U.S. SHIPMENTS OF RETAIL AUTOMATION/POS EQUIPMENT ESTIMATED AT $2.4 BILLION - EMERGING TECHNOLOGIES AND REPLACEMENT/UPGRADE SHIPMENTS EXPECTED TO DRIVE GROWTH

VDC expects annual growth to be primarily bolstered by shipments of replacement/upgrade units to update aging POS systems and traditional POS hardware (i.e., POS terminals/workstations, POS scanners) as well as increased shipments of emerging POS technologies such as self check-out terminals, RFID devices, and ESL hardware.

Natick, Massachusetts. - Over the last few years, the U.S. retail automation/POS equipment market has turned into a hotbed of change. Retail in-store POS systems continue to evolve as an increasing number of retailers embrace wireless technology, new operating systems, thin client architectures, and retail standards to support increased POS system functionality/flexibility, improved customer service, greater operational efficiency, and quicker access to POS information. Although often considered a mature and saturated industry, VDC expects the retail automation/POS equipment market to provide numerous growth opportunities through 2006, especially for emerging self check-out systems and wireless POS solutions such as RFID (radio frequency identification) and ESLs (electronic shelf labels).

Recent analysis from Venture Development Corporation (VDC) reveals that the U.S. market for retail automation/POS equipment exceeded $2.4 billion in 2001. According to VDC's just-published market study entitled "Retail Automation Equipment: A Vertical Market Analysis of Usage and Plans for Wireless, Emerging, and Traditional Technologies," shipments of retail automation hardware are expected to increase by 5.8% annually to reach more than $3.2 billion by 2006 (see Exhibit 1). VDC expects annual growth to be primarily bolstered by shipments of replacement/upgrade units to update aging POS systems and traditional POS hardware (i.e., POS terminals/workstations, POS scanners) as well as increased shipments of emerging POS technologies such as self check-out terminals, RFID devices, and ESL hardware.

EXHIBIT 1
U.S. Shipments of Retail Automation Hardware
(Millions of Dollars)

2001 - 2,443.10
2002 - 2,507.30
2003 - 2,654.00
2004 - 2,868.00
2005 - 3,060.90
2006 - 3,239.60
CAGR - 5.8%

In terms of traditional POS systems, maintenance and support costs for aging proprietary retail automation equipment continue to rise and older, outdated proprietary retail in-store systems are often unable to support emerging retail applications such as wireless POS, customer relationship management (CRM), real-time communication and data collection, and multi-channel retailing. As a result, an overwhelming majority of in-store systems cannot support application flexibility, expanded functionality, communication across the enterprise, and faster processing. This trend is leading many retailers to install and evaluate next generation POS terminals/workstations and newer operating system platforms, such a Windows NT and XP embedded, Linux, Unix, and Java.

At a high level, VDC expects the strongest annual growth for emerging retail automation technologies, including self check-out, RFID (radio frequency identification), and ESL (electronic shelf label) hardware shipments over the next five years. Self check-out technology is increasingly being adopted and evaluated by U.S. retailers (most notably within supermarket, mass merchant, home improvement store, and superstore environments) and has emerged as the fastest growing segment of the retail automation market. Future growth opportunities are primarily being driven by U.S. retailer requirements for labor/cost reductions, increased operational efficiency, and improved customer service.

Application developments for RFID technology within the retail in-store sector are largely concentrated in m-commerce/automatic payment (i.e., fuel and fast food purchases), security access (i.e., hotel room key cards), customer loyalty cards, gift certificate authentication, and creating smarter EAS transponders to support, for example, the storage of pertinent product information within a retail item such as warranty information. And, while RFID has large volume potential in the retail POS market, more rapid adoption is being constrained by system cost, interference, compatibility, and functionality issues.

ESLs remain one of the great mysteries of retail automation/POS technology, offering plenty of benefits to retailers, but taking years to deliver cost-effective solutions. ESLs allow retailers to change prices "on-the-fly," improved customer satisfaction, and reduce labor/costs. To date, the number of ESL systems that have been installed in well-suited vertical markets such as grocery stores/supermarkets and drug stores, has been extremely limited; however suppliers competing in this space are taking steps to foster growth, including technological developments (i.e., label size/form factor, improved life-span), continuing to invest in research and development, cost reduction efforts, addressing compatibility concerns with existing POS systems, and forming strategic partnerships to deliver ESL solutions to retailers.

While VDC expects the overall retail automation technology market to grow moderately through 2006, future growth opportunities for traditional POS technologies are expected to be largely limited to replacement/upgrade shipments. Cautious retailer approaches to information technology (IT) investments (due to the sluggish U.S. economy and unstable retail industry), overall retail automation/POS equipment market maturity and saturation, and extended technology replacement cycles are preventing more rapid market growth. Nonetheless, the emergence of self check-out systems wireless POS solutions such as RFID and ESLs are providing POS hardware manufacturers and solution providers with numerous opportunities for growth.

STUDY SOURCE

Venture Development Corporation, a technology market research and strategy firm, was founded in 1971. Over the years, VDC has developed and fine-tuned a unique and highly successful methodology for forecasting and analyzing highly dynamic technology markets. VDC has extensive experience in providing multiclient and proprietary analysis in the AIDC market. VDC also offers in-depth market research and custom strategic planning consulting services in the areas of industrial measurement and control, WLAN, factory automation, communications, electronic components, RFID, as well as retail automation, office equipment, and consumer electronics.

July 2002

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To view the entire press release including charts go to:
www.vdc-corp.com/autoid/press/02/pr02-25.html

Report Availability:
www.vdc-corp.com/autoid/annual/02/br02-33.html

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ABOUT THE STUDY

The "Retail Automation Equipment: A Vertical Market Analysis of Usage and Plans for Wireless, Emerging, and Traditional Technologies " report is designed to provide subscribers with relevant up-to-date market intelligence to support product planning, market development and channel partnering decisions. The report covers POS scanners, POS terminals/workstations, standalone POS receipt printers, RFID, electronic shelf labels, self check-out terminals, portable data collection terminals, and POS payment/transaction terminals. Furthermore, the report provides vertical market information and analysis of retailer plans related to retail automation equipment, including end-user perceptions of technology, trends, preferred vendors, brand recognition, price sensitivity, and more within each vertical market (department stores, mass merchants, and superstores; drug stores; gasoline/convenience stores; grocery stores/supermarkets; lodging; fine dining and fast food restaurants; and specialty stores).

For further information regarding the "Retail Automation Equipment: A Vertical Market Analysis of Usage and Plans for Wireless, Emerging, and Traditional Technologies" contact:

Michael J. Liard, Project Manager
mikel@vdc-corp.com

Marc Regberg, Senior Vice President
msr@vdc-corp.com

If you would like to subscribe to VDC updates go to: http://www.vdc-corp.com/subscriptions

Venture Development Corporation
Technology Market Researchers and Strategists Since 1971
http://www.vdc-corp.com
508-653-9000