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Future of Self Checkout A landscape study
This work was created in an open classroom environment as part of a program within the Sutardja Center for Entrepreneurship & Technology and led by Prof. Ikhlaq Sidhu at UC Berkeley. There should be no proprietary information contained in this paper. No information contained in this paper is intended to affect or influence public relations with any firm affiliated with any of the authors. The views represented are those of the authors alone and do not reflect those of the University of California Berkeley.
Bhaskar Nallapureddy, Samsung Paramita Das, NetApp
Naveen Nagaraj, VMWare Sunder Parameswaran, NetApp Jure Zaninovich, Lam Research
Poola S, Yahoo
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Abstract “Peoplehavesaidwhencheckoutisworkingreallywell,itwillfeellikestealing.Yougrabapairofshoesandyoujustwalkout.”
‐MichaelChui,Partner,McKinseyGlobalInstituteWhowouldnotlikeanidealshoppingexperience–imaginethatyouwalkintoastore,browseproducts,comparepricing,readreviews,droptheproductsinyourcartandwalkout.Thisisnotinconceivableinthenot‐too‐distantfuture.Thisreportcoversthecurrentstateandthefutureofretailcheckout,whichisataninflectionpointandisripeforadisruptivechangeintheneartomidtermhorizon.Itoutlinesthepainpointsfortheconsumerandtheretailer,andidentifiesanexistingbusinessopportunityasrecognizedbyindustryplayers.Itcoversthetechnologiesinaction,theirpotentialfordisruption,industryplayersinthegame,challengestoovercome,andtheauthors’opiniononthewinnersandlosersintheretailselfcheckoutindustry.Besides,italsocoversahandfulofcasestudiesofindustryplayers,bothincumbentsanddisruptorsthatshedssomelightontheplayerswhoarepositionedtocapitalizeonthehugeopportunity.
Keywords Retail,Self‐checkout,RFID,barcode,Digimarc,Scandit,NCR,Skip
Abbreviations POS PointOfSaleNRF NationalRetailFederationAIDC AutomaticIdentificationandDataCaptureCPG ConsumerPackagedGoodsSNR SignaltoNoiseRatioGTIN GlobalTradeItemNumber(ManagedbyGS1standards)RBR RetailBankingResearchGS1 GlobalStandardsOne(anorganizationthatmanagesstandards)ROI ReturnOnInvestment
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TABLEOFCONTENTS
ABSTRACT..................................................................................................................................................1
KEYWORDS................................................................................................................................................1
ABBREVIATIONS......................................................................................................................................1
1. INTRODUCTION...............................................................................................................................4
2. RETAILCHECKOUT.........................................................................................................................4
I. ABITOFHISTORY.............................................................................................................................5II. INDUSTRYTODAYANDKEYPLAYERS......................................................................................6
3. PAINPOINTSANDOPPORTUNITY.............................................................................................8
4. TECHNOLOGIES.............................................................................................................................10
I. BARCODE.............................................................................................................................................10TECHNOLOGY..............................................................................................................................................................10KEYBENEFITS.............................................................................................................................................................11II. DIGIMARCBARCODE.........................................................................................................................11TECHNOLOGY..............................................................................................................................................................12KEYBENEFITS.............................................................................................................................................................14III. RFID.................................................................................................................................................14TECHNOLOGY..............................................................................................................................................................14KEYBENEFITS.............................................................................................................................................................16
5. CASESTUDIES................................................................................................................................16
I. NCR:THEMARKETLEADER...............................................................................................................16OVERVIEW...................................................................................................................................................................16CUSTOMERS.................................................................................................................................................................17VALUEPROPOSITION.................................................................................................................................................17II. SCANDIT:LEVERAGINGTHESMARTPHONEBOOM..........................................................................18OVERVIEW...................................................................................................................................................................18CUSTOMERS............................................................................................................................................................1918VALUEPROPOSITION.................................................................................................................................................19III. DIGIMARC:RADICALIDENTIFICATIONANDCAPTURE...................................................................19OVERVIEW...................................................................................................................................................................19CUSTOMERSANDPARTNERS....................................................................................................................................20VALUEPROPOSITION.................................................................................................................................................21IV. SKIP:RFID,THEFINALDESTINATION?..........................................................................................22OVERVIEW...................................................................................................................................................................22CUSTOMERS.................................................................................................................................................................23VALUEPROPOSITION.................................................................................................................................................23
6. KEYHURDLESFORADOPTION................................................................................................24
