When multichannel merchants add retail locations to their mix, one item topping their to-do lists is choosing a point-of-sale, or POS, system. This is the combination of hardware and software that records customers’ in-store purchases, accepts payments, and adjusts inventory levels.
With POS systems, connectivity and integration are key. Multi-channel merchants need to be able to link inventory and sales data from their brick-and-mortar stores to those of their direct channels — otherwise accurately estimating inventory levels is next to impossible. And without accurate inventory assessments, merchants may hold extra inventory as a cushion, which will boost costs, or they may fall short of product, which will cost them sales.
“I knew that I would have to link my brick-and-mortar and online stores from the beginning,” says Chris Kuzma, owner of Colorado Springs, CO, bikes and accessories store Bike Stop and a complementary Website, Ebikestop.com. When he launched his company in fall 2003, Kuzma chose Microsoft’s RMS (Retail Management System), along with WebLinX by NitroASL, a software provider based in Cork, Ireland. RMS processes customer transactions on the sales floor; WebLinX pulls orders from the Web and sends Kuzma an e-mail letting him know an order has arrived. He then clicks on a “hot button” to access such information as the type and size of the product sold before electronically transmitting the data to RMS. Once every hour RMS adjusts inventory levels to account for recent sales.
RMS can update inventory levels as frequently as once every minute, notes Brendan O’Meara, general manager of retail management systems for Redmond, WA-based Microsoft. The more frequently the system refreshes the information, however, the greater the bandwidth required. O’Meara says many retailers find that updating information once every 15 minutes is more feasible.
But as far as Jim Dion, president of Chicago-based retail consulting firm Dionco, is concerned, “the only way to go today is real time.” He admits, though, that “it requires a lot more intricate programming and a lot more horsepower” than batch processing. With registers that offer real-time processing, the computer within the POS system is in continual communication with the head office system. Every time a transaction at the store is completed, the data are updated in specific files.
The ability to track sales in real time is one reason Greg Sheive, information technology director for Flint, MI-based hockey gear marketer Perani’s, selected the CWStore POS package from Natick, MA-based CommercialWare. That way, a sales associate in one location will be able to check product stock elsewhere in the company and if necessary request an item to meet a customer’s need.
CWStore’s real-time capabilities aren’t the only reason Sheive chose it for Perani’s 16 brick-and-mortar stores and its 1800faceoff.com Web catalog. He also sought a package that would enable it to record products sold by a matrix of attributes, such as dimensions and shape. Perani’s tracks sales of hockey sticks, for instance, by size and curvature.
Other must-have POS system features include the ability to accept several payment types, such as cash and gift cards, in a single transaction; the ability to manage loyalty and gift card programs; the ability to accept customer returns; and the ability to look across the system to find a product. “These are the core functionalities that one should expect from contemporary retail management solutions,” says Joseph W. Bernard, president of Chicago-based Sales Catalyst Consulting Group.
It’s also important to choose a POS system that easily connects with the peripherals needed to get retail customers through the checkout process, such as receipt printers and barcode scanners. Look for systems based on what’s known as the OPOS (object linking and embedding for POS) standard. This hardware standard allows the POS hardware and software to communicate with one another and work together, says Donald Ippolito, CommercialWare’s Toronto-based director of client services.
Microsoft’s O’Meara also suggests choosing software applications based on an open relational database, as it allows for easier access to the data. In contrast, data storage architecture designed specifically for a particular application may not lend itself to importing and exporting data.
Scalability — the ability of the POS system to continue to function effectively as the number of stores grows — should be a factor in your decision as well. Sur La Table, a Seattle-based multichannel merchant of kitchen tools, chooses third-party products that can grow as the company does, says David Liddle, vice president of information technology. “Going with commercial off-the-shelf products reduces custom application development time. We become integrators and make sure the data are flowing near-time between applications.” Sur La Table’s POS system, Tradewind, is from Cleveland-based Datavantage Corp.
