VDC: Indirect Channel RFID Activity On Rise
Source: Field Technologies Magazine
August 15, 2006 -- According to Venture Development Corporation's recently released RFID Transponders volume of its annual RFID Business Planning Service, the global market for RFID transponders reached an estimated $750 million in 2005. VDC anticipates a compound annual growth rate (CAGR) of nearly 26% through 2010, with revenue shipments projected to exceed $2.3 billion within five years.
Current and Future Global Shipments of RFID Transponders Segmented by Distribution Channel
(Millions of Dollars)
2005
Direct: 371.4
Indirect: 375.7
2010
Direct: 1091.1
Indirect: 1254.9
In 2005, the distribution of RFID transponder revenues was equally split between the direct and indirect channels, with the greatest concentration of revenues being derived from direct-to-end-user (32%) and VAR/SI (36%) sales. Many vendors continue to employ direct-to-end-user strategies for system implementation. However, the proliferation of RFID in the retail and pharmaceutical supply chains is leading an influx of 'solution' providers. In addition, increasing educational efforts, training programs, and partnership programs have shifted the market toward VAR/SI channels, which are expected to grow more rapidly than other distribution channels and hold an increasing percentage of revenue and unit shipments across all regions over the next five years.
Important considerations for the distribution of RFID transponders include:
OEM/private label channels are more widely used for shipments across regional markets, with larger RFID manufacturers shipping their products to partners for further packaging and customization; however, shipments through VAR/SI channels are expected to seize the largest share of the market over the long term due to software and services revenues;
Dealer/distributor channels account for the smallest share of hardware revenues, largely due to the low value-add offerings of dealer/distributors and their interest in moving boxes (which is difficult with non-standardized, non-off-the-shelf products). Dealer/distributor channels are widely being used for transponder shipments to support applications such as animal identification, security/access control cards, and automobile immobilization; and
A primary issue currently facing the RFID industry is a general lack of qualified RFID resellers and integrators that can effectively market, sell, and implement EPC supply chain solutions; however, vast channels exist for closed-loop, traditional application markets such as security/access control, contactless smartcards, library systems, fixed-asset tracking in specialized sectors (i.e., health care), etc.
According to Shan shan Chu, an analyst in VDC's RFID Practice, "In order to succeed with regional and vertical markets, suppliers, regardless of their size, must continue to make strides in building their distribution channel networks. After all, total solutions and prompt customer service are among end-user top selection requirements. The development of competent and effective distribution channels for RFID systems has been, and should continue to be, a major strategic initiative for suppliers of RFID technology and solutions."
The RFID transponder market discussed here by VDC is part of its 2005-2006 RFID Business Planning Service. To view the program proposal, go to: www.vdc-corp.com/aidc/rfid.asp .
www.vdc-corp.com
Current and Future Global Shipments of RFID Transponders Segmented by Distribution Channel
(Millions of Dollars)
2005
Direct: 371.4
Indirect: 375.7
2010
Direct: 1091.1
Indirect: 1254.9
In 2005, the distribution of RFID transponder revenues was equally split between the direct and indirect channels, with the greatest concentration of revenues being derived from direct-to-end-user (32%) and VAR/SI (36%) sales. Many vendors continue to employ direct-to-end-user strategies for system implementation. However, the proliferation of RFID in the retail and pharmaceutical supply chains is leading an influx of 'solution' providers. In addition, increasing educational efforts, training programs, and partnership programs have shifted the market toward VAR/SI channels, which are expected to grow more rapidly than other distribution channels and hold an increasing percentage of revenue and unit shipments across all regions over the next five years.
Important considerations for the distribution of RFID transponders include:
OEM/private label channels are more widely used for shipments across regional markets, with larger RFID manufacturers shipping their products to partners for further packaging and customization; however, shipments through VAR/SI channels are expected to seize the largest share of the market over the long term due to software and services revenues;
Dealer/distributor channels account for the smallest share of hardware revenues, largely due to the low value-add offerings of dealer/distributors and their interest in moving boxes (which is difficult with non-standardized, non-off-the-shelf products). Dealer/distributor channels are widely being used for transponder shipments to support applications such as animal identification, security/access control cards, and automobile immobilization; and
A primary issue currently facing the RFID industry is a general lack of qualified RFID resellers and integrators that can effectively market, sell, and implement EPC supply chain solutions; however, vast channels exist for closed-loop, traditional application markets such as security/access control, contactless smartcards, library systems, fixed-asset tracking in specialized sectors (i.e., health care), etc.
According to Shan shan Chu, an analyst in VDC's RFID Practice, "In order to succeed with regional and vertical markets, suppliers, regardless of their size, must continue to make strides in building their distribution channel networks. After all, total solutions and prompt customer service are among end-user top selection requirements. The development of competent and effective distribution channels for RFID systems has been, and should continue to be, a major strategic initiative for suppliers of RFID technology and solutions."
The RFID transponder market discussed here by VDC is part of its 2005-2006 RFID Business Planning Service. To view the program proposal, go to: www.vdc-corp.com/aidc/rfid.asp .
www.vdc-corp.com
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