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Intelligent retailing: POS helps do more with less

In today's economic climate, doing more with less has become a mantra for many retailers. But how exactly do you do more with less and still deliver the kind of customer service that results in repeat sales? It's a question facing many of today's midsized retailers—as well as many other midsized businesses.

According to a recent IBM study entitled "Inside the Mid-Market: A 2009 Perspective," savvy midsized retailers in the United States and Canada are embarking on initiatives aimed at reducing costs, improving customer service and attracting new business. Technology is playing a central role in those efforts. While some companies are squeezing more value from existing retail systems, others are investing in technology with new capabilities that can have a positive and rapid impact on the bottom line.

Point-of-sale (POS) systems are a prime example. According to "Retail Investment Technology Priorities for CIOs," recently published by Forrester Research, POS applications are one of the six investments selected as priorities for 2009 by more than half of all retail CIOs. The other areas include loyalty, merchandise/price optimization, customer management and in-store promotion. Some midsized companies plan to retrofit existing POS platforms, but others are turning to the latest POS software and infrastructure offerings in an effort to cut operating costs while also providing capabilities that can attract repeat customers.

Moving beyond the cash drawer rings up ROI

POS systems enable retailers to move from PC-based cash drawers to a purpose-optimized device. In doing so, the retailer creates a robust, long-lasting transaction hub that also serves as a centralized source of information that can help enhance efficiency and generate new revenue potential.

By using POS systems to accelerate checkout, increase sales volume and offer occasions for cross-selling and up-selling, retailers can achieve a rapid return on investment. "POS is one of the areas where you can expect a definitive ROI," says Sahir Anand, director of retail research at the Aberdeen Group. "Many retailers can see payback from year one."

Besides upgrading software, why are retailers so eager to replace existing PC-based cash drawer systems with retail-hardened and more efficient POS systems? In the first place, cash drawer systems incur more operating costs than newer solutions. According to the recent IDC Global Insights report "Total Cost of Ownership for Point-of-Sale and PC Cash Drawer Solutions: A Comparative Analysis of Retail Checkout Environments," PC-based cash drawer systems cost 38 to 48 percent more per customer served than full electronic POS systems. Those cost savings last. The IDC report states that electronic POS systems deliver benefits 70 percent longer than PC-based cash drawer systems.

POS enhances the customer experience

According to some retail industry analysts, the term "point-of-service" is more apt than "point-of-sale" for these retail systems. After all, one of the primary benefits of these systems is that they can offer new services that enhance the customer experience.

For example, POS systems can provide new self-service opportunities. As Anand notes, the labor cost of sales can be an enormous financial burden on many retailers. By giving customers fast and easy ways to find product information and make purchases through self-service kiosks, scanners and automatic payment systems, POS systems can help retailers work smarter by avoiding some of those labor costs while creating a positive customer experience.

"Without POS data, I don't think you can do intelligent retailing."

Enhanced intelligence racks up customer loyalty

By capturing customer behavior and predicting buying trends, today's POS systems also provide vital insights that can help retailers improve the efficiency and success of their retail efforts. "Without POS data, I don't think you can do intelligent retailing," says Anand. Armed with customer information, retailers can anticipate customer needs and optimize inventory planning so that items keep leaving the shelves. Customer information can also help retailers plan successful promotions that draw customers back to the store—and build consumer loyalty.

"Loyalty does not work without a point-of-sale system," Anand says. Of course, the success of a loyalty program cannot be measured simply by counting the number of members. "Success should be measured in terms of redemption," Anand adds. "We have found that while 60 percent of companies collect CRM data at the point of service and issue some form of loyalty, only about 30 percent actually redeem loyalty programs at the point of service."

That failure is often due to poor customer intelligence. By providing better insights into customer preferences, POS systems can help retailers develop smarter, targeted rewards that appeal to customers, thereby improving reward redemption.

Add-ons and upgrades extend POS life

Some retailers are choosing to add on to their existing POS systems by integrating software that provides loyalty management tools, customer analytics or self-service options. Software add-ons can help retailers act on important customer data and—in some cases—extend the life of an existing POS system. Armed with new information, retailers can execute better promotions to get shoppers in the door, and then deliver products in ways that resonate with consumers.

Still, some industry analysts suggest caution when considering add-on modules. Getting more value from existing systems may conserve cash now—if the POS system is robust enough to take advantage of these add-ons. Many older POS devices, however, can run up costs due to power inefficiency, as well as the constant intervention they may need to continue operating. System failures can drain internal resources and increase operational costs for the retailer by requiring more frequent and more costly service calls. The restaurant chain Village Tavern learned this lesson the hard way, struggling with downtime caused by aging registers.

For Village Tavern, migrating to a new POS system was the right strategic decision. The company selected a reliable system that includes solutions for inventory, labor management and other business management needs. The upgrade has paid handsome dividends. Reduced system failure rates and help-desk calls have helped cut operational costs while increasing customer satisfaction.

More visibility connects supply with demand

POS systems offer important opportunities for enhancing efficiencies and providing key insights into customer behavior. To take full advantage of the promise of POS systems, many retailers find they need to deploy an integrated, enterprise-wide POS infrastructure for better visibility into inventory across multiple retail outlets in geographically dispersed locations. By doing so, retailers can have inventory match customer preferences.

As a case in point, Rocky Mountain Chocolate Factory (RMCF) was unable to see clearly into its overall sales and inventory processes because each of the company's retail locations maintained its own POS system. The stores e-mailed sales and inventory data to the main office, but by the time the data could be compiled into a usable report, it was typically outdated. As a result, RMCF had a tough time identifying sales trends and ensuring that the necessary stock was delivered where it was needed. To manage its business more effectively, RMCF decided to implement a standard POS platform across all of its stores.

The company credits the POS upgrade with helping to increase sales and profitability. The new systems help the headquarters staff quickly identify trends and respond with improved inventory management and distribution accuracy.

Retailing on a smarter planet starts with trust

Even in a challenging economic climate, investing in POS systems can be a wise move for many midsized retailers. By centralizing retail information and providing key customer insights, POS systems can help retailers significantly improve the customer experience. And that's vitally important, because it boosts the level of consumer trust critical to increasing sales.

"It's all about the convenience for the customer," says Anand. "There can be no holistic shopping experience unless you give some value back to your customers on a consistent basis and you thank them for spending their valuable dollars with your company."

With the right POS infrastructure, retailers can do more with less. Smarter systems give retailers the tools to enhance the customer experience—and at an operational level, gather and act on customer data to create and sell products that resonate with consumers.

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