Jun 02, 2015A new report from Frost & Sullivan finds that sales of RFID readers, tags and software to the retail sector will grow from $738 million in 2014 to $5.409 billion in 2020, reflecting a compound annual growth rate (CAGR) of 38.9 percent.
When Ram Ravi, a Frost & Sullivan electronics and security industry analyst, met with RFID vendors at the RFID Journal LIVE! 2014 event in Orlando, Fla., he noticed that their confidence level had changed in comparison with previous conversations he had had with them. Both hardware and software companies indicated that the "tipping point" had been reached at which RFID technology use became commonplace for retailers. Ravi also carried out subsequent research and conversations with RFID technology vendors and end users, and incorporated all of his findings in a report titled "Analysis of the Global RFID Market in Retail," released last month.
Ravi's analysis determined that the RFID market for the retail sector is growing because retailers have begun to better understand the technology's benefits. The applications for which RFID is used include inventory management, monitoring customer behavior and loss prevention.
"We've reached a point where passive RFID has become a very attractive proposition for retailers," Ravi says, "and they are seeing value in the technology moving forward."
According to Ravi, while apparel is driving RFID adoption at this point in time, another promising area of growth in the retail sector is in perishable foods. As with apparel, meat, fresh produce and other perishable products will be tagged with EPC Gen 2 ultrahigh-frequency (UHF) labels in order to track food items from the time they are first packaged, through the supply chain, and into the store. In this way, companies will be able to reduce the percentage of spoilage that, in turn, leads to the high cost of wasted product.
Most retail RFID usage has occurred in North America and Europe, Ravi's analysis finds. However, he says, he expects that there will be considerable growth during the next few years in India as well, thanks to that country's increased presence of smartphones, as well as disposable incomes. He adds that China is expected to be another large growth area.
In India and China, as well as in North America and Europe, such growth is being fueled primarily by consumer behavior. Specifically, shoppers are using their phones and tablets to make purchases, and expect to pick up or receive products quickly following those purchases. Customer expectations have put pressure on retailers to treat their physical stores as distribution centers from which online purchases can be fulfilled, and has also encouraged the launching of online retailers that have no physical store presence at all, but rather a keen interest in ensuring that goods are distributed to the areas in which purchases are being made very quickly.
One key factor driving RFID adoption globally is omnichannel retailing, Ravi reports. "Increasing levels of e-commerce and m-commerce lays emphasis on inventory management to prevent loss of customers," he explains.
With the use of RFID technology, retailers are improving their visibility into supply chain and in-store inventory counts, Ravi explains, and are thus preventing out-of-stock incidents in which a consumer may have to wait for a product because none was available in his or her regional area. Therefore, RFID provides a return on investment for retailers by helping them to meet consumers' demands for product delivered fast.
The Frost & Sullivan study consisted of analysis of sales data regarding readers, printers, tags, software, and full turnkey solutions and services. "Tags constitute a major share of the market," Ravi states.
As RFID use ramps up, Ravi expects hardware vendors to compete to improve tag, reader and printer effectiveness. Better-performing hardware with the ability to read, write and print RFID labels faster and without errors, he says, is likely to result.
RFID technology providers will focus more on one-stop-shop solutions that will enable an end user to acquire an entire system from a single provider, Ravi predicts, instead of having to procure parts of its solution from multiple vendors. However, RFID technology providers must better understand the retail market.
"From a system integration standpoint," Ravi says, "they need to know more about retailer processes to provide solutions that are effective."
An early challenge to adoption has been concerns from privacy groups, particularly in Europe—as well as in North America, to a lesser degree—about security and privacy breeches that could result from the purchase of an RFID-tagged item. As consumers become more accustomed to RFID use in stores, and as they find no specific privacy concerns, Ravi predicts that such privacy concerns will become negligible. For instance, tags can be removed at the point of sale before a customer takes a product out of a store; the tags can then be disabled, and each tag's ID number can be encrypted as well, in order to provide a greater level of security.
Frost & Sullivan also conducts research regarding RFID growth in other vertical markets, Ravi says, such as manufacturing, logistics, oil and gas, and automotive. He adds, however, that retail seems to be the sector with the most growth at this time.
A full version of the "Analysis of the Global RFID Market in Retail" report can be purchased at Frost & Sullivan for $6,000, by contacting Julia Nikishkina, the company's corporate communications manager in Europe.
