Nov 24, 2019Last week's big news that Avery Dennison is acquiring Smartrac Technology's RFID transponder business is an emphatic sign that Avery has absolute confidence in the future growth of the market for radio frequency identification technology (see Avery Dennison to Buy Smartrac's Transponder Business).
Avery Dennison has been investing in building out capacity to manufacture RFID tags and inlays (inlays are raw transponders that can be converted into a smart label). It has invested in software and service bureau offerings that enable it to manage the serialization of product identifiers for its customers. Now, with the purchase of Smartrac, which is subject to regulatory approval, it is expanding its product portfolio and capacity.
Smartrac offers passive UHF tags, an area in which Avery is strong, but also offers HF tags and inlays, as well as some interesting sensor tags that complement Avery's own sensor tags. Both provide inlays, as well as finished labels and hangtags for retail customers. By buying Smartrac's transponder business, Avery establishes itself as the clear leader for passive UHF tags and inlays, particularly those for apparel, but the deal also allows Avery to offer a more complete product line, with Smartrac's HF and NFC offerings.
The acquisition, if approved, will increases Avery's capacity by some 2.5 billion transponders per year. It also gives the company manufacturing facilities in China, Malaysia, Germany and the United States, adding to Avery's already extensive global manufacturing network.
It's interesting to me that Avery Dennison is increasing its investment and footprint in RFID at a time when some companies appear to be pulling back from the market. What does Avery know that these other companies don't? I think Avery sees the growth in retail, with players such as Under Armour, L-Brands and Nike all recently adopting RFID. Avery also sees the market growing for tags to track luggage and food products, along with other opportunities.
I think Avery is betting that retail apparel is a leading indicator of where the market is going, and it is willing to invest in growing those markets. Apparel is growing quickly, but there are signs that the success of RFID in the retail apparel sector will spill over into many other sectors. In my view, Avery is making a smart bet.
It's also worth pointing out that the emergence of a strong player such as Avery in the retail apparel market takes passive UHF RFID a step closer to mass adoption in that sector. In his seminal book Crossing the Chasm, Geoffrey Moore said these five things are necessary for a technology to achieve widespread use:
• A global standard (passive UHF RFID is the standard for retail apparel)
• A problem no other technology can solve (retailers all struggle with inventory management)
• A whole product (retail is still waiting for this)
• A critical mass of end users (retail apparel is clearly moving inexorably toward this)
• And a dominant player that the market can safely embrace
The one thing that is missing in retail is a complete solution. Avery is now in a position to partner with a software provider and a reader provider to deliver the whole product and ignite the RFID market in retail apparel—which will jumpstart adoption in other sectors. This is good for everyone in the industry.
Mark Roberti is the founder and editor of RFID Journal.