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