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

NCR Continues to Diversify with Acquisition of Retalix

NCR formally announced this past Wednesday an agreement to acquire Retalix, an Israeli vendor of retail, marketing, supply chain and logistics software solutions. The transaction is valued at $30 per share, or approximately $650 million and is expected to close sometime during Q1 2013. NCR intends to finance the acquisition via a combination of cash and an existing debt facility. Via the acquisition of Retalix, NCR strengthens its competitive position in several respects:

• Expanding its retail automation and customer engagement hardware offerings to include a more diversified range of software solutions, both for customer- and employee-facing applications
• Broadening its services portfolio to include additional professional/integration and managed services options
• Solidifying its status as a go-to vendor for end-to-end solutions that meet the specific, unique requirements of retail end users

We view the Retalix acquisition as a well-advised strategic move that furthers NCR’s diversification into the enterprise software market. While it has historically been known for high-end customer engagement and retail automation hardware (in addition to kiosks, ATMs, etc.), during the past 18 months, NCR has made a concerted effort to broaden its software portfolios—especially those geared towards retail and hospitality end users—via strategic acquisition and organic development.

For example, in August 2011, NCR acquired Radiant Systems, a specialized provider of hospitality POS software and solutions, for approximately $1.2 billion. The addition of Radiant materially strengthened NCR’s competitive position within hospitality, where the company had historically been weak relative to its status as a retail leader. In retail, the company recently launched its NCR Silver product—which enables merchants to integrate POS-enabled iPads, iPhones and iPod touches with stationary POS terminals—to address the rapidly growing demand for consumer-grade mobile device use in the enterprise. While Silver is geared towards SMBs, we expect the Retalix solutions that will soon be part of the NCR portfolio will appeal to a broader range of retailers, including Tier 1 leaders like Home Depot and Walmart, where the company has a well-established installed base.

Furthermore, we believe NCR’s efforts to diversify its software and service capabilities are indicative of a broader interest among end users (merchants and hospitality operators especially) to leverage technology platforms for a set of applications well beyond those with which they are traditionally associated. In the context of POS systems, for example, requirements now often include applications besides typical sales and payment functions. In hospitality, operators also need to accept/administer loyalty programs, manage digital menu boards, accept mobile payments/coupons and potentially support a range of back-of-house functions as well. Retail has similarly diverse requirements—and the acquisition of Retalix will enable NCR to meet these needs more consistently across a broader range of merchants. 

The growing importance of specialized merchant/hospitality solutions is a topic we will explore further our upcoming MCET research—contact us for details.

VDC Heads to the Big Apple for CET World 2012

The VDC AutoID team was in the Big Apple on Wednesday for the 2012 edition of Customer Engagement Technology World (CETW). Despite the recent hardships caused by Hurricane Sandy last week, this year’s show went on as scheduled and drew the usual, diverse crowd of vendors and end-users that attend CETW. Although the show floor was somewhat dominated by vendors of kiosk and digital signage hardware, software and solutions, other areas of the CET spectrum—including POS/mPOS terminals, consumer-facing mobile apps and customer analytics—were also well represented. Our observations at CETW 2012 left us with a several takeaways:

• Self-service solutions are alive and well. As we discussed in a recent post, during the past 12-18 months we have observed a certain level of anti-self-service sentiment among some end-user verticals, including restaurants/dining and retail. While there are definitely examples of enterprises that are moving away from self-service solutions, including self-checkout, kiosks and some forms of interactive displays, these particular instances are not indicative of any mass migration away from these technologies. In fact, these self-service solutions continue to evolve and progress in regards to their functionality and ease-of-deployment. Companies such as NCR are developing more capable and more easily-integrated self-service technologies, such as their NetKey offering.
• Merchant/retailer interest in mobility solutions continues to build. The concept of mobility—whether in the context of m.POS, m.payment or any other enterprise application—continues to build momentum. In regards to m.POS and m.payment especially, it seems these concepts have become so trendy as of late that some end-users are evaluating investment in them simply due to the buzz surrounding them. Several mobility vendors we spoke with at the event noted they are hearing from an increasing number of merchants who want to invest in m.POS/m.payment solutions—but have not defined the objectives for their deployment of the same. While these cases may be more of an indictment of the technology strategy—or lack thereof—at the merchants in question, we also see it as a strong indicator that retailers have generally acknowledged the value mobility provides in many applications.
• Personalized communications/offers that cater to individual preferences are a good start, but there is still a long way to go. For example, to engage a customer and maintain his/her loyalty it is equally important—if not more so—to avoid suggesting things that a customer may dislike or find offensive. Similarly, context and timeliness of communications are also important dimensions to consider—as events such as birthdays, anniversaries, or (to cite a timely example) storms and other natural events may have important implications for what a consumer wants—or does not want—to hear from a merchant. Clearly, tailoring communications to this level of precision is far more complex and challenging than simply making add-on sale suggestions or deal offers based on past purchase history—but with the increasingly advanced capabilities of analytics and other data-management tools, it is not an impossible task. 

