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Report: Disappointing RFID Growth From Wal-Mart Mandate

Research firm Marketstrat recently released a report that broadly assesses the "entire RFID ecosystem." Entitled , the report considers the state of the industry today and is full of predictions for the RFID market's growth over the next few years.
May 27, 2005This article was originally published by RFID Update.

May 27, 2005—Research firm Marketstrat recently released a report that broadly assesses the "entire RFID ecosystem." Entitled RFID Equipment and Services – A Market Strategy Report, the report considers the state of the industry today and is full of predictions for the RFID market's growth over the next few years. According to Marketstrat, RFID revenues will reach $2 billion in 2005. They reached $1.49 billion last year, with 43% ($645 million) spent on active and passive tags and 20% ($290 million) on readers. At $280 million, services accounted for 19% of the market, but that figure is expected to grow to $850 million by 2010. Software and integrated circuits each accounted for 9%.

Of the most interesting information is the report's breakdown of RFID technology by application, as follows:
  1. 29% Supply Chain Management
  2. 20% Access Control
  3. 12% Asset Management
  4. 10% Point-of-Sale
  5. 8% Baggage Control and "Other" tied
  6. 6% Vehicle Identification
  7. 4% Animal Tracking
  8. 3% Tire Tracking
The report is explicit in its conclusion that Wal-Mart's effect on industry growth has been disappointing: "Rapid growth rates predicted for RFID based on the Wal-Mart compliance deadline of January 2005 did not come true." This news is not bad, however. Indeed, the haste and panic generated by the mandate's tight deadline was not necessarily conducive to the realization of RFID's long-term benefits. Now, according to Marketstrat, "as companies get deeper into RFID planning and analyze potential business process changes, and with the introduction of Gen2 products, the nature and scope of projects will change, with a long-term roadmap." It continues, "This is a good thing for the RFID ecosystem as a whole, and helps avoid future implosion from poorly planned and implemented solutions."

This most recent research by Marketstrat seems to contradict conclusions recently drawn by IDTechEx, which, among other things, puts supply chain management in fifth place and animal tracking in second place in the 2005 ranking for RFID applications as measured by gross sales. Furthermore, the Marketstrat application breakdown does not even mention smart cards, which IDTechEx asserts will be the dominant source of RFID tag consumption in 2005.

Despite the firms' wildly differing conclusions, there is one sobering data point on which they agree: the RFID market for supply chain management is not experiencing the growth many had hoped and expected.

See the report's site on Marketstrat
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