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

Get a Little Closer to your Sweetheart with AutoID

2012-02-14T10:22:36-05:00

Are you a Valentine’s Day procrastinator? You are not alone and it’s not too late. AutoID is here to save the day. In the spirit of everyone’s ‘favorite’ Hallmark holiday, we decided to blog about how an AutoID-enabled ecosystem can help ensure a romantic, love-filled day with your significant other.

OK – you’re late to the game because you’re just coming home from a business trip, but no sweat … you’ve got your NFC-enabled smartphone (which you used as your boarding pass). As you get off the plane and sprint toward the baggage claim, you pass a flower dispensing kiosk that has the perfect bouquet. You quickly select the bouquet, swipe your phone near the machine, approve the transaction with a tap and voilá, instant flowers for you to hand deliver.

You grab the flowers and make your way to the baggage claim. Although you take solace in the fact that your bag isn’t lost because the airport is using RFID, you still get there before the bags come out and know you’ll be there for at least a ‘few’ minutes. During these valuable few minutes, you call to make a dinner reservation at her favorite restaurant and are told that the only reservation they have is for 10pm and the table is next to the kitchen. But you don’t panic, because this restaurant has a loyalty program that ensures a premium table for its members and you are a longtime member. So you go online, transmit your loyalty card information (as a tech savvy user, you already have this scanned into your smartphone) and reserve a table for two in a dark, romantic corner.

Surprisingly, your bag comes early – must be that RFID system – and you are quickly on your way home, speeding along the highway using your toll transponder to avoid the long lines – and added stress - at the toll booths. You finally make it home, with flowers in hand, are greeted by your significant other with open arms, and are summarily rushed out of the house to make your dinner reservation.

Upon arriving at the restaurant, the hostess scans your loyalty card (displayed on your phone) to authenticate your reservation. You sit down and enjoy a lovely meal. When the bill comes, you pay with your NFC smartphone – at the table, with a quick and virtual ‘high five’ with the waiter’s device. As you are walking out of the restaurant, your sweetheart sees a movie poster advertising the latest Rom-Com (romantic comedy) and says they want to go. You quickly hold your NFC phone to the movie poster, watch the trailer and decide that this is not the movie for you both, but another movie playing at the same theater is. You buy your tickets online and drive to the cinema. At the cinema, you display your tickets on your phone, have them scanned (barcode) or read (NFC), make a quick stop to grab some soda and popcorn (again paying with your phone), and watch the movie.

You’ve had a successful and romantic evening, but wait…we’re not done yet. Keeping this blog post rated ‘G’, you get home and both of you slip into something more comfortable. As you cuddle up by the fire with a glass of merlot, you use your NFC phone to pair with your Bluetooth speakers and play some smooth jazz to set the mood. The rest is up to you – even AutoID has its limits.

Happy Valentine’s Day!

Could Health Care Inject More Life into NFC?

2012-02-10T15:40:34-05:00

This past Monday, NFC Cluster Boston held an event at MIT entitled “NFC in Smartphones Transforms Healthcare.” Given MIT’s long track record of technology innovation, we were particularly excited to hear what some of the leading minds were thinking about NFC and its potential in health care. Furthermore, whereas the majority of NFC events are related to contactless payment and other B2C applications, we thought this conference would provide exposure to some innovative use-cases beyond the aforementioned “usual suspects.” I enjoyed the discussions and presentations, particularly the open-floor panel, and appreciated the vision of the topics that were discussed; however, I wound up leaving the event thinking that NFC in health care is still a ways away.

For the most part, the solutions featured at Monday’s event were for in-home patient use and involved some sort of monitoring or tracking functionality. For example, one of the solutions tracks adherence to a prescribed course of medicine, while another monitors and records sleep patterns. In my opinion, the biggest issue facing these use-cases is that NFC offers little value and no compelling reason for the patient to use the solution on an ongoing basis.

While we do recognize there is potential value in providing health care professionals and health insurance provides a transparent perspective on a patient’s activity (as it relates to their medical condition/treatment), from the patient’s perspective, it is difficult to see a compelling value proposition. Furthermore, we question how willing patients will be—and how often they will remember—to use their NFC smartphone to record health care-related activity. We think patients could find such applications potentially invasive, and without some sort of incentive or reward for their continued use, it will be difficult to otherwise force them into using them on an ongoing basis.