For VDC, CETW 2012 was an informative, interesting and timely event, particularly as we prepare to launch its new MCET research program in the upcoming months. Contact us for more information about that research, in which we will discuss the above trends and many others impacting merchants and the technology providers that serve them.

What Themes Dominated the CET Market in 2011

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

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

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

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

Finding Success in 2012

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

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

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

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.

Smartphones Meet Smart Posters

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

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

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

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

Kiosks – Ringing in a New Age

Interactive Displays & Digital Signs and consumers’ personal handheld devices (including smartphones and tablets) have been steadily converging with kiosks and increasingly changing the market’s landscape.  These devices have caused kiosk vendors to rethink and re-engineer their traditional applications such as product/service information lookup and wayfinding, particularly for consumer-facing organizations. While these applications continue to be popular, organizations are constantly looking for solutions that effectively align with and engage their increasingly technology-savvy consumer base, enhance their in-store experience and improved customer loyalty. Kiosk suppliers are responding to this increased convergence by:

- Enhancing the software solutions set for self-service kiosks – Kiosk suppliers are leveraging relationships with ISVs and SIs to capitalize on the boon of application development in the mobile device and digital signage markets as a means to extend their own platforms. Popular applications include:

    o Smartphone applications (e.g.: RedBox mobile)

    o Online portals (e.g.:  JC Penney’s “Endless Aisle”, Toys ‘r’ Us “Wish List”, Coinstar “Face Cube”)

- Leveraging the same user experiences as some of these next-generation devices - User experience is not just about flashy imagery and music anymore … it’s more interactive.  Retailers are increasingly demanding multi-touch capabilities, particularly for kiosks and digital signage solutions, leveraging the same type of interface many consumers already use. The enhanced capabilities are enabling retailers to further interact with their customers as well as create new sales and marketing opportunities. Examples include Beyond Kiosks & iBracket (build kiosk enclosures for iPads) and IN Media (recently launched IPTV technology based HD kiosk running on an Android platform).

How is the growing surge in tablet sales expected to impact the market for traditional kiosks? Are dynamic software solutions that enable seamless in-store and cross-channel technology integration a must-have for end-users today?  We expect to answer these questions and learn more trends in our coverage of the Kiosk market as a part of the 2011 Customer Engagement Technologies Market Intelligence Service (CET). Stay tuned.

The Many Faces of Personal Shopping Systems

One of the more exciting in-store retail technologies we study as part of our Retail practice is Personal Shopping Systems (PSS), a handheld or cart-based self-scanning device that enables retailers to personalize promotions and the in-store experience while also allowing the shopper to scan-and-bag items on the go. Although suppliers have long touted the value proposition of this solution, it is only over the past couple of years that global retail conglomerates have moved from pilots to larger scale deployments, particularly in Europe.

One of the more interesting trends for the PSS market is that just as the solutions are beginning to gain traction and scale, a new threat is beginning to emerge: Smartphones and tablets. These devices have the potential to integrate many of the same functionalities and values that PSS solutions offer, primarily through applications.  For example, smartphone applications such as AisleBuyer™ (currently available on Apple and Android phones) have the potential to convert the shopper’s personal handheld device into a PCI-compliant self-checkout solution while also supporting the personalization of content and highly targeted advertising and promotions.  Retailers could potentially refrain from investing in this solution given the high upfront costs for procurement & installation, lack of an established market for personal shopping systems and the threat of early obsolescence posed by emerging mobile applications.

Suppliers of PSS solutions are increasingly embracing this trend, with market leaders such as Motorola and Datalogic offering highly functional PSS devices that resemble ergonomic, touch-enabled mobile device solutions such as a smartphone.  Not only are these devices well-aligned with the highly intuitive graphical user interfaces and applications that today’s customer base is comfortable with, but they are also increasingly resembling and being marketed as mobile kiosks or compact digital signage solutions.  

Continued evolution in this direction could eventually enable retailers to bring the advantages of an e-commerce shopping experience to their brick-and-mortar stores as well as converge the benefits of multiple technologies into one device.  

For example:

• In a recently concluded end-user survey of retail automation technology users, a primary adoption barrier for kiosk deployment was the high price of the hardware and the extensive integration required. PSS solutions could offer a more cost effective solution as well as minimize the installation/integration pains.

• Retail in-store digital signage deployments are currently transitioning from a more traditional ad-based model to a more specific and highly personalized platform – which is aligned with the multi-dimensional value propositions as offered by a PSS.

Our research indicates that hardware for personal shopping systems accounted for nearly $27.4 million in global revenues for suppliers in 2009 and has the potential to grow to more than three times that number in five years’ time.  Learn more about VDC’s coverage of the personal shopping system market at: http://vdcresearch.com/_Documents/tracks/t1v7brief-2625.pdf

 

Electronic Shelf Labels: Where’s the Tipping Point?

VDC’s analysts have been following the electronic shelf labeling market for years, and with good reason: we love disruptive technologies. 

