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

New Report: Mobile Barcode Scanners – Shaping the Future of the Data Capture Industry

(VDC recently published a report focused on Mobile Barcode Scanners. The following blog highlights some of our thoughts on this market and its potential.)

The data capture industry is constantly changing. Handheld barcode scanning is no longer restricted to traditional pistol grip form factors or rugged mobile devices as pairing or integrating scanners with consumer devices is increasingly becoming a popular option for organizations’ barcode scanning applications. Capitalizing on growing smartphone adoption in the enterprise space, new and emerging hardware vendors such as Infinite Peripherals & Koamtac and non-traditional ISV participants like Scandit and Manatee Works (now part of Cognex) are challenging AIDC incumbents by bringing data capture technology to a wider audience in new ways.

As retail, logistics, and health care organizations face growing pressures to support vital workforce operations, improve customer experiences and improve productivity, consumer smart device-based solutions such as companion scanners, sleds, and barcode scanning software platforms are being evaluated as viable solutions to replace or be deployed alongside traditional purpose-built devices. The following are short descriptions of mobile scanning form factors that are available in the market.

• Companion scanners: Small form-factor barcode scanners that pair with other devices via Bluetooth/Wi-Fi.
• Sleds: Peripherals that encase and enable consumer-grade smart devices for enterprise- grade scanning.
• Personal Shopping Solutions: Mobile computer solutions that are used by consumers for shopping in store.
• Software platforms: Software development kits that enable consumer-grade smart devices to use their built-in cameras for enterprise-grade barcode scanning

Exhibit: Respondents’ Plans to Replace Purpose-built Scanners with Mobile Scanning Devices

According to results from VDC’s recent survey of mobile scanner end users and evaluators, 63% of organizations are considering replacing their purpose-built scanner investments with mobile scanners for daily operations. Respondents surveyed across retail, logistics, and health care are currently evaluating the option to deploy mobile scanning solutions to support daily operations. Consumer smartphone-based scanning solutions are also gaining consideration in the enterprise space as companies evaluate BYOD policies and alternatives to traditional purpose-built scanners. However, while mobile scanners do make barcode scanning available to a wider audience and broader range of applications, concerns related to initial investments and deployment costs remain.

VDC believes that mobile scanners are just about starting to present growth potential; application development will play a major role in sustaining long-term business development for vendors in the mobile scanning ecosystem, creating apps for enterprise uses cases and extending vendors’ products to wider audiences. Distributors with vertical expertise and a strong application developer network will be key components to success, since vendors must differentiate themselves from competitors and establish strong brand images.

Mobile scanner vendors profiled as part of this report – Amazon.com, Code, Datalogic, Grabba International, Hiku, Honeywell, Infinite Peripherals, Koamtac, Opticon (OptoElectronics Co. Ltd.), Scandit, Socket Mobile, and Zebra Technologies

For more information and insights on this report, please feel free to download the Executive Brief and contact us to learn how to gain access to the full report.

Written by Shahroze Husain and Richa Gupta. For more information, be sure to review our full mobile scanning report- Mobile Barcode Scanners or contact us at [email protected].The author can be contacted directly at [email protected]

NCR puts itself up for acquisition; VDC breaks down the “retail” reasons why

On April 22nd, The Wall Street Journal announced the news that ATM-maker NCR is eyeing strategic alternatives as they face lagging stock prices and shareholder pressure. A potential spinoff, sale of assets, or a full acquisition/buyout - all seem like very viable possibilities. On June 2nd 2015, news broke of NCR asking for first-round bids from prospective buyers and on June 16th, two large private equity firms, Blackstone Group LP and Carlyle Group LP, have paired up in a $10 Billion leveraged buyout (LBO) offer for NCR, including debt.

Started by John H. Patterson in 1884, the National Cash Register Company was the maker of the first mechanical cash registers. Moving forward to 2015, the company is now known simply as NCR, and sells transaction services, automated solutions, software and consulting services to clients across a wide array of industries including financial, retail, hospitality, travel and government. The company facilitates over 550 million transactions a day. NCR divides itself into four major segments: Financial Solutions, Retail Solutions, Hospitality Solutions, and Emerging industries.

• Financial Services provide ATM and payment systems along with software and services for cash management, digital banking, maintenance, and management.
• Retail Solutions provide retail-oriented solutions and systems including POS terminals and software, barcode scanners, self-checkout solutions and kiosks, printer media and software – all in support of an omnichannel experience. In addition, this division provides professional services including installation, integration, device management, and maintenance for some of the company’s largest clients.
• Hospitality provides systems and solutions for restaurant chains and venues including POS hardware and software along with professional services and printer media. 
• Emerging Industries which is targeted towards newer industry verticals including telecommunications and technology, and travel includes maintenance and professional services for third-party hardware for certain manufacturers. It also provides small business-specific systems and solutions including comprehensive POS terminals, software and professional services.

