These slides are from a webcast originally presented on 7/28/10. During this webcast, Chris Rezendes, Executive Vice President of VDC Research, presents the latest data from our 2010 Retail & Transaction Automation Equipment Business Planning Service. Specifically, he discusses: The current state of retailer budgeting and spending on retail automation technology, retailers’ current and expected strategic & operational priorities and how they translate into specific technology investments, the progress being made in defining ROI for next-gen retail automation solutions and the key factors shaping the managed services deployment trend.

1. VDC Research Webcast
Staying Ahead of the Joneses:
Retail Automation in 2010
July 2010
AutoID & Transaction Automation Practice
Chris Rezendes, Executive Vice President
,

2. Recording Available
These slides are from a webcast presented on 07/28/10.
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A full audio recording is available for download at:
http://www.vdcresearch.com/market_research/autoid/freeresearch.aspx#
1 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

3. VDC Research
Complimentary insights & marketing data on the retail and transaction
p y g g
automation technology markets is available at:
www.vdcresearch.com
www vdcresearch com
2 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

4. Today’s Speakers
• Chris Rezendes, Executive Vice President
,
 Chris has 19 years experience in embedded, industrial, defense and other mission
critical and high available technology industries
 He has more than 14 years experience in senior management and leadership
positions at a number of IT systems and professional services organizations
 During that time Chris has initiated or expanded coverage of a number of markets
that VDC covers today
 Ch i h advised many of the llargest and most respected technology companies
Chris has d i d f h d d h l i
in a number of technology segments worldwide
 Chris is a graduate of Harvard University
3 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

5. Recalling Our Context … Still Turbulent
Consumer
Disposable
Demand for
Income and
Value and
Consumer Credit
Service
Point of Point of Point of Point of
Service: Decision Service: Sale
Delivery Selection
Decision / Service and Sale Merging Functionally
g g y
Fragmenting Physically
4 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

6. Operate in One Niche, Deal With Them All …
• The retail market continues to pulse with fragmentation and consolidation in parallel,
 Traditional values in service and next generation business models
 So too do the markets for retail automation technologies
• The technologies supporting retailers might be thought of within the context of traditional,
next-gen,
ne t gen or bridging
 POS terminals might generally be considered ‘traditional’
 IDDS is one of the most challenging ‘next gen’ retail solutions
 And many other technologies , including Kiosks, might be considered ‘bridging’
bridging
• And as retailers make decisions about investing in one technology or another, ROI
comparisons across technologies are forcing niche suppliers to deal with broader
market implications – and broad-line suppliers to carefully modify their approaches
 They are being compared much more often today than 5 years ago
 When they are installed, they are being integrated much more often than 5 years ago
• Retail automation suppliers need frameworks to balance the need to focus with the need to
operate successfully in these complex contexts
• We are going to focus on POS Terminals, Kiosks and IDDS to illustrate these ideas
5 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

7. Survey Demographics – Big Chairs, Mixed Roles
Survey Respondent Title That Best • High citation rate of top execs is largely,
Describes Current P iti
D ib C t Position but not completely, indicative of many
CFO / VP of lower Tier organizations in the sample
CIO
Finance
2.6%
VP 1.6% • More than a few top executives from Tier 2
Operations
5.1% accounts responded to the survey …
reinforcing the thesis that a range of retail
automation investments are
Other  Becoming more strategic than operational; and
10.0%
Non-IT  Within the operational domain, more critical
Director /
Manager • The Non-IT Directors include a mix of
33.1%
front-end and back-end managers
IT Director /  Logistics
Manager
22.5%  Marketing
g
 Merchandising
President /
CEO /  Promotions
Owner
25.1%
6 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

8. Survey Demographics – Bit of a Skew to Tier 2
Respondent Organization's 2009 Revenues • While the survey appears skewed to
smaller accounts, with 59% of respondents
from companies with $100 million in
revenue or less, this Tier represents a
> $5 billion
3.8% number of important considerations
NA  A higher share of the retail establishments in
6.7%
virtually every regional market
 A lower share of current spend
$1.001  A meaningful share of growth potential in the
billion - $5 forward 3-5 years
y
billion
billi
13.7% • At the same time, every other Tier is likely
< $100 over-represented from a statistical
million perspective
59.0%
$101 million
to $1 billion • The resulting picture is likely skewed more
17.0% toward the larger tiers, and/or the advanced
accounts within the lower tiers
7 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

