RFID in Retail – Sustained Growth Expected
Ram Ravi, Senior AnalystMeasurement & Instrumentation
andPeter Gates
Director, Professional Services Europe, Middle East and AfricaTyco International
October 29th, 2014
© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
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Today’s Presenter
Ram RaviSenior Research AnalystAutomatic Identification and Data Capture
Frost & SullivanEuropeChennai, India
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Contents
TRENDS & CHALLENGES
• KEY TRENDS
• INDUSTRY CHALLENGES
• DRIVERS & RESTRAINTS
TOTAL MARKET OVERVIEW
• MARKET SNAPSHOT
• MARKET OVERVIEW
• COMPETITIVE ENVIRONMENT
• COMPETITIVE FACTORS
MACROECONOMIC FACTORS & IMPACT
• GENERATION-Y
• URBANIZATION
• BRICKS TO CLICKS
• DIGITAL SIGNAGE
• CLOUD COMPUTING
CONCLUSIONS
• THE LAST WORD
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Overview of Key Trends in RFID Market in Retail
RFID Market in Retail: Key Trends, Global, 2013
Source: Frost & Sullivan
Pure middleware vendors shift towards solution providers
Item level tagging taking center stage
Greater emphasis on readers performance
Government regulations to address privacy
Increase in mobile workforce drives demand for mobile devices
Source tagging is gaining prominence
TRENDS THREATS
Major RFID vendors in this space have similar product offeringsMajor RFID vendors in this space have similar product offerings
Usage of other technologiesUsage of other technologies
Competition from local RFID vendorsCompetition from local RFID vendors
Economic slowdown/downturnEconomic slowdown/downturn
RFID in Retail
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Industry Challenges
Disinclination of Customers Toward New Technologies
RFID in Retail Industry
Despite gaining prominence, certain retailers are
still skeptical about RFID usage. Successful
implementations will have a spiraling effect and
enhance growth prospects.
The level of complexity is directly related
to implementation time
Low TechnicalSkills
Extensive Customization
The level of technical know-how of
systems integrators (SI) in certain
regional markets pose a challenge.
SI’s hold major power in this market.
Hence, choice of SI’s is key towards
future adoption.
Privacy Issues
Loss of privacy, data theft, and
identity theft are concerns
RFID Market in Retail: Industry Challenges, Global, 2013
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Drivers & Restraints
RFID Market in Retail: Drivers & Restraints, Global, 2013
Source: Frost & Sullivan
Driv
ers
Re
strain
ts
Driv
ers
Re
strain
ts
Denotes Long term Impact
Denotes Current Impact
Increased prominence of item-level tagging augments RFID demand across retail applications
Omni-channel retailing expected to enhance growth prospects of RFID globally
Source tagging boosts RFID adoption in retail sector by enabling supply chain visibility
Enhanced benefits in various business processes across retail supply chain drive RFID adoption rate
Economic fluctuations, a hindrance to continued growth
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Market Snapshot – RFID Market in Retail
RFID Market in Retail: Market Snapshot, Global, 2013
Growth
Market Stage
35.2%
Base Year Market Growth Rate
$ 541.8 M
Market Revenue
(2013)
38.9%
Compound Annual Growth Rate
(CAGR, 2013–2020)
$ 5,409 M(2020)
Market Size for Last Year of Study Period
Source: Frost & Sullivan
95.0
0%
50%
100%
2013
Passive Active
North America
Potential - High
Time - Immediate
Latin America
Potential - Medium
Time – Long term
EMEA
Potential - High
Time - Immediate
Asia-Pacific
Potential – Medium-high
Time – Mid-term
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Market Overview – RFID Market in Retail
RFID Market in Retail: Market Overview, Global, 2013
2013
$541.8 Million
2020
$5,409.0 Million
0
100
200
300
2013
North America Latin America EMEA APAC
Revenue CAGR
38.9%
Source: Frost & Sullivan
Key vendors include, Tyco Retail Solutions, Checkpoint Systems, Inc., ZIH Corp, Impinj, Inc., Avery Dennison, Inc., and SMARTRAC
N.V.