In order to remain competitive and adapt to changing market conditions and consumer trends moving online, NCR made large acquisitions, buying companies like Retalix and Radiant Systems to strengthen its Retail Solutions division and enter the Hospitality segment respectively. However, since then, NCR has failed to integrate and generate sufficient growth from the acquisitions and now carries debt of $4 billion. In this blog, I will shine the spotlight on NCR’s acquisitions of these companies, thereby highlighting the company’s present (unenviable) position from a Retail and Hospitality standpoint.

To expand its Retail Solutions business, NCR acquired Retalix, an Israeli vendor of retail, marketing, supply chain and logistics software solutions. The company was purchased for $650 million with the aim of cross-selling to a combined, larger client base, improving margins through its software model while also leveraging R&D best practices. However, NCR did not successfully leverage Retalix’s strengths to position itself as a leader in the next-generation retail solutions segment – from a mobility and e-commerce standpoint. The division has faced challenges with slowing demand from retail customers as they increasingly embrace mobile devices to support transaction processes and cloud-based solutions for their e-commerce initiatives. Retail Solutions has seen revenue declining quarter-on-quarter since Q1 2014 with the latest Q1 2015 results showing a 9% decrease in revenues, at $445 million. This, coupled with an operating margin of 7.7% in 2014, which lowered from 10.1% in 2013, continues to negatively impact overall profitability. The company’s inability to move with the times, especially as it relates to fulfilling its retail customers’ growing focus on e-commerce and online order fulfillment, along with its increasing liabilities are significant contributors to its declining revenues and profitability.

Acquired in 2011, Radiant Systems was a specialized provider of hospitality POS software and solutions which allowed NCR to become competitive in the Hospitality segment. NCR’s hospitality segment makes up only 10% of revenues and has seen declining quarter-on-quarter revenue growth since the first-quarter of 2014. During Q1 2014, revenue growth was 14% quarter-on-quarter, which has dropped to a 1% decline in Q1 2015. The division has also seen its operating margin drop from 16% in 2013 to 13.8% today. Like retail, the hospitality segment encountered slower sales with customers moving away from traditional POS terminals to mobile and handheld solutions, highlighting the massive gap in NCR’s core product line(s). This part of the business has also been affected from the move to mobile POS, as restaurant POS vendors such as Vend and Touch Bistro use subscription-based models for restaurant POS systems to lower capital expenditures. Furthermore, the increased availability of mobile devices has led to smaller restaurants using these solutions to offer greater flexibility and varied payment acceptance, especially as restaurants begin to accept electronic wallets like Apple Pay, which is proving to be a big miss for a company like NCR.

In a positive move for the company, NCR updated its NCR Silver platform, a cloud-based POS solution for the iPad and iPhone that is aimed at serving small businesses. To stay current with evolving market trends, NCR integrated payment alternatives including PayPal, Apple Pay, Bitcoin and LevelUp along with providing enhancements to facilitate safer and more secure transactions. The company has also priced the service more competitively with NCR Silver offered at $59/month, aimed at small businesses, and a NCR Silver Pro Restaurant Edition priced at $129/month. NCR’s Emerging Industries division is also looking to introduce chip and PIN capability later in 2015. With these latest updates, VDC believes NCR is embracing change while staying competitive with offerings in the marketplace today.

NCR’s retail and hospitality-focused acquisitions have not performed according to market (or even company) expectations. Ineffective strategy execution has also resulted in little-to-no organic growth while prompting the company to take on a large debt for financing these sizable acquisitions, in both the retail as well as financial services sector. NCR’s less-than-optimal performance in recent quarters has pushed its largest shareholders to look for strategic alternatives. Will it better for investors to buy parts of the company as opposed to the whole? That remains to be seen. But, for the company to re-invent itself and get back to its glory days with its retail and hospitality divisions, NCR will have to make a concerted research and development effort to introduce innovative products and solutions that align themselves well with end users’ evolving profitability goals and customer engagement initiatives. The company has a great foundation to build off of; it’s now time to change up the structure and better position its business for current and emerging growth opportunities.

VDC will explore this topic further in an upcoming VDC View. Stay tuned!

(With Richa Gupta, Senior Analyst)

Revisiting Our Annual Barcode Predictions with One Quarter Remaining in 2013

With three quarters of 2013 already behind us, the VDC AutoID team thought it would be interesting to revisit the 2013 predictions we made at the start of the year. In this blog post we examine our barcode predictions and offer an update as we head into the final stretch of 2013.    

Prediction #1:

More barcode market aggregation ahead – Expect continued consolidation of the barcode hardware landscape, particularly to achieve growth across product categories, verticals and regions.