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I. TECHNOLOGY......................................................................................................................................24II. REGULATORY.....................................................................................................................................24III. SOCIETAL...........................................................................................................................................24
7. CONCLUSIONS................................................................................................................................25
REFERENCES...........................................................................................................................................27
TABLEOFFIGURESFigure1:Benefitsofbarcode[7].........................................................................................................5Figure2:Evolutionofcheckout...........................................................................................................6Figure3:Industryplayersinselfcheckout.....................................................................................7Figure4:Selfcheckoutterminalshipmentsworldwide(210,000),2014........................8Figure5:Customerpainpointsandimpacttobusiness...........................................................9Figure6:Retailersresponsetocheckoutpainpoint..................................................................9Figure7:Sampletypesofbarcodes................................................................................................11Figure8:CodeEmbedder....................................................................................................................13Figure9:CodeDetector........................................................................................................................13Figure10:RFIDfactorysellingpricetrend.................................................................................15Figure11:NCRselfcheckoutplatform..........................................................................................17Figure13:Digimarcwatermarkencoding...................................................................................20Figure14:DatalogicdeviceswithintegratedDigimarcbarcodes.....................................21Figure15:Skipoperation....................................................................................................................23TABLEOFTABLESTable1:ROIofthehypotheticalretailer......................................................................................21Table2:Laborcostsavingsexpectedinthe$3trillionbusiness(top120
supermarketlikeretailsegments).........................................................................................22Table3:Expectedoutcomes...............................................................................................................25
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1. INTRODUCTION “Peoplehavesaidwhencheckoutisworkingreallywell,itwillfeellikestealing.Yougrabapairofshoesandyoujustwalkout.”That’showMichaelChui,apartnerattheMcKinseyGlobalInstitute,describestheretail‐checkoutexperienceinyournot‐too‐distantfuture[1].ThewaywepayforgoodsandservicesatstoresandrestaurantsischangingasthetraditionalPOS(PointOfSale)countersgetsreplacedbynewtechnologies.Manystoresandsmallbusinessesarealreadyusingtabletsormobilephonesthatswipedebitorcreditcards.PurchasescannowtakeplaceanywhereinthestorethankstomobilepaymenttechnologiessuchasApplePay,SamsungPay.Whilethisisthetipofaniceberg‐amuchbiggerchangeintheoverallcheckoutexperienceiscoming‐itillustratestheindustry’srecognitionofanexistingopportunity,andthatbigplayersarerespondingwithavarietyofsolutionstoradicallychangetheconsumerexperienceofretailcheckout.Anambitiousconcept,Touchlesscommerce[2],showcasedbyToshibainNRF(NationalRetailFederation)’sBigShowinNewYorkCityinearly2015combines3Dandfacialrecognitiontoquicklyscanconsumersfaceandthecontentofthebasketandimmediatelychargestheconsumer.Aspresentedintheshow,thescanningwouldbelimitedto8‐10itemsinasupermarketbasketandisfarfromachievingtherequiredidentificationtargetstomakethetechnologyrealizable.Sometimeinthefuture,assuchtechnologiescrossthebarriersofadoption,wewillessentiallyseeanendtotheconceptofcheckout.Wewouldliketoimagineafuturewhereinwecouldwalkintoastore,shop,andjustwalkoutofthestorewithafilledcartfullypaidfor.WhilethisrequiresdisruptiveinnovationsinPOSsolutions,mainlyfromscanningandpaymentsystems,thelatterhasseensignificantimprovementsandtheformerremainsthekeybottleneckineliminatinglonglinesatcheckout.Inthisreport,wewillshareourfindingsfromourstudyandanalysisoftheretailself‐checkoutlandscape.
2. RETAIL CHECKOUT Keybottleneckinthecheckoutexperienceisindatacapture(scanning)andidentification,oftenreferredtointheindustryasAutomaticIdentificationandDataCapture(AIDC).BarcodesaretheclassicexampleofAIDCtechnologythathasbeensuccessfullyadoptedinretail.
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Inthissection,wewillbrieflycovertheevolutionofcheckoutexperienceinthelasthalfacenturyfollowingwhichwewillsharethecurrentstateoftheindustry.
i. A BIT OF HISTORY Retailcheckoutwithoutbarcodeisalmostunimaginabletoday.Firstuseofbarcodecommerciallydatesbackto1974inastoreinOhio[7].Smallbusinessesbeforebarcodesspentanenormoustimewithinventorymaintenance,assummedupinFigure1:Benefitsofbarcode.
Figure1:Benefitsofbarcode[7]
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Overtime,barcodesgotadoptedfrominventorymanagementintothefrontofthelineretailPOStherebyenhancingthecheckoutexperienceforthecustomers,andenablingthescalabilityofretailstorestosupportalargenumberoftransactions.Figure2:Evolutionofcheckoutshowsthetechnologiesusedhistoricallyatcheckout.Aswecansee,thebiggestdisruptorsofar,wasthebarcodeandwasinventedabout40yearsago.Thefigureshowsthattherecentevolutionshaveallbeenincrementalintheirvalueproposition,andwecansaythatthenextbigthingafterbarcodeswastheself‐checkoutcounter.Thecheckoutindustryisripeforadisruption.Someofthekeyplayersinthisgamearementionedinthenextsubsectionincludingthetechnologiesthattheyareevaluatingforthenextgenerationproducts.
Figure2:Evolutionofcheckout
ii. INDUSTRY TODAY AND KEY PLAYERS Inthisreport,wefocusmoreontheretailself‐checkoutlandscaperatherthanretailcheckoutasawhole.Thus,weidentifiedtheplayersintheself‐checkoutbusiness.InFigure3:Industryplayersin,weshowthekeyplayersthatincludeincumbentsaswellasdisruptors.Inspecific,Horizon1companies(firmswithstableproductsandsteadymarketsharewithlittlegrowth)constitutetheincumbentswithNCRbeingthemarketleader.IBMwasalsoakeyplayerinretailself‐checkoutbusinessandappearshereasToshibaafterthesaleoftheretailbusinessdivisiontoToshiba.
1960
Manualentryofitemsandprices
1970NumericalcodeswereKeyedattheregister
1980‐ 2000Barcodescanners atthecashcounters
2000‐ 2015
Self‐checkoutkiosksandSmartphonebarcodereaders
2015– 2025RFIDscanners
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AsseeninFigure3:Industryplayersin,thereareabunchofdisruptorswithdifferentapproachestosolvethelongcheckoutlineproblem.Scanditfollowsthenaturalevolution,anobviousnextstep,withtheadventandwidespreadadoptionofsmartphones.Itisessentiallyasmartphonebasedbarcodescanningandintegrationintotheretailcheckoutsystem.Digimarcontheotherhand,developedaradicallynewbarcodetechnologybasedonimagewatermarkingandisshowinggoodpromiseofalarge‐scaleadoption.Also,thereareothersmallplayerssuchasshelfXthattakeusasteptowardsunmannedPOSattheshelflevel.Skip,isbettingonthenextbigradicallydisruptiveRFIDtechnology.Apartfromthere,therearemoonshotssuchasToshiba’sideaofbasket/cartlevelimagerecognitionbasedcheckoutandfacialrecognitionbasedpaymentthatwillessentiallycompletelyremovetheconceptofcheckoutfromthestores.WedonotcoverToshiba’sideainthisreportsincewebelievethatitiswayfarintermsoftechnicalfeasibility.
