rfid solutions to shape retail stores of the future

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

5

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


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


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%


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


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


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.


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


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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.


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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

23


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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Inv

en

tory

Acc

ura

cy

Time

100%

90%

80%

70%

60%

50%





0 1 year

During the year, inventory

distortion occurs from:

• Theft• Shipping/receiving errors• Cashier Error• Improper Returns

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Inv

en

tory

Acc

ura

cy

Time

100%

90%

80%

70%

60%

50%





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

26

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?



going too far and



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?



going too far and



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

32

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

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Corporate Communications

Measurement & Instrumentation

[email protected]

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