Update:  It may not even be over but 2013 will be remembered as another year in which we witnessed a large amount of vendor consolidation. The major acquisition of Intermec by Honeywell will likely be the big story of 2013. That transaction's impact and significance dwarfs all other M&A activities announced to date and more than likely any others that may be completed before year’s end.  Somewhat surprising, however, is that our prediction proved true before the Honeywell/Intermec deal closed as at least five acquisitions were announced by the end of May.

M&A announcements of note during the first three quarters in the barcode market include:

• Honeywell completed the acquisition of Intermec after receiving final FTC approval, adding new or augmenting existing solutions in voice, barcode printing, RFID and mobile computing (September).
• OCR Canada acquired Aurora Bar Code Technologies Ltd. in order to increase its presence in Western Canada and expand its enterprise mobile computers, barcode scanner, RFID and wireless network capabilities (May).
• Barcoding Inc bought Miles Technologies Inc. for an undisclosed amount in a move to increase its presence in the central US (May).
• General Data Company, a leading manufacturer and provider of barcode identification, tracking and data management products and solutions sought to expand its healthcare solutions offerings and acquired Triangle Biomedical Sciences Inc. (TBS), a leading manufacturer and supplier of instrumentation, reagents and consumables for the clinical and research pathology market (May).
• Datamax-O’Neil acquired the thermal printer assets of Source Technologies, a leading provider in specialized printing solutions (May).
• Telenor acquired Liquid Barcodes, the largest provider of mobile coupons in Norway, to strengthen its focus on coupons, value codes and loyalty solutions. Along with the company Valuecodes, in which Telenor has a controlling 51% stake, Telenor will become the leading mobile coupon player in Norway and have a strong foundation for further expansion (March).

Prediction #2:

Barcode vendors will learn to “accessorize” – More barcode hardware players will actively look to enter [or further entrench themselves in] the “accessories” market – developing sleds and/or sleeves with barcode scanner,  payment acceptance or other features that support consumer-grade device usage in retail, healthcare and enterprise environments.

Update: Starting with a large number of vendor products announced and on display at NRF, it was clear in January that “accessorizing with AutoID” was central to many product development strategies. Buoyed by the expanding BYOD trend and focus on lowering total cost of ownership (TCO), several vendors such as Griffin Technology and Honeywell have released new sleeves and sleds suited for enterprise, retail and/or healthcare environments.  

Prediction #3

Future with mobility, not without in [barcode label generation software] market – An increasing number of barcode printing software providers will extend label printing support to portable devices (both purpose-built and consumer-grade) – facilitating mobile applications such as field sales, field service and direct store delivery (DSD).

Update: We give ourselves partial credit on this prediction as the products and capabilities to support mobile printing are available, however, end-user usage of mobile print commands managed and sent from consumer devices remains in the nascent stage. At this point in the year, most barcode label generation software and barcode printer vendors have announced support (i.e., drivers, firmware) for leading mobile operating systems such as iOS and Android.  In our 2013 conversations so far, remote print management and mobile device support remain key software development areas. In fact, expect a leading barcode label generation software vendor to announce enhanced mobile device support as part of a major new product launch in early October.

Prediction #4:

Embracing the tech-savvy consumer – Scanning with and displaying barcodes on mobile device screens will continue to grow significantly among consumers. We predict more QSRs (quick service restaurants), convenience stores, restaurants, theme parks/ entertainment venues and other consumer-facing enterprises will invest in and deploy barcode imagers and consumer-grade mobile devices to interact with consumers (e.g., coupon redemption, payment, loyalty/rewards programs).

Update: This prediction was likely going to come true; however, the quick pace of adoption and strategy migration has taken vendors (and us) by surprise. For example, 2D imager adoption remains strong through three quarters with growth outpacing all other barcode product categories, especially in retail sectors. Providing examples of business strategies focused on targeting and serving  consumers armed with smartphones are supermarket chain Giant and Stop and Shop, drugstore chain CVS, and Australia’s eRX to name a few. In addition, according to their Q2 2013 Trend Report, ScanLife processed over 7 million scans in consecutive months for the first time ever, users tend to scan over 3x per month on average (a 22% increase from a year ago) and scanning from tablets has increased by a whopping 1300% from Q2 2012.

Recap of VDC's AutoID Team's Q2 Blogs: Did You Miss Any?

If you missed any blog posts from Q2, here is a recap, including hyperlinks and core AutoID technology focus for each posting. 

A Preview of our Handheld Barcode Scanner Report

AutoID Focus: Barcode

The recent trends in the barcode industry continued in 2012. What is the state of the handheld barcode market? This article looks at the state of the barcode industry and provides insight into key trends and competitive dynamics for the handheld scanner market.

Cognex watching Microscan’s products like a “Hawk”; files IP infringement claim

AutoID Focus: Barcode

In April, Cognex filed a lawsuit against competitor Microscan’s Mobile Hawk product for patent infringement: Microscan is refuting the claim of infringement alleging it is original technology.   

