new concept—in fact, Starbucks’ payment app, provided by mFoundry, sets the gold standard for success when it comes to mobile payment apps. However, what distinguishes LevelUp is the type of merchants that are adopting the solution—in particular, independent retailers and other SMBs whose limited IT budgets typically preclude them from evaluating contactless solutions. To date, most contactless payment deployments (barcode, QR code, or NFC-based) have been at major Tier 1 enterprises, such as Starbucks. LevelUp is working to change this paradigm, and early indicators suggest it is succeeding, as the company has 3000 participating merchants across 10 regional markets and just secured an additional $12 million in VC funding. Perhaps QR codes/barcodes will be the technologies that bring contactless payment to the masses after all, not NFC—only time (and the actions of consumers, merchants and financial institutions) will tell.

AutoID Technology Recap - See What You've Missed This Month

Each month, we will be posting a brief recap of our posts to give our readers a quick guide to what we've covered. Each post will be categorized by AutoID technology (RFID, NFC, Barcode or Other). Check back here in the last week of each month to see what you've missed!

(Read the full post by clicking on the title)

 

NFC Secure Element Issue No SIM-ple Matter: Key Questions Surface at London Underground

AutoID Technology Focus: NFC

SIM-based secure elements (SEs) do not meet the performance requirements for applications—such as transportation ticketing—where customer throughput is a key metric. Well, this is at least the opinion of Shashi Verma, the Director of Customer Experience of the London Underground. Verma recently went on record stating that current SIM-based SEs are too slow to deliver the required levels of passenger throughput on London’s public transport network. The critical question of SE ownership is a contentious issue that could potentially delay the broad deployment of secure NFC applications—such as ticketing, contactless payment and security/access control.

 

Apple Confirms m.Wallet Application in iOS 6…

AutoID Technology Focus: NFC

...But, contrary what the NFC-related rumors swirling around Apple would suggest, this app uses QR codes, not NFC. At the company’s 2012 Worldwide Developers Conference (WWDC) keynote address, the company introduced an updated version of its mobile operating system, iOS 6, which features Passbook, a new mobile wallet app that enables a range of cards, tickets, coupons and other credential types to be stored electronically in a mobile device.

 

NCR Makes 2D Barcode Secure Enough for ATM Cash Withdrawals

AutoID Technology Focus: NFC/Barcode

In recent posts, I have discussed some of the headwinds NFC faces in respect to achieving mainstream adoption. One of the most critical challenges facing NFC is that many of the applications it enables are achievable via other, more established technologies such as QR codes and 2D barcodes, usually with less cost and integration complexity to boot. To counter this criticism, NFC proponents are quick to point out that these competing solutions have their own shortcomings, particularly in respect to their lack of security.

 

Part 1 of 2: Universities "Tap" NFC for Campus Security/Access Control

AutoID Technology Focus: NFC

We’ve said it before, and we’ll say it again: contactless payment and mobile commerce applications are only the proverbial tip of the iceberg in regards to the diversity of applications NFC enables. Security/Access control, particularly for physical (e.g. corporate/academic campus, floor, room) applications, is among the other NFC use cases VDC has been monitoring with expectations for near-term growth.

 

Part 2 of 2: Security/Access Control Could “Unlock” Domestic Opportunity for NFC

AutoID Technology Focus: NFC

While enterprise environments present the most obvious market opportunity for vendors of NFC-enabled Security/Access Control solutions, we believe the consumer/domestic market also has strong potential to drive near-term growth in the NFC market. As NFC-enabled smartphones increasingly win share among consumers, this domestic Security/Access Control opportunity will ripen as consumers seek to leverage NFC technology embedded in personal devices for a broader range of uses, both in- and out-of-home.

