Look at Me, I’m ILT: Passive UHF RFID Item-Level Tagging Market Opportunity Update
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Item level tagging, or ILT, is not a new concept or application in the RFID universe. In fact, ILT was an early vision for supply chains – the ability to track RFID-enabled items from the point of manufacture to the point of sale or point of delivery. The early vision for RFID-enabled ILT, however, differed from the early reality. RFID technology, especially passive UHF, was not ready for high-volume, low-cost ILT applications largely due to cost, performance and lack of standards. That is no longer the case. ILT is now a reality in a number of industries, but the road has been long. During this QuickCast, VDC's Mike Liard discusses some of the key trends in the burgeoning ILT segment and why both vendors and solutions providers, particularly those in the passive UHF space, can no longer afford to ignore it.
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Look at Me, I’m ILT: Passive UHF RFID Item-Level Tagging Market Opportunity Update
- 1. AutoID & Transaction Automation Practice Michael Liard – Director, RFID QuickCast Look at Me, I’m ILT: Passive UHF RFID Item-Level Tagging Market Opportunity Update March 2012 © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
- 2. Recording Available A full audio recording is available for download at: http://vdcresearch.com/market_research/autoid/freeresearch.aspx © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
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- 5. Ways to Work With Us Our market research is the basis for the many other ways that VDC can help you to grow your business. Our clients rely on us to Our market research is the basis for the many other ways that VDC can help you to grow your business. Our clients rely on us to provide actionable insights that support theirtheir most important strategic initiatives including: corporate development provide actionable insights that support most important strategic initiatives including: corporate development projects, opportunity assessments and lead generation programs. projects, opportunity assessments and lead generation programs. © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
- 6. Today’s Speaker Michael Liard Director, RFID Michael is VDC’s Director of RFID in the firm’s AutoID research practice. Michael serves as VDC's lead analyst and consultant on all proprietary research and consulting engagements involving RFID product, market or channel development. Michael has covered the RFID and broader automatic identification industry, including research and analysis for barcode, contactless, NFC and RTLS technologies and solutions for more than a decade. Prior to VDC, Michael was employed by ABI Research as Practice Director, RFID. He also worked for Accenture (formerly Andersen Consulting) in their Organization and Human Performance practice. Michael has contributed to and has been cited in various industry trade press and national publications, including national TV appearances. Michael has also been a speaker at a number of industry-related conferences. Michael was presented the “Excellence in Journalism Award” by AIM Global in 2011. He was the first industry analyst to receive the award since its inception. Michael graduated Summa Cum Laude from Providence College (Rhode Island, USA) where he studied Political Science (major), Business, Marketing, Finance, and Economics (minors). For complimentary insights and marketing data: http://blog.vdcresearch.com/autoid/ © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
- 7. Today’s Agenda The Diversified Story of ILT Passive UHF ILT Tag Volume Remains Centered in Retail Apparel Key ILT Markets Being Driven by Anti- Counterfeiting & Authentication Recommendations for a Broader ILT Strategy © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com vdcresearch.com
- 8. The Diversified Story of ILT (Item-Level Tagging) ILT = A common theme with many variations High frequency (HF) solutions historically successful in limited-range ILT Luxury goods such as jewelry, designer goods, sports memorabilia, etc. Early industry choice for ILT before emergence of low-cost, high-volume passive UHF tagging solutions Passive UHF-based systems now dominate ILT volume, interest and activity Passive UHF tags have a cost and range advantage vs. HF-based tags Passive UHF tag volume now surpasses total HF tag volume due to ILT efforts What’s Hot and What’s Not for Passive UHF ILT Hot right now = Retail Apparel Heating up = FMCG (Fast Moving Consumer Goods) Hot/Cold = Pharmaceuticals © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
- 9. Passive UHF ILT Tag Volume Remains Centered in Retail Apparel Passive UHF Tag Volume for ILT applications exhibiting 50% CAGR in short term, even stronger growth predicted through 2016 Global Shipments of Passive UHF Transponders for Item-level Tagging Segmented by Product Type (Millions of Units) CAGR 2010-2012 = 50% 1400 1200 1000 (Millions of Units) 800 600 400 200 0 2010 2011 2012 Retail Apparel Pharmaceuticals FMCG/Other ILT © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
- 10. Key ILT Markets Being Driven by Anti-Counterfeiting & Authentication Passive UHF tagging happening to varying degrees in a number of key high-volume consumer good markets Pharmaceuticals All eyes on Korean and government pharmaceutical tagging mandate US will remain a laggard in pharmaceutical ILT Other countries and pharmaceutical companies continue to investigate RFID Alcohol China & Korea ILT initiatives underway with volume ramping expected Brand protection and consumer authentication are major objectives M2M Coffee pods and brewing system get the RFID treatment New Keurig® VUE™ brewer and RFID-enabled consumables deliver authentication and personalization Other FMCG (Fast Moving Consumer Goods) Consumer electronics Tobacco © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
- 11. Recommendations for a Broader ILT Strategy VDC offers some high-level guidance to achieving success in burgeoning passive UHF ILT markets Tagging at source is critical for long-term success of ILT market Tag application methods and services are key Bulk encoding and mass serialization solutions/approaches are also critical RFID integration must be as seamless as possible not to disrupt existing manufacturing processes It is vital that alliances and partnerships are focused on the delivery of total solutions Vendors must develop strategies and co-branded market messaging that centers on the consumer experience with RFID whether in-store, at home, or with mobile device interaction Tag volume is but one indicator of an ILT market opportunity Readers Printers/Encoders and Applicators Software Services © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
