March 28, 2001, 12:00 AM

Making the Connection

Always a linchpin in retailing, the point-of-sale terminal is being elevated to star status because of its new web capabilities. Retailers are using the device to manage inventory, to link web stores to physical stores and for many other purposes.

 

When Djangos, a Portland, Ore.-based seller of used and new CDs and videos, opened its web site in March 2000, it knew it needed real-time inventory systems. With 20 stores in four states, a web site that sells to consumers in 90 countries, and an inventory in which a particular product may be only one or two items, Djangos really had to know what it had in stock-every second of the day. “Many of our items are one-of-a-kind,” says Steve Furst, president and COO of Djangos. “We can’t be in a position of selling the same item to two customers. We have to know as soon as something is sold.”

 

Thus Djangos started on an inventory odyssey to find a system that could link its stores, online kiosks and web site all to a single database and do it in real time. Djangos ended up integrating SpectrumRetail’s ProphetLine retail management system’s code into a proprietary technology to create a real-time application. Today, a customer on the web site could literally see a purchase disappear before his eyes if a store sells the item or if someone else on the web site buys it before the first customer checks out. With this system, no Djangos customer thinks he has bought something when he really hasn’t, Furst says. “Now I don’t have two dissatisfied customers, I have one satisfied customer,” Furst says. “I don’t have a customer who says, ‘I bought it, you charged my account and now I don’t have it.’” Djangos attempts to minimize hurt feelings by offering the would-be buyer the chance to sign up for an e-mail notification service when another copy of the same product becomes available.

 

While the one-of-a-kind nature of Djangos’ merchandise may require it to update its inventory system much more frequently than other retailers-every nanosecond, according to Furst-the need to keep a near real-time view of inventory in today’s competitive, multi-channel retailing environment is not unique to Djangos. “All retailers are trying to get that cross-channel promotion to happen,” says Christine Lowry, senior vice president of marketing for Austin, Texas-based 360Commerce Inc., which sells systems that link retail data. 360Commerce’s customers include Home Depot, Sears and Burlington Coat Factory. “Real-time availability of data makes it possible to better serve the customer across channels.”

 

Starring the POS terminal

 

 

The key to making data communication possible among various retail entities is the point-of-sale terminal. Always a linchpin in a retail operation, the point-of-sale terminal today has been elevated to star status. Retailers more and more are recognizing that the POS terminal is the link from the store to the outside world and many are upgrading its abilities, including adding web access. In fact, 75% of POS terminals today include web technology, says Greg Buzek, president of IHL Consulting Group, of Boynton Beach, Fla., which follows the retailer technology market. That high number, though, does not mean retailers are taking full advantage of the capability. “Retailers are still trying to figure it out,” Buzek says. “In 2000, only about 10% of retailers were using the capabilities of the POS terminal. This year it will grow to 20% to 25%.”

 

Given the newness of the web notion, it’s surprising that 76% of retailers have or plan to have web-based POS systems within a relatively short time, according to retail-systems consultants LakeWest Group Ltd. of Cleveland (see chart).

 

All major vendors of POS terminals are capitalizing on the web trend. IBM Corp., Fujitsu Transaction Systems Inc., NCR Corp. and Wincor Nixdorf, which according to IHL control 45% of what used to be thought of as the cash register market, all are making major pushes to place web-enabled technology. And the VeriFone division of the Hewlett-Packard Co. and Hypercom Corp., which between them own 57% of the electronic payment terminal market, are making a similar effort. In addition, companies such as Found Inc., Triversity Inc., Datavantage Corp., 360 Commerce and SpectrumRetail Inc. are all evangelizing the single-data-source message.

 

Retailers are installing such systems to achieve a variety of objectives. Some, such as Finish Line Inc., based in Indianapolis, want to expand the inventory that stores of limited size can carry. Others, such as Hudson’s Bay Co., Canada’s largest retailer, want to extend the reach of their stores. And still others, such as the restaurants that participate in the Food.com web site, are planning to create new business models. All have one thing in common-they are using these systems to make their e-commerce operations easier to use and more responsive to customers’ wants and needs. “This allows the dot-com and land-based worlds to work together,” says Richard F. Lawson Jr., president and CEO of Found, which provides a retail web-based infrastructure that allows retailers to know their inventory levels and placement throughout the sales day. “We allow the option for the consumer to shop the site or shop the store.”

 

Whatever the reason retailers are adopting these systems, observers say the Internet opens up new possibilities for retailers-many as yet undreamed of. And so even IBM, which for years sold a proprietary POS system, is opening up. “We enable the Internet,” says Julie Roberson, worldwide software marketing manager for retail store systems for IBM Corp., stressing the word enable. “There’s no way to put some canned function on these devices. Everyone will want to use it in different ways.”

 

Indeed, many retailers are rebelling against the proprietary systems that vendors had used in the past. “Lots of retailers are interested in moving off proprietary operating systems,” says Don Paschal, director of retail marketing for Fujitsu Transactions Systems. Fujitsu has just introduced a web-based POS system that uses Fujitsu-developed, Linux-based software that operates within the IBM 4690 system. “We wanted to let users of IBM POS applications have an option for hardware platforms,” Paschal says.

 

 

Exponential opening

 

 

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