9. Survey Demographics – Broad vertical sample
Respondent Organization Classification • The retail segment mix is affording us the
Gasoline/ opportunity to explore some trending on
Petrol/
Convenience specific technologies in niche markets
Mass Store Lodging
Merchant 4.0% 3.0% • Specialty continues to be producing
4.2% upbeat performance. If this continues,
Drug Store/ technology suppliers will need more
t h l li ill d
Pharmacy Other
5.1% 15.1% visibility here
• Department stores are leading the charge
with respect to ‘changing the rules’ to
Dining draw and convert What technologies are
convert.
6.5% Department
Store they relying on?
12.1%
DIY/ Home
Improvement
6.7%
Specialty
p y
Travel Hard Goods
7.2% 12.0%
Specialty
Soft Goods Grocery/
7.6% Supermarket
Entertainment 9.0%
6%
7.6%
8 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

10. Current / Planned Usage – Solid Next-gen Growth
How Would You Define Your Organization's Usage of the • No surprise in the deployment rate or
Following Retail & Transaction Technologies? planned investment rate of traditional
Planning to technologies – POS Terminals, Printers,
Currently No Plans to
Using
Install During
Use
Transaction Terminals
12-24 Months
• Solutions that bridge traditional and
POS Terminals /
Workstations
65.0% 21.3% 13.7% next-gen retail automation deployments – SCO,
Kiosks, PSS
POS Receipt Printers 61.3% 22.0% 16.7%
 Are exhibiting solid installed base rates – especially
Payment / Transaction
when one considers the survey demographic
72.3% 14.7% 13.0%
Terminals
 And strong gro th profiles for 12 24 month
growth 12-24
installation plans
Imaging Solutions 35.0% 27.0% 38.0%
• It might be curious to see two high visibility
Self-checkout Solutions 21.0% 26.7% 52.3%
next generation solutions – Imaging and
IDDS – exhibit a lower 12 24 month investment
12-24
Self-service Kiosks 20.7% 27.0% 52.3%
rate versus current installed rate.
Personal Shopping
Devices
16.3% 27.0% 56.7%  ‘Natural’ dip based on leaders’ distance ahead
of the market
Electronic Shelf Labels 21.7% 27.3% 51.0%  Reaction to performance?
p
Interactive Displays and
28.3% 27.7% 44.0%
Digital Signage
9 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

11. Investment Being Driven by Metrics
What Were the Primary Adoption Drivers • This data was collected in Q2 2010 …
for Your Organization s Retail &
Organization's
Transaction Automation Technologies?
during the past 45 days!
• Cost reduction is still the number 1 driver –
Cost Savings 3.95 an indicator that retailers have no visibility
to stability?
Operations Improvement
O 3.90
• Operations improvement – a fuzzy term –
Sales Uplift 3.73 continues to rise on these lists of drivers.
It is being driven in part by advances in
Customer Empowerment 3.49 business intelligence (BI) solutions
• Sales uplift, rated #3, and the only other
Industry Compliance 3.32
factor with a rating higher than 3.5 on a 5.0
scale, remains the elusive, holy grail of ROI
Multi-Channel Synchronization 3.20
for many of these solutions
Government Compliance 3.17 • Compliance – both customer and
government – received relatively low
DKN 2.98 ratings. This, and a relative absence of
reference to PCI, leads us to believe that
0 1 2 3 4 5 this i
thi is not driving material investment
td i i t i li t t
Scale: 1=Low / 5=High
10 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

