RFID in Retail – Sustained Growth Expected

Ram Ravi, Senior Analyst

Measurement & Instrumentation

and

Peter Gates

Director, Professional Services Europe, Middle East and Africa

Tyco International

October 29th, 2014

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2

Today’s Presenter

Ram Ravi

Senior Research Analyst

Automatic Identification and Data

Capture

Frost & Sullivan

Europe

Chennai, India

3

Full 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 offerings

Usage of other technologies

Competition from local RFID vendors

Economic 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 Technical Skills

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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Today’s Presenter

Peter Gates Director, 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?

Inve

nto

ry A

ccu

racy

Time

100%

90%

80%

70%

60%

50%

0 1 year

12

How does this Happen?

100%

90%

80%

70%

60%

50%

0 1 year

Inve

nto

ry A

ccu

racy

Time

At the beginning of the year, a physical inventory

is done, and inventory accuracy is near 100%

13

How does this Happen?

Inve

nto

ry A

ccu

racy

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

14

How does this Happen?

Inve

nto

ry A

ccu

racy

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

15

100%

90%

80%

70%

60%

50%

Inve

nto

ry A

ccu

racy

Time 0 1 year

What Can be Done?

16

100%

90%

80%

70%

60%

50%

Inve

nto

ry A

ccu

racy

Time 0 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%

Inve

nto

ry A

ccu

racy

Time 0 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%

Inve

nto

ry A

ccu

racy

Time 0 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 improve

execution 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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Retail

Performance

+ Security

Solutions

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 Footprint

Operating in 70 countries worldwide

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Switzerland Headquarters

Boca Raton, Florida

Irvine, California

Shenyang, China

India: Outsource Mfg

Zaragoza, Spain

Echt, Netherlands

Atlanta, Georgia

Singapore

Hong Kong

Brazil: Joint Venture DC & Mfg

Matamoras, Mexico

Shanghai, China

Design Center

Manufacturing Site

Recirculation Center

Major Distribution Center Optimum 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

Market

Leadership

Solution

Portfolio

Global

Customers

Scale &

Experience

Global

Reach

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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

Market

Leadership

Solution

Portfolio

Global

Customers

Scale &

Experience

Global

Reach

www.tycoretailsolutions.com @TycoRetailNews

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