How does Legislation Impact Barcode Technology Adoption?

AutoID Focus: Barcode 

Many governments have looked towards barcode technology to enhance traceability of highly counterfeited products (pharmaceuticals, food, etc.). Legislation usually takes time for implementation, however. How does legislation impact barcode adoption?  

Embedded Sensing & M2M Enable Advanced Efficient Agriculture with RFID

AutoID Focus: RFID

A new product from RFMicron, the Magnus chip, allows for upgrades in typical passive RFID technology. These upgrades enhance performance and adjust performance for given levels of moisture. One particular industry this could help is agriculture. Learn more by reading this post.

What is Shaking Up the Barcode Technology Market?

AutoID Focus: Barcode

2012 was interesting year for many markets, including the barcode market. Beyond economic stagnation and volatility, there are three other factors that contributed to the performance in the barcode technology market.

TEKLYNX International Partners with VDC Research on Recent Channel Leadership Workshops

AutoID Focus: Barcode

In mid May, TEKLYNX partnered with VDC, CEO Focus, and Felton Consulting, to present two separate channel leadership workshops. These workshops offered a valuable opportunity for executive-to-executive interactions. Well over 100 attendees participated in the two live events.

Is this the end of barcode labels as we know it?

AutoID Focus: Barcode

Many technologies are changing the traditional look of black and white barcodes. Two such relevant technologies are colored barcodes and watermarks (invisible barcodes). Do these technologies prove to be the demise for barcodes or are they merely complements?

The Power of Datalogic's Magellan 9800i - Now Available

AutoID Focus: Barcode

Growth in the barcode industry has continued, anchored by the need for camera based imagers. Datalogic, this June, released a game changer for the retail industry in the multi-plane camera based scanner-scale, the Magellan 9800i, specifically for checkout.

What You See is Just Not What You Eat Anymore

AutoID Focus: Barcode

In China, many wealthy people have looked towards international sources for their cuisine. Why? Because there have been several counterfeiting scandals over the past few years. Barcode and other AutoID technology can bring asset tracking capabilities to China.

VDC's AutoID & Data Capture Practice's Summer Intern Gets Enamored by RFID

AutoID Focus: RFID

Several factors of everyday life are often misunderstood or generally ignored. VDC’s AutoID & Data Capture Practice's summer intern’s baptism into the world of AutoID, especially RFID, was eye opening and empowering. 

The Magic of Macy’s Omni-Channel Retailing Strategy Becoming More Potent with RFID

AutoID Focus: RFID

Omni-channel retail is an ideal in which all channels of a retailer are seamlessly integrated such that information is shared in real time. Macy’s has implemented RFID at the item-level for apparel and moving toward tagging other items with the goal of enabling omni-channel retailing.

The RFID Application Invasion Marches on

AutoID Focus: RFID

Friedrich Dick (a German cutlery company), Fleye (an action sports filming company), and the government of Taipei are all using RFID in creative ways. As RFID becomes more affordable and accessible, a higher number of companies and organizations are looking to implement RFID as solutions.

DC Velocity Talks Item-Level RFID and Distribution Centers with VDC’s Mike Liard

AutoID Focus: RFID

DC Velocity magazine sought thought leadership from several RFID experts on the impact that item-level RFID tagging will have on distribution centers. Mike Liard, of VDC, helped DC Velocity on both an article and a webcast concerning this issue.

The Magic of Macy’s Omni-Channel Retailing Strategy Becoming More Potent with RFID

In the world we live in today, having options is everything. When someone mulls over a purchase, two common considerations are: when do I need this by and where can I get it? In this day and age, if the answer to the former is “not for some time,” then online research or purchases are common.  If, however, the answer is “as soon as possible” or “tomorrow,” brick-and-mortar stores are still the choice. Either answer prompts the significant follow up question, “where can I make my purchase?” Research, typically online or in a catalog, occurs until the informed consumer finds the product he or she wants.

So, what if the consumer needs her product immediately and recognizes the product is on a retailer’s website and she heads to the store only to discover it to be out-of-stock? Is there an in-store kiosk available from which a shopper can order the product from another store and have it deliver to her local store or doorstep? In addition, consumers are increasingly “buying with a click” or simply buying on a whim; therefore, retailers need a strong online and mobile presence to service these consumers, especially in today’s connected world. By not having inventory available in store or affording customers alternative purchasing option, a retailer may not only miss out on a sale, but may also endanger that customer’s loyalty or brand perception.

How are retailers able to avoid lost sales, disappointed customers or diminished loyalty? The answer is omni-channel retailing. Omni-channel retail is a concept of interconnectedness. A retailer needs to combine all the heterogeneous parts of the supply chain, into one smooth, completely connected framework.  Put another way, omni-channel retailing means connected customers can shop for and purchase the same items across many channels.