12. High Cost & Fuzzy ROI Still Holding Markets Back
• ‘Cost’ and ‘No Clear ROI’ were the two
Primary Barrier to Investment Comparison
most often cited barriers to adoption of
ALL THREE comparison technologies
POS
Kiosks IDDS
Terminals • However, the rates of citation for POS were
much lower than those for Kiosk and IDDS
Cost 1 2 1 • Another coupled pair of barriers showed
up with fair – regularity
 Compatibility with existing infrastructure
No Clear  Integration complexity
ROI 2 1 2
• Lack of financing citation in POS as sign of
• Compatibility • Integration • Integration maturity of that market? Commoditization?
w/ Existing Complexity Complexity
Infrastructure
• Compatibility • Training or • The Kiosk market continues to be plagued
• P d t
Product w/ Existing
/ E i ti Other
Oth by
b a number of issues – ‘T h l
b fi ‘Technology
Availability Infrastructure Operational
Other Hurdles Immaturity’ – one would not expect from a
• Lack of • Technology
Acceptable Immaturity • Compatibility technology with such age and installed base
Financing w/ Existing
Infrastructure • IDDS citation of ‘Training / Other Operational’
is lik l
i likely confirming a known
fi i k
Scale: 1=Low / 5=High
11 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

13. Product Selection Driver Comparison
Leading Product Selection Criteria Comparison
g p • The table shows the five highest and lowest
rated product selection criteria against a
POS
Terminals
Kiosk IDDS pre-defined list
• Reliability • Reliability • Other • How are these markets behaving similarly?
• Ease of Use • ROI • Display Size
 Durability of the solution is the #3/4/5
y
• Durability • Touch Screen • OS consideration. The solutions need to withstand
Highest
• Connectivity/ • Ergonomics/ • Durability unkind human operation.
Communication Footprint
Rated • Ergonomics/  Supplier brand is at the bottom of the lists. !?!
• Expected Life • Display Size Footprint
/ Duty Cycle
• Durability  Environmental conditions . All deployments are
controlled and sheltered
• How are these markets behaving
• Display Size • Packaged • Memory
Solution differently?
• Power • Ease of Use
Consumption • Compatibility
• Manufacturer/
 Ease of use rated #2 in POS, near the bottom in
w/ Existing Kiosk and IDDS. Kiosk shocks us
IDDS
• Touch Screen Brand
Infrastructure
Lowest
• Environmental • Environmental
Rated Conditions
• Ease of Use
Conditions • Displays ratings are a key area of risk
• Environmental
• Manufacturer/
Conditions
• Expected Life/  Kiosk and IDDS responses placed touch and size
Brand Duty Cycle very high. POS placed both low
• Manufacturer/
Brand  Is there a perceptual barrier to overcome for POS
suppliers looking to participate?
12 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

14. Vendor Selection Driver Comparison
Vendor Selection Criteria Comparison • At last, and island of commonality …
POS • There are no substitutes for the four most
Kiosk IDDS
Terminals commonly cited and highest rated
• Product • Product • Product
requirements:
Quality Quality Quality  Quality and price
y p
• Price • Ease of Use
of HW
• Price
 Ease of use
• Maintenance • Ease of Use
Support • Price of HW  General support and urgent troubleshooting
Highest
Rated • Ease of Use • Maintenance • Maintenance • Some myths debunked?
of HW Support Support
• Technical • Technical
 POS suppliers need not h
li d t have a b d range of
broad f
Trouble- Trouble- solutions. Perhaps customers are skilled at
shooting shooting shopping best in class fit for their app?
 Excellent experiences attached to kiosk vendors
Single Source
g are not translating into brand power. Does the
Lowest Brand market see these still as one-off projects?
Product Variety Solution
Rated Reputation
Capability
 IDDS – and emerging / growth market – is NOT
looking for single source solutions? Perhaps
they already understand these successful
deployments are the sum of parts, and those
parts are diverse skills not likely found in one
group?
13 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

15. Channel Preferences Comparison
Channel Migration Comparison • The POS market remains heavily
89.7%
reliant on the direct channel
HW Manufacturer 100.0%
75.7% • Direct and Other are the only two
69.0%
expected to grow, with Other made up
Dealer/
st buto
Distributor
75.0% largely of IT vendor and ISV citations
74.3%
74 3%
65.5%
• Catalog citation rates are plummeting
System Integrator 70.8% across all three technologies …
54.1%
62.1% IDDS • The Kiosk market looks to be
E-Commerce/ Future
Web/ I t
W b/ Internet
t
41.7%
41 7% returning a bit to its earlier channel
54.1% Kiosk sourcing preferences with:
41.4%
Future
VAR 33.3% POS  Direct expected to grow from 58.3% to
51.4% Future 100.0%
34.5%  Low or marginal value-adding channels
g g
Catalog 29.2% plummeting
23.0%
3.4% • IDDS channel sourcing really does
Other 0.0% look a mixed bag – but a learned one
5.4%
 Continued high direct citation
g
0% 20% 40% 60% 80% 100%
 Sharp growth in highest
value-add ISI channel
14 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

