October 7, 2013, 4:09 PM

Tablets are making cash registers a thing of the past

More stores are using tablets as point-of-sale terminals, says a new study.

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Consumers aren’t the only ones using tablets to make purchases. Today, an increasing number of stores are using tablets as point-of-sale terminals, according to a new study from consulting firm Mercator Advisory Group Inc.  

The report, “Tablets at Checkout, a True Disruptor,” forecasts the number of tablets affixed at checkout counters and used as payment terminals at U.S. stores will rise from 80,000 today to 2.2 million by 2016. In addition to affixed tablets, a growing number of retailers are giving sales associates tablets to check customers out anywhere in the store.

More than 208 million tablets will be in the hands of consumers worldwide by the end of next year, the report says. This widespread adoption will lead many stores to switch to tablets at the point of sale as both consumers and store associates become more familiar with how to use them.

ShopKeep POS Inc., for example, introduced an iPad POS checkout service in 2011. It debuted its web-based tablet checkout service at the Telluride Film Festival in August of that year. A year later at the same festival, it tested adding PayPal acceptance with PayPal’s store-based payments system, PayPal Here.

With PayPal Here, a consumer with the PayPal payment app on her smartphone can open her app to view a list of nearby merchants who accept PayPal. The consumer finds the desired merchant within the app and virtually checks in at the merchant. When the consumer checks in, her PayPal account information pops up along with her photo so that the merchant can verify her identity. When the consumer arrives at the merchant and selects her goods, the merchant charges her PayPal account without the consumer ever having to touch her smartphone or wallet.

In July 2013, ShopKeep rolled out its tablet point-of-sale service for all merchants that accept PayPal Here, meaning the some 20 million consumers who have the PayPal payment app on their smartphones can pay at merchants using PayPal Here via the ShopKeep POS tablet point-of-sale system.

ShopKeep, which also works with other payment processors including Global Payments Inc. and Total Systems Services Inc., says sales for merchants using its tablet-based point-of-sale system rose 17.4% in June 2013 compared to June 2012.

Merchants are attracted to tablet-based point-of-sale systems in part because they are often less expensive than conventional electronic registers, the report says. In many cases suppliers do not charge licensing fees for their tablet-based checkout systems, monthly fees cover 24/7 customer service and merchants automatically receive system updates via the web.

For example, Groupon Breadcrumb, another tablet-based point-of-sale system, significantly updated its web-based system just eight weeks after it launched in July 2013 with new features including the ability for merchants to store up to an hour’s worth of transactions in case an Internet connection is lost. Because such services are web-based, merchants don’t need back-office servers, further reducing costs. The updates automatically provided through Groupon Breadcrumb, for example, would have taken much longer with a server-based system and may have required an onsite visit from an employee of the point-of-sale system provider, the report says.

Fees for Groupon Breadcrumb, according to the report, range from $99 to $399 per month, depending on the number of tablets a merchant is using to complete transactions. Merchants pay $545 for an iPad, stand and processing system. That price increases to $820 for systems with a receipt printer and to $1,070 for a cash drawer and web router. Processing fees are 1.8% per transaction plus 15 cents for Visa, MasterCard and Discover cards.

Square, another tablet-based terminal system, charges 2.75% of each transaction or a merchant can opt to pay a flat $275 monthly fee, the report says. Set-up is free but cost for the iPad stand and card reader is $299 and rises to $499 with a receipt printer. The iPad is sold separately. ShopKeep, meanwhile, charges $1,200 for one iPad, an iPad stand, a cash drawer, receipt printer and a card-swipe device. It then charges merchants $49 per month, which covers support, and register software that generates sales, and inventory reports and other analytics. It processes payments via PayPal for a 2.7% transaction fee but also works with other card processors that set their own rates.

To drive business, however, some tablet systems are offering merchant deals for switching over. For example, Groupon is waving processing fees for a merchant’s first $5,000 in credit card volume. 

Many merchants are also taking advantage of tablets’ mobility, arming store employees with tablets that can be used for checkout or accessing information online about products all around a store, reducing checkout lines and helping consumers get more information more quickly. Some tablet point-of-sale systems also support loyalty programs and coupons, provide accounting systems, and integrate with e-mail and text message marketing campaigns.

As tablets become more widespread, more merchants will become comfortable with the concept of using them to take payments, the report notes. However, they also will expect payment processing software to be easy to use.

“They (merchants) have grown accustomed to software updates being handled automatically,” the report notes. “They understand how Apple iOS and Google Android tablets work and they expect that their point-of-sale software should work similarly. This expectation and the simple user interface of tablets will drive many merchants to seek out tablet-based point-of-sale systems, especially those merchants that are newcomers to payment card acceptance and have no legacy relationships standing in the way. Tablet-based systems also portray to customers that the merchant is staying modern with its technology.”

 

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