Many retailers have embraced omni-channel retailing and its advantages, but unlike most other retailers, Macy’s has a not-so-secret weapon in RFID technology which affords more accurate, real-time inventory visibility. As highlighted during its recent investor meeting, Macy’s is enhancing its omni-channel retail strategy by broadening its overall RFID strategy. While the technology is already deployed in US stores (select apparel items and display shoes are tagged), the company is expanding store-based fulfillment to 500 locations and working with 50% of its suppliers to stock RFID-tagged goods for improved inventory counts.

RFID tagging has been so successful that Macy’s CEO Terry Lundgren expects it to reduce the need for distribution centers whereas stores will serve as distribution centers and closest-to-the-customer fulfillment locations.  RFID will play an essential role in achieving the vision of omni-channel retail by ensuring that merchandise is replenished in a timely manner and regular automated cycle counts on inventory are enabled. VDC believes item-level RFID will continue to elevate and evolve the omni-channel retail concept and the technology will play a transformational role in the omni-channel retailing experience.

(A special thank you to Nicholas Reposa for his significant contributions to this posting. Mr. Reposa is currently a Researcher in VDC’s AutoID & Data Capture practice.)

NRF 2013: The Big Show Day 2 in Review

The VDC AutoID team’s second day at NRF was just as busy as the first, and was packed with vendor meetings, new product briefings and walking the show floor. Since our previous post focused on broader trends and observations gleaned from NRF 2013, this blog is dedicated to sharing some of the key vendor announcements and product introductions made during the event:

• NCR and PayPal announced a partnership whereby NCR will leverage PayPal’s leading cloud-based payment technology to augment the functionality of its mobile solutions targeted at hospitality enterprises, particularly restaurant/dining operators. Initially, NCR will integrate PayPal with its NCR Mobile Pay and NCR Aloha Online Ordering applications, giving customers an alternative to using credit/debit cards via enabling smartphone-based online (i.e., PayPal) payment. Besides the convenience and security benefits, PayPal will also bring social commerce features to the apps, including online check-in and reviews. Eventually, NCR also plans to integrate PayPal into its Convenience-Go (C-Go) and Endless Aisle applications. The NCR-PayPal partnership demonstrates NCR’s commitment to “making everyday transactions easier” for the consumer and merchant as well as PayPal’s leadership in the digital payment ecosystem.
• Zebra announced a new line of mobile receipt printers targeted at retailers and other B2C merchants that increasingly leverage consumer grade i-Devices (i.e., iPhone, iPad and iPod touch) as mPOS platforms. The new iMZ220 and iMZ320 are designed for easy integration with mPOS devices (including consumer grade offerings, such as those from Apple) and are among the first Link-OS-enabled products the Company plans to launch during 2013. Link-OS is a new operating system designed for use with Zebra devices which includes a SDK and core software applications that the company believes will make its hardware easier to integrate, manage and maintain from any location.
• HP debuted several new retail-focused POS products that address merchants’ increasingly strong interest in sleek, aesthetically-pleasing stationary terminals and rapidly growing demand for tablet-based mPOS solutions. For retailers seeking a more attractive alternative to clunky, traditional stationary POS terminals, HP introduced its RP7 and RP3 Retail Systems, both of which combine a sleek, modern appearance with the robust connectivity and build quality retail and hospitality operators require. HP also showed its new ElitePad along with a line of peripherals designed specifically for use with the tablet.

As usual, NRF delivered again in 2013 with many great exhibitors, vendor briefings and new product announcements. We look forward to attending next year’s edition, but until then, stay tuned to this blog for more AutoID-related news and opinions. Also be sure to listen to our upcoming NRF Quickcast, in which we will further discuss key takeaways from this year’s Big Show.

NRF 2013: The Big Show Day 1 Recap

The VDC AutoID team attended this year’s NRF in full force. With vendors representing all of the core AutoID markets, including MCET, RFID and Barcode, there were many new and innovative retail-targeted products to see relevant to each of the practice’s coverage areas. The following are a few broader observations from day 1 in the Big Apple:

