Sato Holdings (6287) Could See Earnings Transformed as RFID Scanning Comes to Japan
It is over a decade since the IBM (IBM US) RFID (Radio Frequency Identification) shopping advert came out (and it is still well worth a watch at https://www.youtube.com/watch?v=WGuXOuQOe18), but the technology is yet to appear on our high streets. Indeed, Amazon's (AMZN US) solution at its Amazon Go store in Seattle forgoes RFID in favour of LIDAR (Light Detection and Ranging) and camera technology. In Japan, we may only be months away from RFID implementation: five leading convenience stores (CVSs) – Seven & I (3382 JP), Ministop (9946 JP), FamilyMart (8028 JP), East Japan Railway’s (9020 JP) Newdays unit and Lawson (2651 JP) – have joined together to introduce RFID-based checkout scanners. This move is understandable, given Japan's labour crisis. Companies are increasingly looking at how to operate staffless during certain periods. While one obvious solution has been self-scanning, the self-service systems you see in supermarkets don't really help in Japanese convenience stores. This is because even an experienced customer takes so long to scan items that it is more efficient if they just queue up – particularly if the store is a cramped one, with little space around the checkout aisles. For this reason, RFID scanning, which requires little input on behalf of the customer, is something of a Holy Grail for the CVS industry. The problem, though, has always been the cost of the RFID tag.
This report highlights opportunities for Sato Holdings as we think it is well-placed to supply Japanese manufacturers with RFID solutions with disposable tags, which it sources from third-parties (probably either Dai Nippon Printing Co Ltd (7912 JP) or Toppan Printing Co Ltd (7911 JP)). However, having provided the tags to the manufacturers, Sato is in an excellent position to provide big-data and big-data analysis to both the manufacturer and the CVS store. With annual sales of ¥100bil, Sato is a decent-sized company, but at that size, its business could still be dramatically transformed by the introduction of RFID-scanning checkouts.
Sato Holdings is a holding company mainly engaged in the manufacture and sale of electronic printers, hand labelers and other products. Co. offers electronic printers and hand labelers, integrated circuit (IC) tags and labels, seals, tags, tickets, ribbons and magnetic cards (MC). Co. is also engaged in businesses related to manpower dispatch, employment agency, cargo delivery, electronic equipment inspection and assembly, the maintenance of electronic printers, the construction, application and management of intellectual property (IP), as well as the development of application software.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
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