It’s the Best of Times—and the Worst of Times

By Mark Roberti

Adoption of radio frequency identification technologies is picking up, but the number and size of projects are still too small to keep some RFID companies from going under.

On a daily basis, I am asked about the state of RFID adoption by solution providers, end users, academics and others with whom I meet and converse. My answer a couple of years ago was that times are tough. Following the financial crisis, a lot of businesses put technology projects on the back burner, and only those facing serious operational issues considered deploying RFID systems. RFID vendors were struggling.

These days, the picture is a little more complicated. In some ways, things have never been better. Adoption is really beginning to pick up. We are seeing more apparel retailers using RFID in their store operations, for example. This has led to a spate of positive articles about how RFID is helping retailers to improve inventory accuracy, reduce out-of-stocks and increase sales. Those stories, in turn, have caused companies in other industries to look into RFID's potential. I've never been more optimistic about the prospects for RFID than I am today.

At the same time, the volume and size of projects remain relatively small. Only a handful of retailers have deployed RFID chain-wide. Less than 5 percent of all hospitals globally are using an active RFID-based real-time location system. And only a small number of manufacturers have adopted the technology in a meaningful way. I could go on, industry by industry, but you get the picture. Adoption is happening in every country and in every industry, just not on a scale that is needed to keep all RFID companies afloat.

We've seen a lot of consolidation in the RFID industry during the past three years. In some cases, large firms purchased RFID companies expecting better growth, and when it didn't miraculously appear, they all but shuttered those acquired businesses. This reduces options and innovation, which is not good. Others that did not see sales pick up quickly after several years of investing in new products have divested their RFID product divisions (Motorola Solutions, for example). But it's likely that the acquiring companies will continue to develop their technologies. Likewise, several RFID companies acquired struggling software firms or systems integrators to strengthen their offering, and this will serve the technology's users well.

I anticipate that 2016 will be more of the same. We will see continued adoption, but it will not soar to a level that will support all players in the industry. Weaker companies will go out of business, as some already have, while others offering good technology will be purchased. Newcomers to the market will need to exploit specific niches to gain market share.

If the global economy does not experience any major shocks, I think we will see RFID really begin to gain momentum in 2017. So my advice to smaller RFID vendors and systems integrators would be to focus on those currently researching RFID, and to target advertising to reach those seeking your solution. Spending wisely can preserve cash and generate additional revenue.

The larger players are getting most of the big deals today, so they are not hurting. Some might cut back on their marketing, but now is exactly the wrong time to do that. As the market grows, those who seize the opportunity will likely emerge as the big winners when the market takes off.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.