• Hardware is becoming increasingly less important, and more vendors realize it. Conversely, software, and, more importantly, the functionality it enables, is the critical issue for retailers. Some hardware and solution vendors have been aware of this dynamic for some time now. Others, we think, have only recently awakened to this reality. This is more often (but not always) true in the case of large-scale, enterprise-focused vendors of retail automation and customer engagement solutions that have historically pursued differentiation via hardware ruggedness, lifecycle, and so forth rather than ease-of-use, intuitive functionality and application innovation. During conversations throughout the show, it was evident that several large-scale, traditionally hardware-focused vendors have pivoted to a broader focused strategy—one that seeks to differentiate on innovative software and functionality in addition to hardware.
• Traditional POS terminal refreshes contribute to mPOS growth. The common strategic drivers behind the recent explosion in retailers’ mPOS investment are well documented, and include improved labor utilization and efficiency, better customer service and employee empowerment. However, during our time at NRF 2013, we validated another, more pragmatic factor playing a role in mPOS’ rapid growth: stationary POS terminal refreshes. As merchants update traditional POS systems, vendors indicated that mobile terminals are usually included in their next-generation solution evaluation process. The stationary vs. mobile conversation is different for every retailer, and depends on variables including store format, sub-vertical and strategic/operational objectives, but increasingly the final solution is comprised at least in part by mPOS. While we expect this trend to continue throughout 2013 and well into the future, at the same time we believe stationary POS will remain relevant for many types of retailers as well. 
• The m.Wallet war rages on with no end in sight: The struggle to establish broader adoption in the m.Wallet and contactless payment ecosystem is as highly contested as ever, both in the context of which stakeholder(s) own the m.Wallet (a single retailer, a multi-retailer consortium, the MNOs, etc.) and in regards to enabling technology (mobile barcode, NFC, cloud-based). At this point in time, there is no certainty as to which of these entities and enabling technologies will be successful in the long term. Valid arguments exist both for and against these prospective m.Wallet owners as well as each enabling technology, and all were represented on the NRF show floor. Ultimately, consumers have the final say as to which stakeholders and enabling technologies win. Without consumers’ approval—i.e., their adoption and ongoing use—no m.Wallet or contactless payment technology will be successful in the long term. 

That concludes our recap from the first day at NRF. Stay tuned to this blog for another post highlighting some of the key vendor announcements and observations from day two.

Would You Pay Extra to Pay with NFC? Neither Would We.

Here’s a hypothetical decision: Would you pay $60 for an NFC-enabled iPhone case that enables you to pay via your smartphone—but only at ISIS partner merchants in Salt Lake City and Austin? Or, would you prefer to pay anywhere (at no additional cost) with old-fashioned cash or credit/debit cards? The choice seems absurdly clear—the vast majority (we would estimate 99%) of consumers will choose cash or card payment.

Still, despite a market opportunity that we believe is accurately summarized by the above choice, vendors with aspirations to cash in on mobile payment and NFC hype continue to introduce NFC retrofit solutions for smartphones lacking embedded NFC. Incipio is the latest entrant, having debuted its “Cashwrap” NFC-enabled iPhone 4/4S case earlier this week at CES. Incipio joins a market that seems crowded considering the nascent state of the NFC ecosystem in most regions. For example, companies such as DeviceFidelity, Flomio and Wireless Dynamics already offer (or are developing) similar accessories for both the iPhone and older Android devices. Frankly, given NFC’s weak support within enterprises and low awareness among consumers (not to mention that cash and cards are a free and highly effective alternative), we wonder: who is buying these products?

Among consumers, NFC contactless payment faces a daunting uphill battle to mainstream acceptance for at least two key reasons:

• Cash and cards’ familiarity with consumers across all demographics
• Security concerns, especially for solutions storing payment credentials on the device (as opposed to the cloud)

Keeping in mind the above factors, it is unlikely that the average consumer will spend additional money, time and effort to pay via NFC. If NFC-enabled contactless payment is to gain broader adoption, it must be absolutely frictionless to use (meaning no special cases, SIM or MicroSD card required) and offer incentives for ongoing use (for example, rewards or exclusive deals) to ensure consumers do not revert to cash or cards. Remember, cash and cards are accepted everywhere and cost the consumer nothing—in terms of money, time or effort—to use. We believe an NFC payment solution that cannot say the same has a highly challenging path to success.

Motorola Solutions Looks to Capture Retail POS Share with New Bioptic Imager

By all accounts, 2013 seems very eager to live up to its promise of being an interesting year for the barcode technology market. To start off, Motorola Solutions Inc. (MSI) made a new product announcement today – the multi-plane 100% camera-based bioptic imager/scale MP6000 – the company’s first foray into the high-volume stationary POS scanning market. What makes this particularly interesting is that up until today, Motorola was the only player from among the BIG THREE in the overall barcode scanner market (the others being Datalogic and Honeywell) with no stationary POS offering for high-throughput retail environments. We expect MSI to sell this product into grocery stores, supermarkets, hypermarkets, mass merchandisers and other such big box retailers. MSI credits its customer-side scanner to be one of its biggest competitive differentiators in an “almost exclusive” bioptic scanner market essentially governed by 3 players – Datalogic, Honeywell and NCR. Motorola’s scanner enables customers to simultaneously scan their own coupons, gift cards and loyalty cards, including those displayed on smartphone screens, with the attendant/cashier facilitating the POS checkout process.