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Competitive Factors by Product – RFID Market in Retail
Source: Frost & Sullivan
Performance Price Form Factor Interoperability Know-howAvailability/
Delivery time
Customer
Reference
Customer
FriendlyErgonomics
Tags NA NA
Readers
Middleware NA NA NA
RFID Market in Retail: Competitive Factors, Global, 2013
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Macroeconomic Factors & Impact - Generation-Y
Source: Frost & Sullivan
6.99 Billion
8.01 Billion
2011 2025
GEN-Y
0-14 years
15-34 years
35-64 years
65 years and above
18% & 35%
are the expected growth of smartphones and tablets between 2012-16
448mUsers expected to use m-payments by 2016. Asia and Africa expected to dominate
40%of mobile users are from emerging economies
China
India
Indonesia
Brazil
Russia
Nigeria
Others
Percent of mobile phone users by country, 2012
APAC offers huge
long term growth
prospects
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Macroeconomic Factors & Impact - Urbanization
Urbanization
• Population explosion is driving the migration of more people to urban areas.
Mega Cities
• Mega cities, regions, and corridors will emerge as a result of urbanization. The evolution of smart cities means greater emphasis on technology.
New Sites
• Industry is on the lookout for offering enhanced customer experience thereby creating opportunities for new technologies across applications.
Future Product/Technology
• Cheaper options for data storage, integrated/embedded software in readers, RFID sensors, and wireless are expected to offer opportunities.
Analysis/Unmet Needs
• Better management of increased data. Data can now be accessed dynamically at better speeds.
Source: Frost & Sullivan
Macroeconomic Trend: Macro to Micro Impact, Global
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Macroeconomic Factors & Impact - Bricks to Clicks
Store Sizes to Decrease by 15%-20% by 2020 (from 2011 levels)
In-store, online and mobile to integrate creating a ‘Omnichannel’ shopping
experience
M-Payment Users to increase by 16% exceeding the 1 billion mark
by 2025
Before Clicks After Clicks Macro to Micro Implications
Small-box Format(Virtual Stores)
Single-Channel Omnichannel
Money Wallets Mobile Wallets
New Marketing Solutions through new ‘social’ platforms
TV Campaigns Social Media Campaigns
Big-box Format(Hypermarket)
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Macroeconomic Factors & Impact - Digital Signage
The convergence of in-store technologies,
Economic uncertainty in Europe and the US
Digital signage not yet considered a mainstream marketing medium,
Drivers Restraints
Ability to track customer behaviour
• Non-effectiveness of traditional media
• Nearly 50% of digital signage market is from retail and hospitality
• RFID being used to monitor instant customer reactions and enhance shopping experience
• Content strategy is critical to the success
Drivers & Restraints for the Digital Signage Industry, 2013
• Diverse cultures and traditions globally
• Varied choice of customers
Macro Micro
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Macroeconomic Factors & Impact - Cloud Computing –Smart Clouds
Cloud Computing: Managing Cloud Assets—A Strategic Perspective, 2012–2020
Few Businesses Fully Embracing Cloud to Sustain Business The Emergence of Cloud Factory
2012 2016 2020
Private Clouds
Hybrid Clouds
Integration of Clouds
Public Clouds• In-house infrastructure designed as a cloud platform; Specific for larger companies.
• Smaller companies supplementing current systems.
• Integrating multiple cloud service providers.
• SMEs taking full advantage of cloud services.
• These are the next trend in cloud computing.
• These flexible, customized clouds can address a particular business need for a specific period of time.
Smart Clouds
• The rise of cloud computing is expected to enhance growth of the RFID market in the retail industry. Smart clouds are expected to be used by retailers to store data related to inventory. Hence, the advent of smart clouds is expected to increase the use of biometrics.
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Competitive Snapshot – RFID Market in Retail
Companies • <75
Key Applications
• Inventory Management• Shrinkage Prevention• Supply Chain Visibility
Major Participants
• Avery Dennison, Smartrac N.V., Impinj, Inc., ZIH Corp., Checkpoint Systems, Tyco Retail Solutions
Other Participants
• SML Group, Motorola Solutions, TAGSYS,noFilis, AutoID GmbH, Mojix Inc., Nordic ID, PSION PLC, Intermec Technologies Corporation, CAEN RFID
Distribution Structure
• Direct sales, value-added resellers, system integrators
Notable Acquisitions and Mergers
• Zebra’s acquisition of Motorola enterprise business
• Honeywell’s acquisition of Intermec Technologies
RFID Market in Retail: Competitive Structure, Global, 2013
Source: Frost & Sullivan
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The Last Word
2
3
1
Achieving greater levels of performance will be the main differentiating factor. For example, reader suppliers are working on achieving 100% read rates.