We know there is opportunity in health care opportunity for NFC, but specific use-cases and applications need time to evolve before adoption can begin. Health care enterprises are among the most conservative in regards to technology investment, so any NFC solution targeting this vertical must offer an undeniable value proposition. Vendors could look to deliver value on any number of dimensions, including cost reduction, improved care accuracy and regulatory compliance, just to name several. But, bear in mind—if the patient is expected to play an active role in utilizing the solution, they too must receive compelling value in order to ensure its use.

Trolling for Dollars

2012-02-10T13:53:40-05:00

RFID technology and application patents have been a topic of industry debate for many years, particularly those tied to passive UHF EPC Gen 2 technology. Historically, RFID patent activity has centered on patent pooling efforts, consortium building and the occasional patent infringement suit between or among vendors. However, the industry is facing a new threat: NPEs (non-practicing entities), more commonly known as patent trolls. And, one in particular, Round Rock Research LLC (Round Rock), is capturing headlines by filing suit against major RFID users including Macy’s, GAP Inc, J.C. Penny, Hanes, Dole, Pepsi as well as passive UHF end users in a variety of industries.

Unlike what we have seen in the past, the intended targets this time around are not vendors and solutions providers. Round Rock is pursuing enterprise end users, including many with deep pockets, currently citing five patents which cover communication methods or passive UHF EPC Gen2 RFID. The specific patent numbers are: 5,500,650; 5,627,544; 5,974,078; 6,459,726 and RE 41,531 (with others under consideration). Micron Technology Inc. sold these patents along with some 4,200 others to Round Rock founder John Desmarais.

Although the complaints filed by Round Rock differ in some ways, each claims that a specific defendant has infringed Round Rock’s patents by making, using, selling or importing products or systems that consist of or include passive UHF RFID EPC Gen2 tags and readers. The actions are the result of Round Rock allegedly having grown frustrated with the slow pace of licensing discussions and possible royalty collections in the passive UHF EPC Gen2 RFID arena. Therefore, Round Rock elected to bring these suits in order to provide a catalyst for what it dubs “stalled negotiations.” Round Rock has consistently asked the court to declare that a defendant’s infringement is “willful” and to award unspecified damages, attorneys’ fees and expenses incurred in litigation.

Where’s the RFID Troll Patrol?

To better understand the RFID industry’s response or plan of action to address this significant issue, VDC Research reached out to several leading passive UHF EPC Gen2 component, hardware and solutions providers as well as industry associations. Responses were relatively uniform: we are doing our homework; however, there is little the RFID vendor community can do to defend or protect customers and users other than recommending they seek legal counsel and use the procedures of the courts to extend the process, including forcing Round Rock to produce documentation. The hands of most industry associations are also tied as they operate as non-partisan entities. They, too, are suggesting end users seek independent counsel.

The harsh reality is that those being sued are apparently left to fend for themselves with no direct assistance or defense support from vendors and industry associations at this time. VDC Research believes a collaborative response is required; however, uncertainties around the best approach remain.

VDC Research supports the right of organizations to derive value from the intellectual property that they own. But, when done in this fashion, questions about blackmail and the inadequacies of our patent protection system arise. In this particular case, passive UHF EPC Gen2 RFID end users had no knowledge, no advance warning and were essentially blindsided. The fear is that the issue will balloon if not controlled or addressed soon, and that largest accounts – which are the most attractive to both RFID technology vendors and Round Rock – will delay further investment in RFID.

VDC Research continues to monitor the situation and will provide additional commentary and analysis as more information is gathered.

Nintendo Makes NFC Technology Vendors Say "Wiiiiii!!"

2012-02-01T11:44:35-05:00

Nintendo’s Wii platform revolutionized the home videogame console with its motion-sensing controller, thereby enabling a more interactive gaming experience. With its latest version of this platform, the Wii U, Nintendo is looking to push the envelope once again…and this time, NFC (Near Field Communication) is positioned as the big differentiator. The Wii U features a NFC-enabled touch-screen controller, and will initially leverage its NFC capability for payment, player profile creation, game card management, and/or avatar/character creation and storage. For example, a player can use NFC to pay for access to new game levels/features and save their progress. Provided the NFC concept is intelligently designed and executed, and well-supported from the developer community perspective, we view this as a very positive development for the overall NFC market for four reasons:

The integration of NFC into the Wii U will introduce more consumers to the technology—resulting in increased awareness and market growth. The opportunities for growth and exposure are significant—Nintendo sold approximately 20 million Wii consoles in 2010 (4 years after its introduction). For many customers, the Wii U console will be their first exposure to NFC applications. Furthermore, based on our end user research, the demographics of videogamers are well-aligned with those of early adopters of NFC. We think a positive experience with NFC gaming will pique consumer interest in other NFC devices and applications, thereby driving growth in the broader market.