Many of the disruptive technologies we follow have proven more evolutionary than revolutionary:
• 2D barcode symbologies,
• RFID, and
• voice recognition

Each of these technologies has made fools of optimists and cynics alike.  Still waiting for that much ballyhooed 5 cent smart label?  Take a number.  Still waiting for multi-modal data capture to be embraced globally by warehouses and T&L operators?  We’re already there.

So what’s the deal with electronic shelf labels? 

The value proposition is as compelling as it was in the eighties and nineties, even more so with the new functionality ESL suppliers have added in recent years:
• dynamic displays,
• temperature and stock monitoring,
• longer life displays that consume less energy,
• Stock to light capabilities, etc. 

Yet, ESL suppliers have yet to successfully secure that elusive retail reference account that will start those dominoes tumbling, particularly in North America, which remains largely under-penetrated.

The capital outlay required to support ESL is far from insignificant and is compounded when high volume retail chains (those who stand to benefit the most) consider investing.  With the average North American supermarket carrying 46,852 items and ESL volume pricing approaching $5.00, the cost to outfit a single supermarket can easily exceed $250,000.   The alternatives are far less CAPEX intensive.  Accounting for labor savings alone won’t provide a return on investment in less than three years, not with the “median stock clerk” earning $9.38 per hour, sans benefits. 

As with the aforementioned technologies, finding the tipping point has as much to do with accessing incremental revenue as it does with labor savings and operational efficiency.

How much incremental revenue might a typical supermarket access through pricing optimization, and what impact might this incremental revenue have on the ROI calculation? 

These are the questions forward thinking retailers are contemplating, and endeavoring to answer.  Is this the breakout year for ESL?  Are we there yet?  Are we there yet? 

ESL is one of nine retail automation technologies we’re covering in 2010.  Learn more here: Retail and Transaction Automation Equipment, 2010

Retail Automation in 2010: What Needs to Be Done to Operate Successfully?

In yesterday's webcast, we provided a sneak-peek into the data from our 2010 Retail & Transaction Automation Equipment Business Planning Service. 

The webcast was recorded and the slides can be found below.  We encourage you to review both to get a good high-level picture of the current state of the traditional and next-gen retail and transaction automation markets, and how customer experiences with multiple technologies are aiding, or hindering, retail automation supplier efforts to gain traction in this turbulent market. 

To quickly summarize some of what we covered, we thought we'd use this platform to share how retail automation suppliers can operate successfully, given the still-turbulent state of retail today.

• Recognize and leverage your strengths – above your brand – in alignment with the common key product and vendor selection criteria including: reliability, durability, product quality, price and ease of use.

• Be specific, differentiated and relevant when it comes to your product(s) because brand matters less than ever when it comes to product selection – and customer requirements differ materially across certain product class boundaries. 

• Promote ROI.  Adoption in every product category is being hindered because of fuzzy ROI.  

• Take on the integration / compatibility challenges by thinking about new product opportunities or brand-worthy opportunities.

• Develop your communications/ network management capabilities, both wireline and wireless, as it addresses the acute challenges of integration  and compatibility.

• Study how some of the differences in requirements and preferences across technical segments can be as powerful as the differences across vertical segments.

Staying Ahead of the Joneses: Retail Automation in 2010

View more presentations from VDC Research Group.

2009 Retail Automation Investments Hampered by Store Closings and Shifting IT Priorities, Spurring Holistic Innovation Among Tier 1 Suppliers

We have nearly completed our research campaign with leading and emerging suppliers of retail automation solutions.  We’ve learned that 2009 was a challenging year for many of these suppliers, as leading retail chains extended their refresh cycles for core POS solutions and related components.  This contraction left many retail automation suppliers with a short list of less than compelling strategic alternatives likely to create margin compression that could adversely impact the industry long after these markets recover. 

Thankfully, many of the thought leaders we interviewed took a different tact, innovating well beyond feeds and speeds to address the operating requirements of deploying enterprises more holistically, all while reducing the CAPEX burden and providing a clear migration path to next generation technologies.  As the appetite for retail automation investments rebounds in 2010, these suppliers are reaping the benefits of investments made to broaden their software and managed service offerings:

• Access to new sources of revenue
• Increased customer retention
• A higher degree of insulation against competitive displacement

We’re seeing examples of this type of holistic innovation in many of the retail automation technical segments we cover including self check-out, kiosks, and digital signage, reflected in the revenue contribution many suppliers are attributing to software and services compared to previous years. 

We believe the viability of managed services as a growth strategy is strongest for those suppliers who have direct selling relationships with their key accounts, broad product portfolios, and the strategic alliances required to support new application development and commercialization.  As the retail automation markets rebound in 2010 and beyond, these suppliers will emerge better positioned to address the requirements of their key accounts with flexible and scalable managed services offerings, providing a viable source of differentiation against more hardware-centric suppliers of retail automation.

These themes and other trends will be expounded upon in many of the retail automation technology market analysis volumes being published in the weeks ahead.  Stay tuned.