AutoID & Data Capture Blog

Transponders as consumables - A signal event for the RFID markets?

Since I began studying the market, I’ve been saying that RFID will evolve similarly to barcode and will undergo broad adoption throughout global value chains.  I’ve also been saying that in order to attain broad adoption for many RFID solutions, a consumable tag would be required – a tag that would need to meet user performance and price expectations, as well as supplier community gross margin requirements.  The market has been moving in this direction for a while …

  • What if we could not get to that performance? That would be RFID in 2001.
  • What if we could not get to that pricing? That would be RFID in 2004.
  • What if we get there, but not at margin? That would be RFID in 2007.
  • What if we did get there, with margin? That would be the RFID market in 2010.

A consumable is defined as a required product or component that is depleted or disposed of after use and has recurring demand.  An example of a consumable is a printer cartridge or label.  An industry that uses a consumables model is typically highly price sensitive, more mature, commoditized and competitive. 

Translation:  If you are going to make money in this market, you better have extraordinary volume or another source of profit. 

This idea of transponder as consumable has been a dominant industry and market development theme since we first observed it over a decade ago, and recent information from our 2010 RFID Business Planning Service end user survey reinforces the notion. 

There are many data points that support our statement, but what I’d like to talk about in this blog is how the transponder market is showing signs of shifting toward a consumables-based model. 

So … is the RFID transponder market shifting toward a consumables model?

According to our latest research, nearly 50% of end users who responded to our survey (N=342) cited use of transponders that are disposed of after use.  In addition, respondents citing an installed base of transponders in excess of 250,000 stated that at least half of their transponder volumes were considered to be a recurring consumable.

For larger users of RFID transponders, the answer would be yes. 

Ok … so what does this mean to the RFID community?

  1. A shift to a consumables based market indicates that certain segments of the RFID market are showing signs of advancement to more stable growth phases; it denotes lots of volume on a recurring basis.
  2. This also implies that respondents with larger installed bases (primarily passive users) are scaling and expanding their solutions – finally.
  3. A consumables market will drive a split in distribution channels. With transponders migrating away from service providers to channels such as distributors and OEMs. Value-add services don’t mean as much as price in the standard/commodity portions of a consumable market.
  4. Tag price sensitivity will increase and bargain hunting will become a common practice. The buyer may even accrue more purchasing power and let suppliers ‘battle’ for their business (i.e.: reverse auctions).
  5. These consumable/commodity markets will not make up the entirety of the RFID opportunity, just some of the fastest growing.

When will this shift occur? 

Gradually, unevenly, and over an extended period of time - not unlike the bar code label market. 


ADDRESS


TWITTER FEED