16. What is to be Done?
• Recognize and leverage your strengths – above your brand – in alignment with the
COMMON key product and vendor selection criteria
• On the product side, be specific, differentiated and relevant
 Durability, but operational, NOT environmental
 Brand … appears not to matter but we cannot say do not lead with it But we will say be wary of how
matter, it. But, say,
• You must staff, develop and promote the following initiatives
 ROI. Still not clear. The market is still not convinced. We have a lot of work yet to do here
 Integration / compatibility challenges – are there new product opportunities? Brand-worthy processes?
 Communications / network management capabilities. Wireline and wireless. It drives the issue above
• Study how some of the differences in requirements and preferences across technical
segments can be as powerful as the differences across vertical segments
 In general, the retail automation supplier community has done well drilling down, or double clicking into
g pp y g g
verticals, segments and niches
 However, some challenges exist in the different perceptions / values placed on common components across
multiple solutions
 Consider the display in POS versus the display in Kiosk versus the display in IDDS
15 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

17. Retail / Transaction Automation Planning Service
Three Tracks
Track 1: Technology Market Analysis Volumes
 Volume 1: POS Terminals/Workstations
 Volume 2: POS Receipt Printers
 Volume 3: Payment/Transaction Terminals
 Volume 4: Imaging Solutions
g g
 Volume 5: Self-Checkout Solutions
 Volume 6: Kiosks
 Volume 7: Personal Shopping Systems
 Volume 8: Electronic Shelf Labels (ESL)
 Volume 9: Interactive Displays and Digital S
Signage
Track 2: Vertical Market Analysis Volumes
 Volume 10: Retail
 Volume 11: Hospitality
Track 3: Distribution Channel Analysis Volume
Service Architecture
 Technology Supply-Side Reports (Track 1) or Vertical Market Reports (Track 2)
 Quarterly Bulletin (included with purchase of at least one full Track)
 Customized Executive Summary (included with purchase of entire Service)
 Real-time Analyst Access
16 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

18. Primary Research & Market Model Highlights
Target Communities Approximate Sample Size
Phone Interviews Retail automation equipment suppliers N = 150 (+50%)
Web-based Interviews End users, retailers, VARs/integrators, distributors N > 600 (+20%)
Study Publication Date Actual Market Size / Supplier Share Forecast Market Size
Service Year 2010 2009 2010-2014
17 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

19. Founding Sponsor Benefits & Schedule
• Service Schedule:
 Founding Sponsor enrollment: through January 29, 2010
 Deliverables begin with Q1 Bulletin, with major reports: April thru September 2010
 Planning discussions with early subscribers:
g y through February 2010
g y
 Monthly status reports: begin January 2010
 Interim findings by volume one month prior to publication of each final report volume
• Founding sponsors receive the following benefits:
 Opportunity to provide input on the study architecture, scope, direction
 Monthly updates and real-time qualitative findings of interest at each major milestone
throughout the execution phase of the study
g y
 Discounts from standard post-publication prices
 Executive presentation that walks your team through the research sponsored
18 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice

20. Q&A Session
Thank You for Attending this VDC Webinar
For more information about VDC Research coverage of the global markets
for retail and transaction automation technologies – including the 2010
Retail Automation Market Intelligence Service – please contact:
Tom Wimmer
Director, Auto ID and Transaction Automation Technologies Practice
twimmer@vdcresearch.com | 630-279-7959
t i @ d h 630 279 7959
Chris Rezendes
Executive Vice President
cjr@vdcresearch.com | 508-653-9000 ext.120
j@ d h 508 653 9000 t 120
19 –  2010 VDC Research Group, Inc.
Auto ID & Transaction Automation Practice