Figure3:Industryplayersinself‐checkout
Skip,Scandit,shelfXandDigimarcarerelativelysmallercompaniesintheself‐checkoutbusiness.Thedominantplayersintheself‐checkoutterminalbusinessareshowninFigure4:Selfcheckoutterminalshipmentsworldwide(210,000),2014,whichobtainedfromarecentmarketsharedatabyRetailBankingResearch(RBR).
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Figure4:Selfcheckoutterminalshipmentsworldwide(210,000),2014
3. PAINPOINTS AND OPPORTUNITY Checkoutisthelastopportunityfortheretailertomakeanimpressionontheconsumer.Longlinesatcheckoutcouldruintheentireexperienceeventhoughtheconsumerhadthebestpossibleshoppingexperienceuntilthen.Theproblemoflonglinesandtheresultingfrustrationoftheconsumerneedsnosignificantdataforjustificationsincemostofushavethefirsthandexperience.Thekeypainpointistheimpacttotheretailbusiness.Asshownbytheretailcustomerexperience.comstatsinFigure5:Customerpainpointsandimpacttobusiness,brick‐and‐mortarstoresarelosingcustomers/businessduetolongcheckoutlines.AsurveyofUSinternetusersbyeMarketershowsatleastabout30%oftheparticipantsindicatethattheywouldgobacktobrick‐and‐mortarstoresifsmoothandquickself‐checkoutoptionsexisted.Also,aHarrispolldatafrom2013showedthatastaggering88%ofUSadultswanttheirretailcheckoutexperiencetobefaster.Allthenotedsurveyresultsindicateaclearholeoranopportunitytoimprovetheexperience.AdifferentVDCsurveyoftheretailorganizations,showninFigure6:Retailersresponsetocheckoutclearlyindicatesthatorganizationsarerespondingtothispressingneed.85%ofsurveyedbusinessesareconsideringupgradingtheirPOSscanningsystems.
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Figure5:Customerpainpointsandimpacttobusiness
Figure6:Retailersresponsetocheckoutpainpoint
Since,brick‐and‐mortarretailisabouta$22trillionbusinessgloballyandthescanningportionofcheckoutcostsabout0.4%ofsales(basedondatausedbyDigimarccoveringtop120supermarket/hypermarketchainsglobally),thebusinessopportunityis$88billionforcompletelyeliminatingscanningfromthecheckoutflow.Thispresentsanattractiveopportunityforbusinessestoimproveefficiencies.
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Inthenextsection,wewilldiscussthekeytechnologiesthatarebeingexploredtotapthislargeopportunity.
4. TECHNOLOGIES
i. Barcode Barcodesareconsideredasoneofthegreatestinventionsofthe20thcentury.Oneoftheoriginalformsofthebarcode,whenitwasinventedbackin1948byNormanWoodland,wasinspiredbyMorsecode,essentiallyaverticalextensionofthedotsandlinesinMorsecode.Lateronittooktheformofcircularbullseyeshapedpatterninordertomakeitrobustagainstorientation.Eventually,whenitwascommerciallyimplementedin1974,ithadtakentheformthatweseetoday.TherearemanydifferentkindsofbarcodessuchastheretailUniversalProductCode(UPC),thepostalcodeandmanymoreasshownin[10].
Technology
BarcodetechnologyworksofoffaprinciplecalledSymbologycarryingencodeddata.Thisencodingallowsthescanningdevicetoknowwhenadigitorcharacterstartsandwhenitstops,similartoabinaryrepresentation.Werecognizebarcodesasanarrayofparallellinesalternatingbetweenwhiteandblacklines.Barcodetechnologyprovidesasimpleandinexpensivemethodofrecordingdataorinformationinanumberofapplications.
Thelineorlinearbarcodetechnologyissometimesreferredtoas1Dencoding.Whilewearemostfamiliarwiththesebarcodes,therearemorecomplexcodesthatemploytheuseofdotmatrixestostoreandidentifyfarmoreinformation.Thesearereferredtoas2Dbarcodes;onepopularformof2DbarcodesistheQRcode.2Dbarcodesarecomprisedofminiaturedots,liketheolddotmatrixprinters,whichcreatepatternsthatarereadinthescanningprocess.Thekeydifferencebetweenthetwotechnologiesisthescanningtechnique.Linearbarcodesaredecodedbylaserscanners,whichusereflectedlighttomeasurethewidthpatternsofalternatingwhiteandblacklines.However,the2Dbarcodesrequireanimagecapturedevice.
Thepopularityandpotentialof2Dbarcodeshasenabledalarge‐scaleadoptionofimagescannersincheckoutkiosks.Barcodesusheredarevolutionincheckoutandinventorycontrolbesidesmanyotherindustries.Today,itisdifficulttoimagelifewithoutthem.Theywillcontinuetohavealonglifeduetothelevelofadoptionthattheyhavereached–accordingtoGS1,therearemorethan5billionscansperday.