- 12. Strategic Insights 2012: RFID Market Final Deliverables: Track 1: FastForward: Insight for Leaders Volume 1: Authentication & Anti-Counterfeiting: The Next Wave of Adoption Volume 2: RFID Exposed: The Naked Truth on the Benefits of RFID Volume 3: TBA Volume 4: TBA Track 2: RFID Supply & Demand Analysis Volume 1: Americas Volume 2: EMEA Volume 3: Asia-Pacific Volume 4: Global Volume 5: EPC UHF Solutions Custom Datasets VDC Research maintains the most extensive databases of vendor, channel and end-user data in the RFID industry. The information contained within this database is updated continuously and is the most comprehensive of its kind, offering highly granular and reliable market intelligence on nearly all leading and emerging RFID markets and opportunities on virtually any dimension. © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
- 13. Thank You for Attending this VDC QuickCast For more information please contact: Sherrie Nankin – Account Director snankin@vdcresearch.com | 508.653.9000 x119 Michael Liard – Director, RFID Drew Nathanson – Vice President For complimentary insights and marketing data: http://blog.vdcresearch.com/autoid/ © 2012 VDC Research QuickCast AutoID & Transaction Automation vdcresearch.com
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- Thank you for that introduction. Today, I will be discussing the RFID market opportunity for Item Level Tagging, also known as ILT. Our presentation today is entitled: Look at me, I’m ILT. This is an appropriate title given that any vendor or solutions providers – particularly those in the passive UHF space – can no longer afford to ignore the burgeoning ILT segment. Let’s begin by taking a quick look at the agenda for this QuickCastWe will first discuss some high-level observations on the RFID ILT market as a whole including HF and Passive UHF considerationsNext we will hone in on the passive UHF ILT segment where VDC sees strong momentum We will then explore the passive UHF ILT market further, examining the influence of anti-counterfeiting and authentication on adoptionFinally, we will offer some strategic guidance to vendors and solutions providers targeting ILT
- To start, let’s be clear item level tagging is not a new concept or application in the RFID universe. In fact, ILT was an early vision for supply chains – the ability to track RFID-enabled items from the point of manufacture to the point of sale or point of delivery.The early vision for RFID-enabled ILT, however, differed from the early reality. RFID technology, especially passive UHF, was not ready for high-volume, low-cost ILT applications largely due to cost, performance and lack of standards. That is no longer the case. ILT is now a reality in a number of industries, most notably retail apparel.It has been a long road to get to the current levels of adoption and planned usage. As passive UHF technology and solutions matured over the last decade, shorter range HF RFID systems were being tested and deployed. Costs and range limitations in supply chain environments, however, presented hurdles to broader HF adoption for item-level tagging. Nonetheless, HF solutions have found current and historical success in select markets such as high-end luxury goods. For example, many major high-end retail jewelers have deployed HF-based systems tying together employee access control, item-level inventory control and even RFID-enabled marketing in stores. A few years back HF and UHF tags battled it out for frequency selection in the pharmaceuticals industry driving by anticipated – now delayed again – e-pedigree compliance in California. Passive UHF has now become the frequency of choice for the vast majority of pharmaceutical ILT pilots and deployments.So, what’s hot and what’s not in passive UHF ILT markets? VDC sees three key trends.
- Passive UHF tag volume for item-level applications far outpaces that of HF tag alternatives. This slide illustrates passive UHF tag shipments for item-level tagging by primary product category or type. VDC has grouped the passive UHF ILT opportunity into 3 key groups – Retail apparel, pharmaceuticals, and others (including fast moving consumer goods such as alcohol, tobacco and consumer electronics). There was a sharp spike in passive UHF volume two years ago, Hundreds of millions of passive UHF tags were shipped in 2010. The main factor then, and now, is the multi-year, multi-billion unit order from Wal-Mart for retail apparel items. Other retailers and brands contributing to volume demand include Marks&Spencer, Gerry Weber, American Apparel, JC Penney, Macy’s and others. In the pharmaceutical space, Korea’s government compliance program is driving strong volume. The RFID ILT initiative in Korea is being closely monitored by other countries including Germany and the US. ILT of alcohol products is driving strong volume in China and Korea, placing RFID tags on products such as wine and whiskey for authentication and anti-counterfeiting. At present retail apparel accounts for 75-80% of passive UHF ILT volume, with nearly 1.3 billion tags expected to be consumed this year. Category Shipments 2010 2011 2012 Retail Apparel (Millions) 620 850 1275 Pharmaceuticals (Millions) 85 125 175 FMCG/Other ILT (Millions) 25 100 200 730 1075 1650 85% 70% 77%
- While the main value propositions for RFID-based ILT are inventory control and supply chain visibility, anti-counterfeiting and authentication are also main drivers for select high-volume goods. VDC highlights some of those specific items here.Pharmaceuticals…Alcohol…M2M…Other FMCGs…Anti-counterfeiting and authentication is playing such an influential role is these and other markets that VDC Research has dedicated its first RFID Fast Forward research effort to this topic, authoring a forward-looking paper on this market trend and opportunity. More information on our 2012 RFID Research Program and Fast Forwards is offered at the end of this QuickCast.
- There are many strategies an RFID vendor or solutions providers can pursue in the passive UHF ILT market. We highlight a few of those recommendations today.
- This slide offers a snapshot of VDC’s 2012 RFID Research Outline and Strategic Insights deliverables. The 2012 program offers two new exciting offerings to our clients:The Fast Forward TrackAND Custom Data Cuts The Fast Forward component takes a deeper dive into select markets and provides insight and thought leadership in areas that showcase the modernization of RFID. Custom Data Cuts enabled clients to select and purchase data relevant to their targeted and served markets and according to your budget. We are excited about our 2012 RFID Research Outline and hope you are as well. Thank you.