Demand is great for one-stop-shop solutions. Companies are expanding by providing a portfolio of products as customer interest in procuring multiple solutions from one vendor increases.
Increasing interests in Omni-channel retailing augments the need for inventory accuracy, thereby driving the demand for RFID.
Source: Frost & Sullivan
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Today’s Presenter
Peter GatesDirector, Professional Services
Europe, Middle East and Africa
Tyco International
Responsible for solution design, implementation
and support of item level RFID solutions for the
apparel industry. Leads programs for Tyco at key
global apparel companies in Spain and other large
apparel companies throughout Europe.
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Tyco Business Approach to RFID
• RFID is not a business strategy – it is an enabler of a variety of business strategies
• Solution/Result focus – value can only be derived from a solution
• Focus on solutions that deliver business value – apply the optimum amount of technology to capture the value
Hardware
Services
Software
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Evolution of RFID’s Market Acceptance
2001: MIT
AutoID
•Big vision –
Internet of
Things
•Open standards
– Internet
model
•Sophisticated
thought leaders
•Obvious
overlap with
EAS
2003: Walmart
Supply Chain
•Customer lead
innovation –
critical to be
connected
•“Copy cat”
phenomena in
retail strategy
•Importance of
a business case
•Difficulty in
driving source
tagging
2005:
Gen 2 EPC
•Technology
performance
•Political nature
of standard
setting
•New market
leaders and
pace of
innovation
•Physics based
opportunity
targeting
•Fixed vs.
mobile
infrastructure
2007: Inventory
Accuracy
•University of
Arkansas and
VICS
•Inaccuracy
problem – how
large?
•Statistical
research on
RFID’s impact
•Business
process
thinking and
use case
requirements
2009:
Apparel
•Scaling RFID
tagging
•Understanding
supply chain
models
•Clear linkage to
loss prevention
2011:
Dept. Stores
•Funded by
improvements
in inventory
accuracy
•Scaling
enterprise class
RFID software
•Role of
professional
services
•Ecosystem
partnering
2013:
Omnichannel
•Change in
shopper
expectations
and behavior
•Fundamental
and
foundational
change in retail
•Data accuracy
is critical for
maximizing
opportunity
•Role of the
store –
customer
experience?
VISION MARKET TECH VALUE TAGGING SCALE IMPERATIVE
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• Inventory distortion costs retailers more than $800B/year globally
• Out-of-Stocks represent 56% of the problem
• Inventory accuracy, the foundation to retail, only averages between 65-80%
• Current shopper behaviors, including Mobility and Omni-channel retailing require accurate inventory and effective replenishment throughout the supply chain
Strategic Context – Inventory Intelligence
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Inventory Visibility helps retailers:
�Improve inventory accuracy, planning and store allocation
�Reduce out-of-stocks
�Increase inventory turns and gross margin
�Enhance customer experiences
�Establish the foundation for successful Omni-channel retailing
Strategic Opportunities – Inventory Visibility
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How does this Happen?
Inv
en
tory
Acc
ura
cy
Time
100%
90%
80%
70%
60%
50%
0 1 year
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How does this Happen?
100%
90%
80%
70%
60%
50%
0 1 year
Inv
en
tory
Acc
ura
cy
Time
At the beginning of the
year, a physical inventory
is done, and inventory
accuracy is near 100%
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How does this Happen?
Inv
en
tory
Acc
ura
cy
Time
100%
90%
80%
70%
60%
50%
At the beginning of the
year, a physical inventory
is done, and inventory
accuracy is near 100%
0 1 year
During the year, inventory
distortion occurs from:
• Theft• Shipping/receiving errors• Cashier Error• Improper Returns
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How does this Happen?