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Aradicalnewspeedycheckoutsolutioncannoteasilyignorethefactthatbarcodesareheretostayforlongandarenoteasilyreplaced.Hence,therearemanycompaniessuchasScanditthatleveragethisfactandusethepowerofsmartphonestohaveincreasedlevelofcustomerengagementandfastercheckout.AfewexamplesofalargevarietyofbarcodesareillustratedinFigure7:Sampletypesofbarcodes.
Figure7:Sampletypesofbarcodes
Key Benefits ProventechnologyanddeeprootedNoadoptionchallengesfortechnologythatworkswithbarcodesEstablishedecosystem
ii. Digimarc Barcode DigimarcBarcode[3]isaradicalimprovementtotraditionalbarcodefunctionalitythatisfaster,morereliableandmoreversatilethantoday’sUPC/EANsymbol.Inaddition,itoccupieszerospaceonthepackage.WithDigimarcBarcodes,productpackagescanbescannedwithDigimarc‐enabledPOSimagescannersatcheckoutsignificantlyfasterthantraditionalUPCbarcodescanners.
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Inthenexttwosubsections,wecoversomedetailsonthetechnologybehindthenewbarcodeandthekeybenefitsofthetechnology.
Technology Imagewatermarking,aproventechnologythathasbeendeployedinlargescalewithexceptionalrobustnessindifferentverticals,enablesthisamazingnewbarcodetechnology[4].TheDigimarcBarcodeisbuiltonaFixedCodeDirectSequenceSpreadSpectrumrobustimagewatermarktechnologyutilizingatemplatethatisrotation,scale,andtranslationinvariant.AkeyinnovationenablingtheuseofprintwatermarkinginConsumerPackagedGoods(CPG)fordetectionwithimaging‐basedbarcodereadersisacolorandilluminationmodelthatmaximizesSignaltoNoiseRatio(SNR)whileoperatingunderawellbehavedvisibilityconstraintmodel.Thewatermarkisimperceptible,allowingsignificantredundancyonapackageenablingprintingonallsidesofthepackagewithoutaffectingtheaesthetics.InwatermarkingwithFixedCoding,thepackageartwork,orCoverWork,hasnobearingonhowthemessageismappedtothewatermark.DuringwatermarkdetectiontheoriginalWorkisnotavailable,sotheCoverWorkisanoisesourceforthewatermarkdetector.AlthoughtheCoverWorkisasignificantsourceofnoiseintermsofitscomparativeamplitudewiththewatermark,itcanbemitigatedthroughtheuseofhigh‐passfiltering.Inthecaseofdigitalimagery,smoothcontoursandtonallyflatregionsoftheimageareplaceswhereahigh‐passfiltercanbeusedtogreatadvantageforwatermarkrecovery,lesssoforedgesandbusytextures.CodeembeddingishowthewatermarkiscombinedwiththecoverworkusingtheprocedureillustratedinFigure8:CodeEmbedder.Inthefigure,themessagecanbeassumedtobeaproductidentifiersuchasGlobalTradeItemNumber(GTIN)thatisusedinUPCbarcodeandthekeyreferstothespreader.Thefigureshowsupdatedworkflowofthepackagecoverdesign(whichissoftwareoriented)priortoprinting.
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Figure8:CodeEmbedder
CodedetectorasshowninFigure9:CodeDetectoristhetechniqueusedduringscanningandautomaticidentificationoftheproduct.Thiswouldrequireanimagecapturecapabilityonscanner,whichalsohappenstobearequirementforsupporting2Dbarcodescanning.Thehighpassfiltering,asshowninFigure9:CodeDetectoreliminatesthecoverworkandleavesbehindanoisyembeddedcodethatisthencorrelatedagainstthespreadercode(generatedfromtheKey).SlicerwouldspitoutthemessagebitsthatconstitutetheidentifiersuchasGTINthatuniquelytagstheproduct.
Figure9:CodeDetector
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Themassivefootprintoflinearbarcodesensurestheirlongevity.CentraltothedesignofDigimarcBarcodesisitsabilitytocoexistwithexistingovertsymbologies(barcode).However,asretailstoresandtheirsupplierscontinuetheadoptionofimaging‐basedbarcodescanners,theirabilitytoleveragethebenefitsofDigimarcBarcodewillgrow.
Key Benefits
Orientation(speedyscan)–Duetothenatureofthebarcodewhichisbydesignrobustagainstorientation,andduetotheimperceptibilityofthewatermarkallowingforsignificantprintingredundancyonallsidesofthepackage,packageorientationwithrespecttothescannerisnolongerarequirement.
CustomerEngagement–Sidebenefitoforientationagnosticscanabilityisthatclerksatcheckoutcounterscanbetterengagewithcustomers.Besides,Digimarc‐enabledbarcodescanningapponsmartphonescandirectlyengagecustomerswiththeproductsandhelpwithadvertisingandcross‐sellingopportunities.Theycouldcontinueengagingwiththeproductrelatedinteractivemobilecontentevenafterleavingthestore.
Cost–Haslittletonoimpacttoexistingprintingandscanningsolutionssinceitcanessentiallyreusethesameworkflowastoday’sbarcodebasedsolutions.Theonlychangetotheworkflowsisafewsoftwareupgrades
Aesthetics–Allowedpackagecoverdesignersmoreflexibilitysincethebarcodedoesnotimposeadesignconstraintsuchasspaceandshapelimitations.
iii. RFID RFIDisaradicaltechnologythatcancompletelydisruptretailcheckoutifitsolvessomeofthetechnologicalchallengesthatitisfacingtoday.