 

Which Application Will Drive Consumer NFC Adoption? Samsung Lets You Decide…

AutoID Technology Focus: NFC

Which NFC application will be the first to gain broad acceptance among consumers? The answer to this ongoing question is not much clearer now than it was a year ago, despite the numerous new NFC-enabled smartphones that have reached the market during the past 12 months. Many enterprises and NFC vendors are thinking ambitiously when it comes to driving consumer adoption, with use-cases like mobile payment, mobile marketing, and other relatively complex B2C applications being the cornerstones of many enterprises’ strategies. In contrast, Samsung, a leading manufacturer of NFC smartphones, is taking a more practical approach with the introduction of its TecTiles, which are essentially NFC tags with a sticker backing.

Stay tuned in July for even more expert coverage of the AutoID market.

Apple Confirms m.Wallet Application in iOS 6…

...But, contrary what the NFC-related rumors swirling around Apple would suggest, this app uses QR codes, not NFC. At the company’s 2012 Worldwide Developers Conference (WWDC) keynote address, the company introduced an updated version of its mobile operating system, iOS 6, which features Passbook, a new mobile wallet app that enables a range of cards, tickets, coupons and other credential types to be stored electronically in a mobile device. Passbook is an app tailor-made for many of the use cases associated with NFC—transportation and event ticketing, loyalty, mobile marketing/couponing and, of course, mobile payment, but leverages QR codes instead of NFC. At least for the time being, Apple remains on the sidelines of the NFC ecosystem.

Unfortunately for NFC and the vendors working to bring this technology to the mainstream, competing solutions like QR codes can enable many of the same applications as NFC with far less complexity and cost, although QR codes lack the inherent security NFC offers. Unlike NFC, which requires merchants to invest in contactless infrastructure, QR code-based apps generally can be enabled without major hardware investment, since they leverage hardware such as scanners/imagers that are already installed at most merchants. VDC views the costs associated with specialized contactless hardware as one of the most immediate and obvious barriers to merchant adoption of NFC.

From a consumer adoption perspective, NFC is equally challenged due to relatively weak awareness and accessibility. While QR codes are highly recognizable and printed on everything from real estate signs to product packaging to billboards, NFC-tagged items are highly uncommon and, not surprisingly, lack the immediate recognition of QR codes. As with merchants, consumers do not require a special device to read/display QR codes—almost any common smartphone is capable of supporting a QR app, making QR codes far more accessible to the masses today. In comparison, the population of consumers currently using NFC, while growing, is still highly limited. While NFC smartphone penetration levels could in theory one day approach the levels of smartphone adoption in general, but at this point in time, such a reality seems to be at least several years away, if not entirely uncertain.

To be clear, this recent announcement does not by any means preclude Apple from integrating NFC in its future hardware or software offerings. However, it clearly demonstrates that the company can and will enable many of the same applications (such as an m.wallet) discussed in the context of NFC via alternate technologies. Could Apple announce its support of NFC with the iPhone 5 later this year? Certainly—but we advise any enterprise evaluating NFC investment not to bank on it. 

Miss Any Posts This Month? We've Got You Covered.

Starting this month, we will be posting a brief recap of our posts to give our readers a quick guide to what we've covered. Each post will be categorized by AutoID technology (RFID, NFC, Barcode or Other). Check back here in the last week of each month to see what you've missed!

 

(Read the full post by clicking on the title)

The New Balance Experience Store in Boston Runs Away with RFID

AutoID Technology Focus: RFID

The opening of New Balance’s newest store in Boston, The New Balance Experience Store, coincided with the April running of the Boston Marathon. The company utilized RFID on a number of fronts, both inside and outside of the store, to engage customers and extract valuable business intelligence (BI).

 

AT&T Enables Mobile Marketing Beyond Large Retailers and Brands with New Small Business Services Offering

AutoID Technology Focus: Barcode

AT&T recently announced that it will be extending mobile barcode services to its small business customers. As mobile barcodes continue to gain in popularity, businesses of all sizes including smaller retailers, brands, restaurants and enterprises will have an opportunity to deliver marketing content to consumer mobile devices.

 

Why Would Apple Wait ‘n’ See with NFC?