Nintendo offers application developers an entirely new platform for innovation and experimentation. We believe one of the keys to NFC market growth is a robust and engaged developer community that creates the applications that bring NFC technology to life. The emergence of NFC in videogames brings a large and experienced group of developers into the broader NFC ecosystem.

If the Wii U follows the successful path of its predecessor, we expect competing platforms (namely, Playstation and Xbox) to follow suit with NFC integration. The video game market is highly competitive, and success is defined by innovation and technology advancement. If Nintendo’s integration of NFC is well-received, we think its competitors will be quick to embrace the technology as well—thus driving further awareness and demand for NFC hardware.

A positive reception for NFC in videogames will pave the way for the technology to be integrated into other consumer electronics. Time and again, an innovation that takes root in one type of device soon spreads to others—consider gesture recognition and touchscreen technology, for example.

Unless something goes very wrong with Nintendo’s NFC implementation, we see it as a big step forward in NFC adoption, sowing the seeds for future NFC market growth.

Company Spotlight: Datalogic Shifts to Acquisition-Based Growth Strategy

2012-01-31T16:16:23-05:00

Datalogic has historically been the European share leader in the stationary industrial scanning market, relying on revenues derived from sales in the region to maintain its position on the global leaderboard. The company’s presence in the US – one of the biggest markets for these products – has, however, been fairly low following marginally successful attempts to effectively penetrate the region via organic growth strategies. The company is now employing an acquisition-driven strategy to ensure it is able to capture and grow share within the region. This strategy is designed to achieve the following goals pertaining to the US market:

Increase presence and share
Broaden product portfolios that enable the company to compete in adjacent markets
Establish strong partnerships with distribution channel organizations

Over the past couple of months, Datalogic has made two acquisitions – Accu-Sort (Industrial Scanning/ Imaging) and PPT Vision – in support of meeting the stated objectives, having declared their intentions to investors over the course of 2011. This will significantly increase Datalogic’s presence in the US market (based on VDC data), enhance and expand its patent and product portfolio, and give it access to well-entrenched distribution channels. In fact, with the acquisition of Accu-Sort, Datalogic should now be the region’s stationary industrial barcode scanner share leader. The following table highlights some of the key drivers, from VDC’s perspective, for each of these acquisitions:

In our opinion, it was time for Datalogic to change course with regard to its expansion and growth strategy in the US, and we are bullish on its two most recent acquisitions. In one fell swoop, they become a share leader, expand their technology portfolio, inherit well-established distribution channels and gain access to new markets.

Despite immediate gains in the region, we believe that Datalogic’s ability to continue to grow in the US will be dependent upon whether it can:

Seamlessly and efficiently integrate the acquisitions
Reassure their ‘acquired’ clients and partners that being part of the Datalogic family will only improve upon and add more value to their existing relationship
Overhaul existing channel strategy in the US, which has only met with limited success
Educate these new channels about Datalogic-branded products to realize full potential of acquisitions
Employ effective regionally-specific growth and defensive strategies
Build upon the momentum generated by these acquisitions
Maintain a high rate of innovation

Datalogic has learned over the years that the success that they have enjoyed in Europe does not necessarily translate into the same in the US – primarily because of limited channel and marketing resources in the region. With these recent acquisitions – which we believe are not the company’s last – they do have a promising new product, technology and distribution platform to build on.

Reposition RTLS … in Real-time

2012-01-30T15:58:40-05:00

This is a call to all Real Time Location Systems (RTLS) solution providers … You’re markets don’t fully understand your solutions and their value. Based on our recently completed global survey of 350 enterprises, the vast majority of enterprises using or planning to use RTLS systems have:

Limited knowledge of what RTLS is and what it can do – beyond what they are using it for now
Routinely confused the technology with other solutions (i.e.: asset tracking, time/attendance)
Misperceptions on the benefits and value RTLS can add to their enterprise AND value chain
Challenges justifying investment

Simply stated, most deploying enterprises perceive RTLS as a vertically-centric tracking solution that provides continual and automatic data streams on an object(s) and its environment(s). With the exception of the health care market (which is typically more advanced than other verticals and has been cultivated aggressively for years), when these users are thinking of solution expansion, they are primarily thinking of tagging more objects (scale), as opposed to true expansion of the RTLS platform to be leveraged for other applications (i.e.: compliance), operations and value chains beyond track/trace and location based services.