Technology RadioFrequencyidentification(RFID)useselectromagneticwavestoidentifyandtracklabelsthatareattachedtoproducts.PassivetagsharnesstheenergyfromnearbyRFIDreaderstotransmitelectronicallystoredinformationtothereader.Itisawell‐establishedtechnologyinlargescaleinassettrackingandinventorymanagement.RFIDtags(constituteasmallchipandanantenna)cancarrysimilarinformationasthebarcodesabouttheproducts.Theyremovetherequirementoflineofsightandshortrangebetweenthetagandthescanner.RFIDtagscanbescannedatdistancesofafewmeters.Theycanbereadorwrittento,whichisaradicalnewcapabilitycomparedtobarcodeswhichcanonlyberead.
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RFIDtechnologyhasbeenavailableformorethanfiftyyears.IthasonlybeenrecentlythattheabilitytomanufacturetheRFIDdeviceshasfallentothepricepointwheretheycanbeusedasa"throwaway"device.AlienTechnologiesrecentlysold500millionRFIDtagstoGilletteatacostofabouttencentspertag[11].OnereasonthatithastakensolongforRFIDtocomeintocommonuseisthelackofstandardsintheindustry.MostcompaniesinvestedinRFIDtechnologyonlyusethetagstotrackitemswithintheircontrol;manyofthebenefitsofRFIDcomewhenitemsaretrackedfromcompanytocompanyorfromcountrytocountry.SomecommonproblemswithRFIDarereadercollisionandtagcollision.Readercollisionoccurswhenthesignalsfromtwoormorereadersoverlap.Thetagisunabletorespondtosimultaneousqueries.Systemsmustbecarefullysetuptoavoidthisproblem.Tagcollisionoccurswhenmanytagsarepresentinasmallarea;butsincethereadtimeisveryfast,itiseasierforvendorstodevelopsystemsthatensurethattagsrespondoneatatime.Besidesthatabove,tagcostshaveremainedakeybarriertoadoptingthistechnologytothePOSscanningusecase.Figure10:RFIDfactorysellingpricetrendshowstheprojectedcostsoftagsaspredictedbackin2011byVDC.Thesecostsarenotsignificantincartonlevelscanning,however,itemleveltaggingandidentificationrequiresthecosttocomedowntoapennyorafractionthereof.Basedonthefigure,onecanseethatthetrendisintherightdirectionandpriceisclosingintomakeitviable.
Figure10:RFIDfactorysellingpricetrend
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Key Benefits Noalignment/orientationrequirementsuchasinbarcodesSimultaneousscanningofnumerousproductsRead/WritecapabilityhelpswithreducingshrinkageIntegrationwithbillingandinventorymanagementScandistancerequirementwillberelaxed
5. CASE STUDIES
i. NCR: The market leader
Overview TheNCRCorporation is the global leader thatmakes self‐service kiosks, point‐of‐sale terminals, automated teller machines, check processing systems, barcodescanners, and business consumables. The Company operates through foursegments:FinancialServices,RetailSolutions,HospitalityandEmergingIndustries.TheCompanyprovidesretailandhospitalityorientedtechnologies,suchaspointofsale terminals and point of sale software, bar‐code scanners and other retail‐orientedsoftwareandservicestoretailers,restaurants,foodservicecompaniesandentertainment and sports venues across the world. The Company provides self‐service kiosks and related operating software to the retail, hospitality and travelindustries. Its kiosk solutions support retail self‐service functions, including self‐checkout, way finding (locating products or navigating through large, complexbuildingsandcampuses),digitalsignage,billpaymentandgiftregistries.Itprovidesself‐checkin/outkiosksolutionstoairlines,hotelsandcasinosthatallowgueststocheck‐in/outwithoutassistance..Withitssoftware,hardware,andportfolioofservices,NCRenablesmorethan550milliontransactioneveryday.Self‐checkoutsystemsandtechnologyfromNCRarelargepartsofwhatmakeNCRtheglobal leader in theretailself‐serviceandpointofsale.At thecoreoftheNCRSelfServCheckoutarchitecture is thepatentedNCRSelfServCheckoutTransactionBroker(TB)technology.TheTBenablestheCEAtocontroltheretailer’snativePOSsothatthebackofficeseestheself‐checkoutlaneasjustanotherPOSlane.
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Figure11:NCRselfcheckoutplatform
The technology provides seamless POS integration, intuitive user interface, hi resLCD, touchscreen, hi‐fi audio, animation, non‐barcoded item look‐up, “followme”lights, Bi‐optic scanner with LEDScan Advisor, integrated EAS Tag deactivation,wired/wirelessscanner,securityscaleforweightverification,itemintegrityviaself–learningweightdatabase,remoteattendantstation,highavailabilityservice.