Motorola has established a strong presence for itself in the camera-based, 2D imaging solutions market, particularly with the handheld form factor. VDC’s research covering the space indicates that the company has made significant strides in capitalizing on the explosive growth opportunities that this 2D solution configuration has to offer, especially given end users’ critical requirement to future-proof their technology investments. With continued advancements in 2D performance, Motorola considers the high transaction volume retail market to be primed for a switch from a laser- to a fully camera-based bioptic scanning solution - one that can lower operational costs and enhance data capture efficiencies.

While this is all great news for retailers and the barcode industry doing away with triopoly in this specific technology segment, it will be interesting to see how Motorola prices its newly introduced product. Although the performance of camera-based imaging solutions has improved drastically versus laser technology, pricing is not an apples-to-apples comparison given the increased complexity and high cost of underlying solution components. Will the company’s success with imaging on the handheld side translate to an equivalent achievement with the stationary form factor? This remains to be seen. In our opinion, Motorola will initially target large, Tier-1 retail chains with this product; small-and-medium sized businesses still have to wait their turn, particularly with the (anticipated) pricing structure. My expectation is that Motorola’s success mantra in this market just might be an increased focus on profitability over sales volume – due to the higher associated margins for this brand new product in its portfolio – positioning the company as a one-stop shop to fulfill their retail customers’ barcode scanning as well as future EAS and/or RFID requirements.

VDC Research's 13 AutoID Predictions for 2013: Barcode, RFID & RTLS and Mobile Customer Engagement Technologies

Happy New Year! On behalf of the AutoID team and all of VDC Research Group, we wish you all the
best in 2013.

Although 2012 has just concluded, it is never too soon to look ahead. So to start the new year off in an interesting way, the AutoID team has taken out our crystal ball once again to offer 13 predictions for the AutoID market in 2013, including Barcode, RFID & RTLS and Mobile Consumer Engagement Technologies (MCET). They are presented in no particular order.  