AutoID Technology Focus: NFC

“Will the iPhone 5 have NFC?” This is by far the most frequently asked question we hear when speaking with large enterprises considering NFC adoption. VDC has considered this issue carefully, and while we find it virtually impossible to make a high-confidence prediction about Apple’s intentions, we have identified a number of reasons Apple could continue in its current holding pattern, or perhaps completely pass on NFC.

 

New VDC Research Program Will Provide Valuable Insights into the Near Field Communication Market

AutoID Technology Focus: NFC

We wanted to let you know about an important new annual research program we are launching called The Voice of the Customer Series: Near Field Communication. The series, which is based on extensive primary research of enterprise and consumer behavior, will provide you with the information you need to help ensure you are making the best decisions possible in every aspect of your NFC business strategy.

 

Barnes & Noble Hooks Up the Nook With an NFC Upgrade

AutoID Technology Focus: NFC

NFC is set to make its debut on an e-reader device. Last week Barnes & Noble announced its Nook e-reader will support NFC in the near future—perhaps by the end of 2012. Historically, the vast majority of mobile devices with embedded NFC capability have been smartphones, with the exception of a few niche tablet offerings. This remains true today, although we expect to see increasing near-term availability of other NFC form factors.

 

Visa's Stance on Mobile Wallets vis-á-vis V.me

AutoID Technology Focus: NFC

Visa has ratcheted up the competition level in the European mobile wallet market—and will likely do so in North America before the year’s end. The company just announced that V.me, its in-house mobile wallet solution catering to both consumers and merchants, will launch in parts of Western Europe by Fall 2012. A rollout in the US and Canada is expected to follow shortly thereafter.

 

Stay tuned in June for even more expert coverage of the AutoID market.

 

AT&T Enables Mobile Marketing Beyond Large Retailers and Brands with New Small Business Services Offering

AT&T recently announced that it will be extending mobile barcode services to its small business customers. As mobile barcodes continue to gain in popularity, businesses of all sizes including smaller retailers, brands, restaurants and enterprises will have an opportunity to deliver marketing content to consumer mobile devices. 

The AT&T Code Management Platform enables small businesses to create and manage mobile marketing content. The platform provides customized, pre-made templates to easily create mobile-optimized web land pages. The results of scanning a 1D or 2D barcode can also be changed without replacing the physical codes to keep content up-to-date. After users have created their mobile barcodes, they can use the platform’s reporting tools to measure the effectiveness of any given campaign.

VDC’s research in mobile barcode scanning confirms that mobile barcodes are no longer a stranger to the mobile consumer. The vast majority of Tier 1 retailers and brands (i.e., Macy’s, Best Buy, Coca-Cola) have deployed some form of mobile marketing with barcodes. Meanwhile, smartphones are becoming more widespread with improved displays and cameras. These advances in consumer exposure and comfort with scanning and displaying barcodes using their smartphones will continue to help drive mobile marketing. 

VDC views the new offering from AT&T as a critical market enabler as AT&T is catering to an underserved community of Tier 3/4 small merchants that typically lack the resources and/or expertise required to launch a successful mobile marketing campaign on their own. The company’s extended mobile barcode services offers small businesses the opportunity to deploy an effective, lower-cost marketing strategy that leverages an increasingly popular behavior among consumers equipped with smartphones – namely, mobile barcode scanning.

We expect that mobile marketing services targeted at smaller enterprises will help increase mobile barcode scanning traffic among consumers. Furthermore, consumers want to do more with their smartphones in terms of mobile barcode scanning at more places. In fact, our research reveals that “the ability to scan barcodes in a diversity of stores” was rated the second most important factor in terms of scanning experience in retail stores, with an average consumer rating of 3.68 out of 5.  Given this consumer desire/level of interest, the new services from AT&T are expected to enable smaller business to better serve, target and market to their customer base. 

VDC recently published the “Mobile Barcoding, The Consumer & The Retail Enterprise” FastForward which provides deep insight into the expanding adoption of mobile barcode scanning. For more information on this report please click here: Mobile Barcodes & The Consumer.