CustomersNCRself‐checkoutserves233retailersandconstitutesofAustralian,EuropeanandU.S.chains.CurrentlyNCRhas100K+SCOunitsdeployed.Someoftheleadingcustomersare:
– WalmartinUS– TheretailerLandistheleadingpremiumsupermarketchaininSaint‐
Petersburg:NCRsolutionincreaseditscapacity– GlobushypermarketsinGermanyandtheCzechRepublic,nowinRussia– ColessupermarketinAustralia(749storedinthecountry)‐around4,000
unitsinover500storesin2013– Auchan,oneoftheItaly’sleadinghypermarketshas450SCOlanesin51
hypermarkets– DanskSupermarked,#1groceryretailgroupinDenmarkdeployedSCO– IKIisthesecondlargestgrocerychaininLithuania
Value Proposition Leverageexistingbarcodebasedecosystem
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Incrementalenhancementstoself‐checkoutkiosksAsretailersrespondtovolatileconsumerspending,theywillexpandthenumberofaislesdedicatedtoself‐checkout.Self‐checkout(SCO)offersretailersaneffectivemeansofreducingcostsandimprovingcustomerservice.Afour‐unitSCOkioskallowslargeretailertoreduceheadcountandreallocateemployeestohigherimpactcustomerservicebasedtasks.Self‐checkoutASP(4units): $60,000HeadcountReduction 4SG&AReduction@$30Keach $120,000PaybackPeriod(years) 0.5
ii. Scandit: Leveraging the smartphone boom
Overview Scandit Barcode Scanner SDK transforms smartphones, tablets and wearabledevicesintoenterprise‐gradebarcodescanningtoolsforconsumers.TheDemoappshowcasesthebarcodescanningperformanceoftheScanditBarcodeScannerSDK.Thescannerenablesthecustomertocheckintostorebeginshopping,customerisshownspecialsthereandcanscanitemsincart,customercanadditemsviasmartsearch, can review /change items before leaving and finally scans a QR code atcheckoutandpaymentismadeatthekiosk.
HowScanditworks
6.CustomerusesQRcodeatcheckout;paymentismadeatthe
1.Customerchecksintostore.Begins
2.Customerisshownspecials
3.Customerscansitemsin
4.Customercanadditemsviasmartsearch
5.Revieworchangeitems
Figure12:Scanditworkflow
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Customers Scandit has added North American retail and supply chain markets, with theaddition of several recognized brands to its customer base. The company is nowworking with Party City, Saab, Shell, Priority Payment Systems, FloridaHealthcareand AmericanWoodmark. Capital One and Saks Fifth Avenue are fewnames among rapidly growing list of organizations taking advantage of Scandit’sdisruptiveandgroundbreakingsolution.
Value Proposition LeverageexistingbarcodebasedecosystemHigherlevelsofcustomerengagementCoupons,advertisingandcrosssellingviaappsExpectedROIcanbeestimatedusingsimplecalculationsasshowninthefollowingexample
Self‐checkoutSDK(500units): $4000PaymentKIOSKprice4@$2K $8,000HeadcountReduction 4SG&AReduction@$30Keach $120,000PaybackPeriod(Months) 1.2
iii. Digimarc: Radical identification and capture
Overview Digimarc,aBeaverton,Oregonbasedcompany,isapioneerincontentidentificationacrossallformsofcontent,includingaudio,video,packaging,andimagery.Theydevelopsolutions,licenseintellectualproperty,andprovidedevelopmentservicestoglobalbusinesspartnersacrossawiderangeofindustries.Digimarcholdsalargeandgrowingintellectualpropertyportfoliothatspansthebreadthanddepthofinnovationindigitalwatermarkingandcontentidentification,withover800issuedUSandforeignpatents.Althoughbarcodesaremission‐criticalenablersoftheretailindustry,supportingfastercheckouttimes,moreaccuratepricing,andreliableinventorycontrol,theyhavesomeobviouslimitations.Onesignificantdrawbackistherequirementthatitemsbecorrectlypositionedpriortoscanning,acharacteristicthatcontributestodelaysincheckoutlinesandfrustrationonthepartofbothcashiersandcustomers.Otherobviouslimitationsincludethedevotionofconsiderablepackagerealestatetothevisuallydisruptivestandardblackandwhiteverticalbars,lostrevenuesfrombarcodeswappingfraud,anddifficultyscanningsoiled,wrinkled,damaged,orotherwiseobscuredtraditionalbarcodes.Despitetheselimitationsthebarcodehashadprofoundpositiveeffectsontheprocessesandeconomicsoftheretailindustry.
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Digimarchasidentifiedkeypainpointsofthewell‐establishedbarcodetechnologyandhavedeliveredanewsolutionthatwouldprovidetremendousbenefitsoverexistingtechnology.IthasengineeredasignificantimprovementinthemeansofidentifyingandprocessingCPGsatcheckout,whichobviatesthelimitationsoftraditionalbarcodes.Figure13:DigimarcwatermarkencodingisasampleofhowDigimarcbarcodesareimperceptiblyembeddedintopackaging.
Figure13:Digimarcwatermarkencoding
EarliersectionwithdescriptionofDigimarcbarcodetechnologycoversthetechnologyingreaterdetailandtherelatedbenefits.
Customers and Partners KeycustomersincludeKraftHeinzCompany,WegmansandNewSeasonsGrocers.LeveragingthehighgrowthinadoptionratesofimagescannersinretailPOS,DigimarcpartneredwithkeyplayersinthescanningbusinesstoadoptDigimarcbarcodescanningcapabilitiesintotheircurrentproductsbymeansofasoftwareupgradetherebyreachingoutasizeableretailmarket.SomeofitskeypartnersareNCR,Datalogic,HPandToshiba.Figure14:DatalogicdeviceswithintegratedDigimarcbarcodesillustratessomeofthedatacapturedevicesthatareDigimarcbarcodescanready.