Along the same lines, you should choose a company that is committed to the POS space and will continue to update its systems, says Shieve. “With Commercial Ware, the development team is constantly trying to improve the product. With our previous system, it took months to get something done.” To gauge a vendor’s commitment to the POS market, see how long it’s been in the channel (at least several years is preferable), and ask for a list of customer references. Also check that the product was designed specifically for retail and isn’t a general purpose solution adapted to retailing. And of course, the right vendor will offer comprehensive pre- and postsale installation and training.
Time and money
Pinning down the likely cost of a POS system is difficult, as features and system sizes vary significantly. As a rough guide, says Greg Buzek, president of IHL Systems, a Franklin, TN-based retail consulting firm, you can expect to spend $3,500-$7,000 per station for the hardware, software, and peripherals.
Pricing for RMS’s store operations software starts at about $1,300 for one register. Bike Stop’s Kuzma says his entire POS system cost about $10,000. That covered the software, two receipt printers, three PCs, a laser printer, a keyboard that accepts credit cards, and a barcode blaster that prints the barcodes on product labels. Microsoft technicians handled the implementation of RMS remotely by dialing into Kuzma’s computer and setting up the system.
One way to save some dollars up front is to go with an application service provider (ASP) model, in which the vendor or reseller offers access to the POS system via the Internet. About half of CommercialWare’s customers choose this option, says Ippolito. CommercialWare houses the client’s database, receives and backs up transaction information daily, and maintains the system. The retailer doesn’t have to buy a server to hold sales information and avoids the cost of the database licenses and maintenance. The price can start at less than $200 per location per month, growing as transaction volume increases. In comparison, licensing costs for CWStore typically start at several thousand dollars.
Determining how long it might take to implement a POS system is as difficult as estimating costs. At Perani’s, Sheive figures it will take about a year to get all 16 stores up and running on the new POS system, as he’ll need to travel to each location. At each store, he’ll spend about a half-day introducing the sales associates to the system.
Perani’s will also need to physically count and scan all the product barcodes in order to enter them into the POS inventory database. That way, each store will start the new system with an accurate inventory record. Completing the physical count probably will take about 10-12 hours per store, Sheive says.
Minnetonka, MN-based freelance writer Karen M. Kroll has written for Inc. and IndustryWeek, among other business publications.
Below are companies selected by Retail Systems Alert, a Newton, MA-based research firm, as well as those mentioned in the story:
Datasym POS Systems
ECR Software Corp.
While information software is vital when designing your POS system, so is establishing the physical layout of the cash register station. Sales associates should be able to reach wrapping paper, bags, boxes, and credit-card slips. Mike Inderrieden, Atlanta-based manager of professional services with NCR Corp., suggests determining objectives prior to setting up the register station. Develop several designs and build a mock-up. Watch how well placement of register and supplies allows salespeople to ring customers through. Improve the design until you find the ideal setup. As for the register itself, consider one built specifically for retailing. “It’s a very harsh environment,” says Brad Tracy, an Atlanta-based product marketing director with NCR. Registers in places that sell food and drinks are subject to spills and condensation. Those in apparel stores can overheat if clothes block ventilation. Cash registers built for retail have rugged cases to protect against these dangers.— KK
Inventory information isn’t the only data that need to be integrated within a POS system. Customer information is critical too. Most direct marketers gather customer information when taking orders over the phone or on the Web. This task is more difficult in a store, as customers are reluctant to provide identifying information in a public place. To boost the likelihood that customers will provide this information, sales associates at $14 million cooking products cataloger/retailer PCD’s Cooking Enthusiast explain that as a multichannel company, they like to start with the customer record and thus need the customer’s name.
Most retail customers do provide the information, says Terri Alpert, founder/CEO of the North Branford, CT-based company, which mails about 8 million catalogs annually. “They see it as a value-added service.” Only about 5% of PCD’s retail shoppers prefer to remain anonymous.
PCD developed its POS system internally, basing it on its mail order processing system, which was also built inhouse. Creating the POS system took about one month, although the developer handled other responsibilities as well during this time, says Alpert.— KK