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Technology Stocks : RFID, NFC and QR code Technologies

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From: Glenn Petersen4/24/2017 10:57:24 AM
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How 7-Eleven Will Beat Worker Blues
By Andy Mukherjee
Bloomberg Gadfly
April 23, 2017 4:00 PM EDT

A 7-Eleven store in Japan can no longer afford its most prized possession: the checkout clerk.

The nation's employee shortage is now too acute to waste pricey labor on routine tasks -- like scanning low-value merchandise -- that have proven frustratingly expensive to automate.

But now an old technology is coming to the rescue. 7-Eleven owner Seven & i Holdings Co. is joining forces with rival operators Lawson, Ministop, FamilyMart UNY Holdings and East Japan Railway to introduce radio-frequency identification, or RFID, by next year. That should preclude the need for manual bar-code scanning, Nikkei reported last week, adding that by 2025 all Japanese convenience stores would have fully automated checkouts.

RFID tags are already widely used by retailers in anti-shoplifting devices. Turning them into price tags would enable customers to walk out of stores without having to scan items at checkout counters. Exit gates would open when mobile or card payments have been received.

At 7-Eleven alone, the switch could translate into 50 billion yen ($460 million) in demand for RFID tags, Pelham Smithers Associates wrote in a research note on the Smartkarma website.

New scanner orders for hardware makers like Toshiba TEC Corp., Panasonic Corp. and Fujitsu Ltd. may be a blip on earnings reports; a bigger winner would probably be Sato Holdings Corp., a maker of labels and tags, especially if supermarkets and drugstores follow suit, according to Pelham Smithers researchers. The company's shares have risen almost 10 percent on news of RFID adoption.

What's likely to matter much more to investors, however, is the extent to which Japanese retailers can embrace automation to boost margins. Bloomberg Intelligence analyst Thomas Jastrzab expects operating profit growth at Seven & i to outpace sales gains over the next two to three years, aided by fewer money-losing stores and demand for its higher-margin private-label offerings.

Lawson, meanwhile, is expecting its first decline in annual profit in 15 years, partly because of investment in labor-saving technologies as well as in a newer product mix to appeal to an aging population.

While convenience stores should still come out OK, it's the large-format retailers in Japan that are particularly in need of a miracle cure for weak profitability. As my Gadfly colleague David Fickling noted recently, margins in the core business of supermarket and mall giant Aeon Co. are now so abysmal that it garners the bulk of earnings from financial services and mall development, which account for less than 10 percent of revenue.

Although fashion retailers like Zara use RFID extensively to manage inventory, investing in a 10 yen tag to sell stuff priced 200 yen or lower at a 7-Eleven is a far more challenging proposition. To help consumers warm to the technology, Japan's Ministry of Economy, Trade and Industry might offer subsidies, the Nikkei article said.

The government's involvement is understandable. With the unemployment rate at 2.8 percent, and more than two job openings in Tokyo for every applicant, the country needs to extract the most out of a scarce resource.

Commerce will never entirely move online. But needing a checkout clerk to sell a soda at 7-Eleven is just too expensive a luxury -- both for Japanese society and for shareholders of Seven & i.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Singapore at

To contact the editor responsible for this story:
Matthew Brooker at
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