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

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.

The New Balance Experience Store in Boston Runs Away with 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).

Although the dynamic is changing, RFID has not traditionally played a customer-facing role in retail. Instead, retailers have predominately used RFID for supply chain visibility and back-end inventory control systems. However, certain merchants, including New Balance, have integrated the technology into solutions that both attract and empower customers. For instance to promote the store, 6,000 RFID-enabled prize cards were distributed on the day of the marathon to invite customers to the store in order to discover what they had won. The cards, embedded with a Smartrac EPC Gen 2 RFID tag accompanied by an Impinj Monza 4 chip, were encoded with a unique identification number. By redeeming their prize cards at the point-of-sale (POS), customers learned if their card was a winner. 

InMotion Retail Marketing installed an interactive wall display on which a dozen shoe models are displayed. Next to the sneakers is a 42-inch touch screen and an RFID “hotspot,” a separate shelf where integrated RFID reader antennas are installed. Each shoe style is equipped with a Smartrac passive UHF RFID tag with an Impinj Monza 5 chip. Each tag’s ID is linked to the particular product’s SKU to which it is attached, and is stored in a cloud-based server hosted and managed by Freedom Shopping. When a shopper moves a particular shoe to the “hotspot,” a large image of the shoe displays on the touch screen along with the shoe’s features.

This RFID-enabled display provides both a unique shopping experience for customers and a powerful tool that enables New Balance to perform marketing analytics related to customer traffic and products preferences. Two RFID readers, installed above the display, detect and track product movement throughout the day. New Balance can leverage information provided by InMotion’s software to benchmark it against daily sales records, gain insight to consumer interest in particular products, how often that interest generated a sale, and whether promotional efforts are proving to be effective.

What makes this use of RFID compelling is that New Balance’s system delivers dynamic marketing and promotions while performing important consumer behavior and traffic monitoring simultaneously on the back-end. From the perspective of customer engagement and business intelligence applications, VDC affirms that RFID holds customer-engagement and marketing value propositions largely overlooked by retailers. This differentiation could give New Balance stronger footing against competitors.

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.

Tablet Computers: A Key Point of Convergence for Customer Engagement

The emergence of tablet computers, such as the iPad, Motorola Xoom, and Samsung Galaxy has many businesses thinking about ways to integrate these devices into applications that compliment their existing customer engagement solutions. Tablets are a cost effective, flexible, and easily scalable addition to a variety of enterprise hardware devices such as POS terminals, self-service kiosks, and interactive displays.  In the near term, we expect these devices to become increasingly common in enterprise deployments, as businesses seek to extend the value of existing systems via the integration of tablets.  VDC’s 2010 Mobile and Wireless study forecasted 130% revenue growth in 2011 for tablet devices used within the enterprise. During the next several years, VDC expects growth in this category will continue to accelerate as more hardware suppliers and ISVs offer integration and application development support.
Examples of tablet integration into the enterprise include:

1. A number of Arby’s locations are piloting programs that integrate an iPad with their existing POS terminals, using the tablet as a mobile POS terminal as a means to scale POS bandwidth on an as-needed basis and for queue busting during peak hours.
2. Larger retailers such as Nordstrom, Sephora, J.C. Penney and Converse are conducting iPad pilot programs in stores across the US.  These retailers are experimenting with tablets as electronic catalogs, informational kiosks, social media platforms and interactive displays, as well as leveraging them for payment processing and inventory management.   Examples include:   
   
   • Converse has developed an application that allows customers to design and order customized sneakers while in store.
   • Sephora has created an interactive program that enables customers to test various makeup and color combinations on a virtual model.

Tablets possess tremendous potential for both the enterprise and the customer.   The enterprise will benefit from operational efficiencies, improved margins, increased customer loyalty, and new opportunities to reach consumers. On the other hand, customers are expected to benefit from greater access to information, which will result in enhanced decision making and an improved in-store experience.

VDC expects that adoption of tablets will scale rapidly, as they increasingly become a center of convergence for a diversity of customer engagement technologies.

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.