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Figure14:DatalogicdeviceswithintegratedDigimarcbarcodes
Value Proposition Digimarcbarcodeisapatentedtechnologythatbeatstraditionalbarcodetechnologyinscanspeedandrobustness.Itoffersagracefulupgradepathforallthekeyplayersintheecosystem–companiesofferingpackageprintinganddatacapturesolutions.AspartofanROIevaluationtool,Digimarchaspublishedawhitepaper[6]thatdemonstratedtheexpectedROIforanexamplelargechainretailer.Forthishypotheticalcompanywith$2.5Binsales,and40000SKUswith25%ofprivatelabelSKUs,belowtableshowsanestimatedROIandthetimelines.Detailedcalculationscanbefoundin[6].Table1:ROIofthehypotheticalretailer
Private label adoption Complete adoption
Payback period 9months 3months
ROI 1st yr 30% 400%
ROI 10yr 267% 1700%
[6]alsoperformsadetailedestimateofsavingsforthetop120companiesthatareinsupermarket,hypermarkettypebusinesses.Theexpectedsavingsareabout$3billionwiththelarge‐scaleadoptionofDigimarctechnology.Table2:Laborcostsavingsexpectedinthe$3trillionbusiness(top120supermarketlikeretail
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segments).Table2:Laborcostsavingsexpectedinthe$3trillionbusiness(top120supermarketlikeretailsegments)showsanestimatedsavingssolelyduetofasterscanrateandnotaccountingforthebenefitsofbettercustomerengagement.Table2:Laborcostsavingsexpectedinthe$3trillionbusiness(top120supermarketlikeretailsegments)
Mostrecently,DigimarcachievedacriticalmilestonebyestablishingcollaborationwithGS1US,theindustrystandardsorganizationthatmanagesidentificationtechnologiessuchasUPCbarcodeandRFID/EPC,towardsestablishinganindustrystandardusingDigimarcbarcodetechnology.Youcanreadmoreaboutthisin[5].
iv. Skip: RFID, the final destination?
Overview Skipisastartupthatdevelopstechnologiestopowerthenextgenerationofretail.TheyusenovelRFIDtechnologiestodrasticallyimprovetheefficiencyofinventory,security,analytics,andcheckoutforretailersandwarehousing.Thetechnologybehinditispatent‐pending.SkipisbuiltupontwokeyRFIDtechnologies.Thefirstisapatent‐pendingreadmethodthatworkswithintheexistingRFIDprotocolyetenablesRFIDtagreads~1000xfasterthanthenextfastestmethod.Thesecondisapatent‐pendinglocalizationmethodthatlocatesRFIDtags20xmoreaccuratelythantraditionalmethods(10cmvs.2m).AconsumercansignupataSkipenabledretailerbyregisteringforanRFIDembeddedSkipcardordownloadingtheSkipappandlinkingtheirpreferredmethodofpayment.Onceregisteredtheconsumercansimplypickuptheitemstheywishtopurchaseandwalkoutofthestoretocompletetheirpurchase.Nowaiting.Nolines.
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Figure15:Skipoperation
TheyaresolvingthechallengesofRFIDtechnologywithregardstoscalabilityinsimultaneousmulti‐tagreadspeedsandtheabilitytoidentifyandlocatetagswithinacertainvolume.Theyusemulti‐antenna[8]receivertolocalizetheidentifiedobjects,firstofwhichisanRFIDenabledSkipcard(whichisuniquetoaconsumer)andnextofwhicharetheproductsinthecart.RFIClocalizationtowithinacertainvolumenearthepersonisthekeytechniqueusedforunderstandingconsumer‐productinteractionforbetteranalytics.Itisalsolikelyhowtheproductsinacartareassociatedwiththeconsumer.ThegeneraloperationandflowisshowninFigure15:Skipoperation.Besidescheckout,Skipisalsotargetinginventorymanagementtominimizemarkdownsandout‐of‐stocks.ThecompanystillseemstobeinanearlystageandmightneedtosolvetheproblemofreliableRFIDdetectioninordertobesuccessfulinRFIDbasedcheckoutbusiness.
Customers Walmart,Macy’s,AmericanApparelandothers‐30earlyadopters.
Value Proposition FasterRFIDtagreadcapabilitythanexistingtechnologiesMorepreciseRFIDbasedtaglocalizationthanexistingtechnologiesEliminatecheckoutlinescompletelyProviderichanalyticsonproduct‐consumerinteraction
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6. KEY HURDLES FOR ADOPTION Justlikeanynewdisruptivetechnologyfacesadoptionchallenges,thesolutionsconsideredherehavecertainchallengestoovercomeandimplicitbenefitsoverothertechnologies.Webrieflydescribetheseissuesherebycategorizingthemintothreekinds–technology,regulatoryandsocietal.
i. Technology Whilesmartphonebasedscanningsolutionshavetheconvenienceofavoidinglonglines,thekeychallengeiswithsolvingthetheftproblem.Besides,customersmaynotnecessarilybeeagertotakeonthejobofthecheckoutclerkonaregularbasis.Sustainableadoptionisunderquestionunlesstherearesomeincentivesbeyondtheshortlinesfortheconsumertocontinuetoadoptthissolution.Digimarcbasedcodeshavetoovercometheadoptionchallengeswiththemanufacturers,package‐printingcompaniesandcheckoutdatacapturesolutionvendors.Whilethereissufficienttractionwithdatacapturesolutionvendors,moreneedstobedonetopushtheadoptionfromthepackagingside.RecentpartnershipwithGS1USwillenablewidespreadeducationandknowledgeofthebenefitsofthistechnologyandwilllikelycausetheadoptionratesupstreamtoshootup.RFIDisthemostpromisingintermsoftheefficiencyimprovementacrossthevaluechainsinceitisalreadyfairlyheavilyadoptedindistribution,trackingandinventorymanagementleavingonlythelaststageofPOS.Costoftagisstillabarrierthatisstoppingthetechnologytogofromcartonleveltagstoitemleveltags.Ifthecostproblemissolved,thiswillturnouttobethebestsolutionforbothretailersandcustomerssincetheftconcernsareimplicitlyhandledbythissolution.
ii. Regulatory RFIDwouldbethemaintechnologythatisimpactedbyregulatoryissues.Someoftheseissuesaretodowiththeimpactofradiationsonfoodproducts,environmentissuessurroundingdisposalorrecyclingoftheRFIDtags.Theseneedtobestudiedfurtherfromthestandpointofsustainabilityandenvironmentalimpacts.Othertechnologiesdonothavethisbarrier.
iii. Societal Allthetechnologiesareprimarilyaddressingtheproblemofslowscanningspeeds.Obviousbyproductofsuccessofsuchtechnologiesisthereductioninjobsduetoimprovedefficiencies.ThecostbenefitofadoptingsomeofthesetechnologiessuchasRFIDcouldbeprohibitivelyexpenseforsmallsizeandmidsizedretailbusinesses.
