What’s In Store

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 secondsń-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.”

The Retail Pro system integrates with a credit card processing system from Shift4 Corp. that moves card authorizations over an always-on Internet connection, with no interruption to dial up a network, Jeglum says. Alaska Riverways chose to implement faster card transactions early, because they directly affect daily sales and customer satisfaction. But this fall Alaska Riverways will also begin to benefit from integrated POS and inventory data, providing managers with constant updates of inventory levels, and granting customers, both online and offline, real-time notices of the actual availability of products. The key to making the system effective is the constant updating of inventory data with POS data.

While many retailers will program their POS systems to update inventory once or twice a day, St. Croix’s system updates all the timeń-an option supported by the availability of a high-bandwidth Internet connection.

The system helps headquarters better manage the supply of goods throughout its chain. “We may see that what’s selling really well in the Southwest is not selling in the Northeast, so it gives management the insight to put products where customers will buy them,” Meyer says. As St. Croix managers analyze sales activity by product at each store, he adds, they can use a logistics module in the same Retail Pro system to arrange transfers and deliveries of inventory to the stores that need it. And that means fewer markdown prices, as products sell to the customers showing the highest demand for them.

The flexibility of web-enabled POS systems can also integrate POS and inventory data for online as well as offline operations. Buccaneer Heaven, a store and web retailer of products licensed by the Tampa Bay Buccaneers football franchise, uses software from UniteU.com and Retail Technologies to integrate online and offline POS and inventory data. “My Internet site, BucGear.com, talks to my store inventory system,” says owner Jeffrey Fox. “If someone in a store buys the last item of a product line, someone on my web site will automatically see a note that the product is on back-order.”

Guide to E-Commerce Technology

The leading technology for CRM

The ability to easily integrate a web-enabled POS system with other applications supports additional ways to leverage POS data and improve relationships with customers, analysts say. “Retailers realize they can upgrade their POS systems and then set up to do other things in a completely integrated infrastructure,” Gartner’s Roster says. “POS is the leading technology they can get immediate benefit from, then position themselves to take advantage of whatever customer relationship management or other strategy they want to roll out over the next few years.”

Analyzing what an individual buys, how often, and in which channel, for instance, will provide valuable information to support targeted CRM campaigns, such as through e-mail marketing or POS terminal alerts that help cashiers cross-sell merchandise. “There are natural links between CRM and POS strategies, which are each key strategies for the next several years,” Roster says.

The Bombay Co., a home-furnishings retailer, is already planning to leverage its new web-enabled POS system to support improved customer relationships. “Web-enabled POS will allow us to do a lot of things we couldn’t do before,” says Matt Corey, vice president of e-commerce and marketing.

Bombay recently completed a 10-store pilot of the Integrated Store Operation web-enabled POS system from Retek, which it plans to roll out to all 388 stores this fall. The system can tailor targeted marketing campaigns based on an individual customer’s shopping history, but it can alert store clerks at the point of sale to a shopper’s preferences, providing the opportunity to inform the customer of products or specials she might find interesting. “If a customer from Texas walks into one of our stores in Connecticut, we can see specific data on that customer,” says Chris Benner, manager of store systems.

Such cross-selling opportunities work best in specialty stores that thrive more on intimate relationships with customers than on high volume and long checkout lines. “Our philosophy is to cross-sell products based on personal information that appears on the POS screen,” says Meyer of Croix Retail. St. Croix Shops have increased their amount of cross-selling and upselling of products, he says, leading to more products sold at their original prices, instead of later at discount.

A cashier can also view real-time data on available inventory both at the warehouse and in other stores. So if a customer can’t find what she’s looking for in a particular shop, the cashier can check when and where it may be available. “Sharing that information with customers makes customer service a strong point for us,” Meyer says.

Retailers continue to develop ways to leverage their web-enabled POS systems. At Vineyard Estate Wines shops, a particularly helpful feature is being able to distribute new prices over the web to each store’s POS terminal, instead of sending out paper sheets. “It helps with consistency across the chain and reduces the amount of errors,” Totzke says.

Undoing the rivalries

Web-enabled POS technology also supports an automated alert mechanism designed to keep headquarters in touch with in-store operations. Siva Corp., for instance, offers an EventAlert feature as part of a web-enabled POS system that notifies managers of exceptions to pre-set performance parameters, such as the number of POS transactions per hour during a peak lunch period. The alerts can be set up to appear in multiple ways. While a back-office store manager might prefer to receive an alert on a web page, a district manager might prefer a message to a handheld device, says Siva CEO Jim Melvin.

The availability of new web-enabled POS systems that support the leveraging of POS data throughout the enterprise coincides with the increased availability of inexpensive Internet connectivity. Until recently, enterprise-wide systems that integrate POS data with other applications could cost about $100,000 in hardware costs per store, plus software licensing and maintenance fees, Melvin says. In addition, companies could pay thousands of dollars per month for frame-relay network connectivity.

Getting the politics right

Today, the availability of new technology makes it possible for small retailers to deploy integrated systems at much lower costs. For example, he notes, a retailer could pay about $3,000 per store for Unix- or Windows-based hardware, and get high-bandwidth DSL Internet access for under $50 per month. “Two years ago, most of this integrated enterprise data was going over private networks, but today a lot is going over the web,” Melvin says.

But the flexibility of web-enabled POS systems also makes up one of the biggest challenges for retailers because they must decide how to begin leveraging the systems. And that can involve interdepartmental politics.

“Getting the technology and the Internet connection up is not that hard, but getting agreement on what to first integrate with the POS system can be,” Gupta says. “Everybody needs to think about what the business objectives are, figuring out ROI and getting agreement from management on what the web-enabled POS system should be in years one, two and three.”

paul@verticalwebmedia.com

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