Inv
en
tory
Acc
ura
cy
Time
100%
90%
80%
70%
60%
50%
At the beginning of the
year, a physical inventory
is done, and inventory
accuracy is near 100%
0 1 year
Average Accuracy
During the year, inventory
distortion occurs from:
• Theft• Shipping/receiving errors• Cashier Error• Improper Returns
Inventory Accuracy
drops due to both
Overstated and
Understated PI
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100%
90%
80%
70%
60%
50%
Inv
en
tory
Acc
ura
cy
Time0 1 year
What Can be Done?
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100%
90%
80%
70%
60%
50%
Inv
en
tory
Acc
ura
cy
Time0 1 year
What Can be Done?
Frequent Inventory (Cycle)
Counts prevent drift from
going too far and
dramatically increases the
average inventory accuracy
Average Accuracy
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100%
90%
80%
70%
60%
50%
Inv
en
tory
Acc
ura
cy
Time0 1 year
What Can be Done?
Frequent Inventory (Cycle)
Counts prevent drift from
going too far and
dramatically increases the
average inventory accuracy
But traditionally it has been
too expensive to undertake
physical inventory on a
frequent basis
Average Accuracy
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100%
90%
80%
70%
60%
50%
Inv
en
tory
Acc
ura
cy
Time0 1 year
What Can be Done?
Frequent Inventory (Cycle)
Counts prevent drift from
going too far and
dramatically increases the
average inventory accuracy
But traditionally it has been
too expensive to undertake
physical inventory on a
frequent basis
RFID Cycle Counting
enables frequent inventory counts in
a cost-effective manner to achieve
Inventory Accuracy from 95-99%
Average Accuracy
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Reduce the number of missing display items on the sales floor
�Improve display compliance and address lost sales and overstock conditions
�Enhance customer experience and improveexecution of display strategy
Entry-Level RFID: Display Execution
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Fitting Room Conversion
�Reports give retailers insights into why items aren’t being sold.
� Clothing never entering a fitting room may have issues with price, style, appeal
� Items entering fitting rooms with low conversion likely have issues with fit/feel
�Compare like store conversions
Trend: RFID-Enabled Fitting Rooms
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Tyco’s Portfolio
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RetailPerformance
+ SecuritySolutions
Security
To deliver value and insights into:
Stores
Employees
Shoppers
Inventory
Loss Prevention
Inventory
Traffic
Store Execution
Capturing, interpreting, reporting and responding to real-time data from:
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Tyco Retail Solutions: Global FootprintOperating in 70 countries worldwide
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Switzerland
Headquarters
Switzerland
Headquarters
Boca Raton, FloridaBoca Raton, Florida
Irvine, CaliforniaIrvine, California
Shenyang, ChinaShenyang, China
India: Outsource MfgIndia: Outsource Mfg
Zaragoza, SpainZaragoza, Spain
Echt, NetherlandsEcht, Netherlands
Atlanta, GeorgiaAtlanta, Georgia
SingaporeSingapore
Hong KongHong Kong
Brazil: Joint Venture DC & MfgBrazil: Joint Venture DC & Mfg
Matamoras, MexicoMatamoras, Mexico
Shanghai, ChinaShanghai, China
Design CenterDesign Center
Manufacturing Site
Recirculation CenterRecirculation Center
Major Distribution CenterMajor Distribution CenterOptimum Value Stream to Service Global
Footprint & Emerging Geographies (BRIC)
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�Tyco Retail Solutions has leading market share and experience in retail RFID implementations
Why Tyco$1B
Business Unit
MarketLeadership
SolutionPortfolio
Global Customers
Scale &Experience
GlobalReach
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�Tyco Retail Solutions has leading market share and experience in retail RFID implementations
�From tags to readers, software to professional services, Tyco Retail Solutions offers comprehensive RFID solutions
�50 year long retail expertise to drive value across different retail verticals
�Single platform to capture data and translate it into actionable, real-time business intelligence
�Open architecture to allow partners or customers to extend our capabilities
�Global deployment and support
�Multiple deployment options
Why Tyco$1B
Business Unit
MarketLeadership
SolutionPortfolio
Global Customers
Scale &Experience
GlobalReach
www.tycoretailsolutions.com
@TycoRetailNews
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For Additional Information
Julia Nikishkina
Corporate Communications
Measurement & Instrumentation
Ram Ravi
Senior Research Analyst
Measurement & Instrumentation
Kiran Unni
Research and Sales Manager
Test & [email protected]