1. Barcode: More market aggregation ahead – Expect continued consolidation of the barcode
   hardware landscape, particularly to achieve growth across following dimensions:
   • Regional – Vendors seeking to grow their presence in emerging country markets,
     particularly targeting barcode printer and scanner vendors based out of
     Asia-Pacific.
   • Vertical – Vendors looking to increase their proliferation into high-growth industry
     verticals – particularly healthcare.
2. Barcode: Vendors will learn to “accessorize” – More barcode hardware players will actively
   look to enter the “accessories” market – developing sleds and/or sleeves to support consumer-grade device usage in enterprise environments. This is particularly relevant to vendors addressing customer-facing applications with their devices in retail, healthcare, hospitality and commercial services. 
3. Barcode: Future with mobility, not without in software market – An increasing number
   of barcode software solution providers will extend label printing support to portable devices (both purpose-built and consumer-grade) – facilitating mobile applications such as field sales, field service and direct store delivery (DSD). Today, mobile barcode label generation software penetration is in a very nascent stage, but we expect that to quickly change. Mobility IS the way forward across verticals and industries and the entire barcode value chain must and will respond accordingly.
4. Barcode: Embrace the tech-savvy consumer – Scanning with and displaying barcodes on mobile device screens will continue to grow significantly among consumers. Barcode vendors and their enterprise and retail customers must continuously adapt to this explosive trend. We predict more QSRs (quick service restaurants), convenience stores, restaurants, theme parks/ entertainment venues and other consumer-facing enterprises will invest in and deploy barcode imagers and consumer-grade mobile devices to interact with consumers (e.g., coupon redemption, payment, loyalty/rewards programs).
5. MCET: Mobile point-of-sale (mPOS) will remain the hottest technology among B2C business operators – This trend will be most prominent in retail, but increasingly in dining as well, despite the fact that enterprises often lack clear strategic objectives guiding their investment in the same. In 2013, MCET solution providers must assume leadership roles in educating their customers on technology selection, software and security, best-fit use cases for specific mobile devices/form factors and total cost of ownership (TCO).
6. MCET: NFC as a broader ecosystem will make little progress beyond incremental gains in
   shipments of NFC-enabled smartphones – Yes, this means more NFC-equipped phones in consumer hands, and limited scale pilots and tests will continue, but 2013 is not the year when the technology gains global-level traction. However, expect more TV commercials for mobile phones and mobile network operators (MNOs) to advertise NFC and its applications – and more importantly, look for more commercials to specifically mention the term “NFC” in order to engrain the technology in consumer minds.
7. MCET: Merchants’ general focus on mobility - mPOS in particular - will bring great opportunity for vendors of adjacent peripherals – POS peripheral vendors (e.g., receipt printers, barcode scanners, payment solutions) are expected to drive growth via innovative, highly-portable versions of these traditional POS extensions. These vendors will be jockeying for competitive position more aggressively in 2013, responding to burgeoning demand among retailers, restaurants, hospitality and other enterprises wanting to differentiate and augment their systems by  “going mobile” at the POS.
8. MCET: Contactless mobile payment via NFC will not explode in popularity among consumers during 2013, but consumer usage and merchant support of this application will experience strong growth – Barcodes displayed on mobile device screens and core/traditional RFID (e.g., contactless tickets, smartcards) – not NFC – will continue to enjoy broader global support for mobile payments in the foreseeablefuture. For NFC to gain ground in 2013, more NFC-enabled devices must reach consumer hands, more NFC-compatible payment terminals must be deployed and more collaboration among invested parties must occur within the NFC ecosystem (especially in terms of consumer education, transaction fee negotiations/resolution, and application development).
9. RFID & RTLS: Vendors – especially RTLS solution providers – will develop the “healthcare
   stare” – The use of RFID and RTLS is on the rise in healthcare, most notably in the US thanks to the VA’s announced $540M+ contract to track equipment and supplies at 21 of its Veteran Integrated Service Networks (VISNs).  However, the contract award to HP was not met without controversy in 2012 as IBM filed a protest to the US Government Accountability Office (GAO) and won the decision. The contract will be rebid among, at least, the six original bidders.  This spark to the market (and sizeable contract) drew a lot of attention in 2012 and we expect the RFID and RTLS frenzy to continue in healthcare in 2013. However, we caution vendors (especially RTLS providers) to not focus solely on healthcare and to seek opportunities and market development in other vertical markets where the competitive field may be less crowded.
10. RFID & RTLS: Passive UHF EPC item-level tagging (ILT) in the apparel sector will
    pick up the pace after a somewhat slow 2012 – This past year was a mild disappointment in terms of retailer deployment of RFID for ILT of apparel. For example, no major reader or printer/encoder orders were delivered, several large retailers remain behind originally announced plans (e.g., Wal-Mart, JC Penney) and some newer programs were pushed to or will start in 2013.  So what to expect in the year ahead? Even more American Apparel stores will go live with RFID (a bright spot for 2012 as well), Wal-Mart will reassess its RFID plans but remain committed, Macy’s will make its anticipated move, JC Penney has bigger worries than RFID, international retailer Zara will play a key role in increasing tag volumes and RFID EAS will become a more critical part of the ILT in apparel conversation.
11. RFID & RTLS: Embedded RFID keeps the forward momentum – At the end of 2011 we
    noted the rise of “RFID inside,” or embedded RFID, as a key trend to watch for in 2012.  We are keeping it on the list in 2013 after seeing a great deal of progress in 2012. For example, ThingMagic released a new, smaller passive UHF reader module, Xerafy continued product development for embedded RFID specialty tags (e.g., tools), ICs and chipsets from players such as Impinj, NXP, Murata and AMS decreased their footprints, Coca-Cola Freestyle dispensers with passive UHF technology inside continued deploment, RFID and NFC made their way into consumer devices such as Keurig Vue coffee brewers and Nintendo Wii (Skylanders game) and much more. With price points declining and form factors shrinking, we expect to see solutions and applications such as these expand and new innovations to be introduced in 2013.
12. RFID & RTLS: Honeywell Scanning & Mobility will get strategic on RFID – and quickly
    – after announcing its first RFID product and the acquisition of Intermec in 2012 – After some exploration of RFID while acquiring several barcode scanner and mobile computing companies over the last few years, Honeywell made some eye-catching RFID moves in 2012. They made a subtle move in introducing an RFID reader and then made a major move in announcing the acquisition of Intermec (a major RFID IP holder and RFID equipment manufacturer). We predict Honeywell will aggressively develop its RFID strategy in 2013, becoming a strong competitor in select verticals and applications that play to the combined strengths of Honeywell and Intermec. What’s next for Honeywell – RTLS in 2013 or 2014?
13. AutoID: Governments in China and the EU continue to connect with the concept of the Internet of Things (IoT) – While the US government remains largely silent, China and
    the EU actively fund research IoT projects, create policies to govern the IoT and deploy IoT technologies (including RFID, NFC and sensors). Much of the IoT activity in the US has been at the city level (e.g., smart cities) and we do not expect that to change. In looking ahead and predicting where will be the epicenter of IoT innovation, we are placing our bets on China. Simply look at what is on the list of IoT development subsidy projects from China's Ministry of Industry and Information Technology and Ministry of Finance (announced November 2012). UHF and microwave RFID chip design, product technology R&D, miniaturized intelligent sensor technology R&D, ad-hoc networking technology for wireless sensor networks, intelligent logistics and intelligent traffic are among the 14 categories of project, comprising 149 projects in total, which will receive support from the government.

I would like to extend a special thank you to Richa Gupta (VDC’s barcode analyst) and John Shuster (VDC’s MCET analyst) for their contributions to this blog.