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WhileDigimarchelpswithbetterengagementofretailerswithcustomers,smartphonebasedscanningsolutionsandRFIDsremovesthehumaninteractionsandpersonaltouchfromtheshoppingexperience.Thiswouldbodewellwithcertaincategories/age‐groupsofcustomerswhilenotsowithcertainothergroups.
7. CONCLUSIONS Reviewingthelandscapeofretailcheckoutindustry,wehaveidentifiedaclearbusinessopportunityandthekeyplayersthatarevyingforaportionofthepie.Wealsoevaluatedthekeytechnologiesthatareunderconsiderationtotaptheopportunity.Duetotheincreasingfrustrationoftheconsumerandtheresultingimpacttothebusiness,retailerswhodonotrespondtothispressingneedwouldbeseverelyimpacted.Solutionprovidersintheself‐checkouttechnologybusinessanddatacapture/identificationingeneralneedtoinnovateandcomeupwitharadicallynewapproachtothecheckoutproblemintheneartomediumtermhorizontotapthe~$88billionopportunity.Basedonthepubliclyavailableinformationaboutvariousplayers,webelievetherewillbesomewinnersandsomelosersbasedonthestrategicdecisionsmadebythemgoingforward.Following,Table3:Expectedoutcomes,isourexpectationonthefutureoffewofthekeyplayers,andalsothestrategicstepstheyshouldtakeinordertoavoidobsolescence.
Table3:Expectedoutcomes
Company Future When Remarks
NCRLeadershippositionwillbechallengedbydisruptivetechnology.
5Years
Willneedtoinnovateoracquiretomaintainleadershipandmarketshare
ToshibaMayeventuallyabandonmarket 5‐7years
IBMself‐checkoutacquisitiondidnotpanout.Novisibleinnovationagenda
Scandit AcquisitiontargetbyNCR 3years Complementsexisting
technology
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DigimarcBestsuitedtodisplacebarcodetechnologyinnearterm
2‐4years Acquisitiontargetbycurrentmarketleaders
Skip Potentialmajorwinner 5yearsSuccessdependentonRFIDadoption.FundedbyMicrosoft
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References
[1]JohnTierney,May2014,”TheFutureofRetailCheckout:NoCheckoutatAll?”,http://www.theatlantic.com/business/archive/2014/05/whats‐ahead‐with‐the‐retail‐checkout‐experience/362017/[2]MarineCole,Jan2015,“TheFutureofRetail:Hassle‐FreeCheckout”,http://www.thefiscaltimes.com/2015/01/14/Future‐Retail‐Hassle‐Free‐Checkout[3]Digimarccompany,“DigimarcBarcodeOverview”,https://www.digimarc.com/docs/default‐source/solution‐briefs/barcodebrief.pdf?sfvrsn=4[4]TonyRodriguezetal,2015,“AutomationandWorkflowConsiderationsforEmbeddingDigimarcBarcodesatScale”,https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwi2lJ_jj6_MAhUJ42MKHeKlBlsQFggvMAA&url=https%3A%2F%2Fwww.digimarc.com%2Fdocs%2Fdefault‐source%2Ftechnology‐resources%2Fpublished‐technical‐papers%2Fbarcode%2Fdmrc‐automation‐and‐workflow‐considerations‐for‐embedding‐digimarc‐barcodes‐at‐scale.pdf%3Fsfvrsn%3D4&usg=AFQjCNHDjJqPCiPsNCFDDppz7MHRnpfmWA&sig2=wLstfBXx1FW9PPXCBhEmFg&bvm=bv.120853415,d.cGc[5]DigimarcPressRelease,Jan2016,“GS1USandDigimarcAnnounceBroadCollaborationtoAdvanceProductIdentification”,https://www.digimarc.com/about/news‐events/press‐releases/2016/01/12/gs1‐us‐and‐digimarc‐announce‐broad‐collaboration‐to‐advance‐product‐identification[6]DigimarcCorporation,“Digimarc®Barcode:AQuantitativeModelofAnnualLaborCostSavingsandReturnonInvestmentforRetailers”,http://model.digimarc.com/wp‐content/uploads/2014/04/Digimarc‐Barcode‐Quantitative‐Model‐white‐paper.pdf[7]TonySeideman,“Barcodessweeptheworld”,http://www.barcoding.com/information/barcode_history.shtml[8]SpencerHewett,“SystemsandmethodsforRFID‐basedretailmanagement”,http://www.google.com/patents/US20150199890[9]Skip,company,http://b1ca250e5ed661ccf2f1‐da4c182123f5956a3d22aa43eb816232.r10.cf1.rackcdn.com/contentItem‐6392923‐51297026‐vf9mh64s0a0jf‐or.pdf[10]Wikipedia,https://en.wikipedia.org/wiki/Barcode#Linear_barcodes[11]“WhatisRFID?”,http://www.technovelgy.com/ct/technology‐article.asp
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