We believe the market needs to better understand the technology, its capabilities, limitations, value propositions, etc., before broader adoption can occur. The ability of suppliers to grow their accounts will be largely tied to their individual and collective abilities to educate the market on RTLS. RTLS providers need to reposition their messaging on RTLS as more than just another track and trace solution - continued market development hinges on it.

For more information on our recently completed RTLS Enterprise End User survey, click here.

Voice of the Customer: 3 Things an RTLS Supplier Needs to Know

2012-01-23T13:28:51-05:00

We just completed a global study of enterprise end users of Real-Time Location Systems (RTLS) and it revealed some interesting insights about what companies that are using or adopting RTLS are/will be looking for from their vendors. Although there is a wide array of requirements enterprises are placing on their RTLS solution providers, the following three are critical for RTLS vendors to address:

Be a one-stop shop: Nearly ¾ of all respondents indicated a preference to deal with one company for their solution –not only because they want someone to assume responsibility for the entire implementation, but because they want their vendor to be a long-term partner with whom they can grow. This will become more critical as RTLS solutions become more pervasive in indoor and outdoor environments and need to leverage a host of technologies. Piece-meal is not the right go-to-market strategy (remember TimeDomain?).
Be Prepared to Start Your Customers With Small, Focused Deployments: The vast majority of respondents’ initial deployments were relatively small and focused on one or two very specific business issues in which the vendor was intimately involved with the design, integration and deployment of the solution. Within 12 months of attaining their required ROI, however, most of these “start-small” customers were already looking to expand their RTLS solutions within the enterprise and, in some instances, the value chain … with the same vendor. The early success of their less complex deployments became instrumental to their ability to justify further investment. Early successes are critical – they not only offer proof of concept and facilitate solution expansion and scale, but they also provide a level of knowledge based on real world experience that becomes a critical foundation for future solution innovation and evolution. End users that had more complex initial deployments often struggled to achieve a successful implementation and had lower ROI. As a result, they were notably slower to expand/scale their systems, more reluctant to increase their RTLS budgets, and indicated a lower level of commitment to the technology. We encourage vendors to focus on helping their clients achieve successful pilot projects before pursuing enterprise-scale initiatives.
Enhance your Software and Service offerings: Increased commoditization, competition and price sensitivity for RTLS hardware, along with a more diverse product mix (i.e.: EPC Gen2 Passive RFID) are expected to not only decrease hardware margins, but they will also make it more difficult for RTLS vendors to differentiate. Software and services are critical to a solution’s success, and are expected to become even more so as RTLS systems become increasingly complex, more deeply integrated and more broadly deployed. The end user is becoming increasingly aware of this. In fact, more than half of the respondent population stated that they would be allocating more of their RTLS budget to software and services, particularly as they continue to integrate, expand and scale their solutions throughout their enterprise and value chain. Based on the responses to this survey and how RTLS solutions continue to evolve, we see increasing demand for the following software and service offerings:
- Solution performance (i.e.: accuracy, precision)
- Data management (i.e.: monitoring, analytics, distribution/porting)
- Device management (i.e.: device health, maintenance)
- Application development (i.e.: expanding RTLS platform within enterprise/value chain)
- Integration and Scale (i.e.: seamless, facilitated, convergence with other systems)

All indicators are pointing to increasing year-over-year growth and significant opportunity for RTLS vendors who are prepared to be total solution providers, willing to invest in their accounts, and develop competency and expertise related to software and sevcies.

NFC at NRF

2012-01-20T14:29:37-05:00

NFC was a pervasive theme at the 2012 NRF show held this week in New York City. Technology vendors of all types were talking about their plans for integrating NFC into their product portfolios and, in many cases, displaying their latest NFC-enabled solutions. Whereas NFC is a nascent, still-developing technology, its presence remains somewhat confined to a few key product categories, but as consumer adoption of NFC smartphones scales in 2012 and beyond, we expect to see an increasingly broad range of customer engagement/retail automation solutions incorporate NFC into their design. What follows is an overview of some of the notable NFC activity at this year’s NRF.

ViVOtech introduced its ViVOtouch NFC solution, which is mobile marketing software platform that allows merchants to deliver targeted/personalized content, offers and loyalty programs to customers via their NFC-enabled mobile devices. This solution also allows for interactive shopping and NFC-enabled information retrieval on the store floor, further enhancing the shopping experience. Contactless payment is certainly a hot topic, but as a standalone application its ROI potential probably is not strong enough for most enterprises to justify investment. We believe solutions such as this will drive the adoption of contactless payment NFC solutions in retail.

