August 28, 2003, 12:00 AM

What’s In Store

How extending a web strategy to the POS is giving some retailers an edge.

With today’s level of competition in retailing, it’s more crucial than ever to get the right products before the right customers in the most efficient way. Not only does this provide for happier, more loyal customers, but it also can prevent products from going stale and being sold at markdown prices.

For a growing number of merchants, the ticket to more efficiency and profits is a web-enabled point-of-sale system that leverages POS data in multiple ways. At the top of the list are updating inventory data and recording and analyzing customer shopping behavior. Those two work together to help retail managers better match products and customer demand. “Sales are flat now, but our new POS system has made us more profitable,” says Dennis Meyer, director of information technology for Croix Retail Inc., which sells high-end knitwear apparel in 15 St. Croix Shops across the U.S. “It’s resulted in better margins because of better inventory control, more visibility in moving products from shop to shop, and the ability to keep customer information in front of our store clerks so they can suggest additional products.”

There are several other benefits which web-enabled POS systems support: faster credit card transactions, automated distribution of pricing updates from headquarters to stores, and the ability of managers to receive alerts about concerns such as sales and inventory levels or employee staffing levels. In addition, web-enabled systems can be easier to install and implement, and their ability to integrate with existing infrastructure can save companies from ripping out and replacing all of their old equipment.

Un-embedding

Indeed, the benefits of web-enabled POS systems are becoming widely recognized. 55% of specialty retailers surveyed last year by LakeWest Group Ltd., a Cleveland-based research and consulting firm, have installed web-enabled POS systems; of the remainder, more than half plan to have a web-enabled system within two years. “As retailers are looking at new POS options, they’re thinking about web-enablement,” says Sunita Gupta, analyst and vice president at LakeWest. “At the end of the day, they want to have better customer service.”

A big advantage of web-based systems is the fact that they free up stores from having to contain as much hardware and software as they need today to run their local systems. Because much new POS technology is Java-based, it can run on a thin client terminal at the store with most application processing on a server at headquarters, allowing data to be transmitted between headquarters and stores with browser access.

“Retailers are taking out of their stores the processes that don’t need to be in stores,” says Jerry Rightmer, senior vice president and CTO of 360 Commerce, provider of web-enabled POS. Without Internet connectivity between stores and the home office or large private networks, retailers’ only option is to run management software within each store and overnight batch files of data to headquarters, often on a weekly basis.

Different retailers will deploy their own mixture of thin and thick computing clients in the way that supports their particular operations, he adds. While some retailers are moving toward having all of their applications hosted on remote, central servers, others keep some mission critical applications, such as POS sales processing, in-store to assure that stores can continue to process sales transactions even when a network connection may be down, says Peter Baskin, vice president of store strategy for Retek Inc.

Andres Wines Ltd., for instance, which operates more than 100 Vineyard Estate Wines retail shops in Canada, plans to transfer most of its POS application processing to a central server at headquarters, making it easier to maintain. Andres uses its web-enabled POS system to monitor sales activity and inventory levels for all stores from headquarters. Much of its application processing today is embedded in store terminals, an arrangement that protects its sales-processing activity from network disruptions. When it’s ready to transfer to a central server it will consider a new hybrid system from Retail Technologies Inc. that will keep enough application processing in the stores to prevent disruptions. “If the network goes away, we can still operate locally,” says David Totzke, information technology support specialist.

Not just a cost center

Jeff Roster, retail industry analyst with Gartner Inc., says web-enabled POS technology is stirring up significant interest among retailers because they see it as leading directly to increased sales and profits through better customer service and more efficient use of inventory. “It’s the first time I’ve seen a shift of mentality among retailers in their approach to technology,” he says. “They’re beginning to realize that they can no longer just look at technology as a cost center, but as a revenue-generating opportunity. And POS is front-row-center. Retailers realize they can set up their POS system to do many things.”

Speeding up checkout lines is one of them. When crowds come to the gift stores operated by tourism company Alaska Riverways Inc., for example, time for processing purchases can be short and precious. Customers from tour groups of 600 or 700 swarm one of its main shops in the 20 or 30 minutes just before or just after taking a boat cruise. “We operate high-intensity stores,” says Reid Jeglum, general manager of retail operations and information technology.

Until recently, customers suffered through long checkout lines, waiting for the credit-card-wielding tourists in front of them to get their purchases processed with a minute or more just to get each transaction authorized. But today, the checkout lines move faster thanks to a new web-based POS system Alaska Riverways implemented early this year. One of the first benefits the company has realized from its Retail Pro web-enabled POS system from Retail Technologies is that credit card transactions now take about 5 seconds from the time a card is swiped until a customer gets a paper receipt, including about three secondsñ-instead of up to 90 seconds-to obtain an authorization. With high traffic, the overall savings in time is substantial, Jeglum says. “If you multiply a minute and a half, instead of three seconds, across 500 transactions, that’s an awful lot,” he says. “As a result, we’re seeing double-digit percentage increases in sales.”

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