NFC payment terminal leader VeriFone introduced its PAYware Mobile Enterprise for Tablets, a secure payment acceptance solution that is compatible with the company’s GlobalBay Mobile POS solution. The solution is designed to run on Apple’s iPad 2, and provides the same functionality offered by the original iPod-touch based PAYware solution. PAYware for Tablets has the same fully secure encryption as previous versions of the solution, and enables the acceptance of traditional payment cards, PIN/EMV smartcards and NFC contactless payments. The solution adds further utility for merchants via a built-in 2D barcode scanner for item scanning, coupon acceptance and inventory management.

INSIDE Secure demonstrated its NFC-based solutions for consumer and product authentication in retail. The solution enables shoppers to verify the authenticity of high-end/luxury goods and allows merchants to confirm the identity of customers. Whereas mobile devices, particularly smartphones, are becoming an increasingly prevalent element of retail marketing strategies and consumer shopping behavior, we expect that solutions leveraging NFC for brand and user authentication will become increasingly popular among retailers of luxury and other high-end goods.

Mobility and customer engagement have been pervasive themes with retail for some time now. NFC offers retailers a way to achieve both of these strategic objectives in a manner that is reliable, fast and easily-scalable. As consumer adoption of NFC gains momentum, we expect to see an increasingly diverse range of retail technology solutions support this technology.

NFC Payments … Good Things Will Come to Those Who Wait

2012-01-20T13:57:18-05:00

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

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

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

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

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

VDC Research’s RFID Takeaways from NRF Big Show 2012

2012-01-19T18:25:08-05:00

At this year’s NRF show, RFID technology made the strongest showing VDC Research has seen yet. From RFID vendors and their solution partners showcasing innovative end-to-end application offerings to big retailers and brands reaffirming their RFID adoption plans, rollouts and program extensions it was clear that RFID is increasingly being positioned as a core technology that enables enterprises to “engage and evolve” (the theme of this year’s show).

Here are a few highlights we picked up during the course of the event:

RFID-tagged Apparel Items are the 1% – 200 billion apparel items. This was the estimated total number of apparel pieces globally that was communicated to VDC by several vendors and retailers attending NRF. So, assuming roughly 2 billion RFID tags, that translates to approximately 1% penetration. The good news is that the percentage (penetration rate) will only increase in 2012 and beyond.
RFID is Fashion Forward, but Going Backward (a good thing) – Retailers and brands using RFID consider themselves early innovators, positioning them as “fashion forward” versus their peers; however, RFID tagging is most meaningful when you tag at the source, or further “backward” in the supply chain. Some exhibitors at NRF were predicting a surge in apparel source tagging by the end of 2012 and into early 2013. As a result, source tagging was major theme being identified by vendors this year. This included strong messaging from Tyco Retail Solutions and Avery Dennison’s RBIS team on RFID source tagging solutions (including offerings that combine RFID with EAS/LP capabilities/functionality) and the announcement of a new solution called ViziT™ from SML Group Ltd. SML works along with the Impinj STP™ source tagging platform and is able to offer high-speed RFID chip encoding and label printing through SML’s own global network of service bureaus.
The Magic of Macy’s RFID Message – Macy’s leadership was very vocal once again about its RFID program and plans, offering highlights during a panel. Macy’s Chief Administrative Officer, Tom Cole, reportedly stated that it will only be a matter of time before RFID tags become as common as barcodes, especially for apparel. He also indicated that while Macy’s, their competitors’ and their suppliers’/brands’ approaches may vary, it is important that we move RFID forward as an industry. We agree with Mr. Cole that RFID will be a competitive advantage and differentiator in the beginning for those that support it, but it will come down to which retailers and brands can put the technology to the best use – just like with barcodes today.

While most NRF attendees come for what’s new in “traditional” retail solutions, many left this year’s conference with a greater appreciation for the “modernizing” retail solutions (including both RFID and NFC technologies). We expect the 2013 NRF event to carry this trend forward, showing us the next wave of innovative solutions and users of RFID and its related technologies. In fact, we think it would be interesting to see an “RFID Pavilion” or "RFID Showcase" of sorts at a future NRF conference - a dedicated area in which attendees can see how RFID, contactless and NFC technologies can be leveraged to enhance retail operations and the customer experience.