September 30, 2004, 12:00 AM

POS will never be the same

(Page 2 of 4)

In another scenario, he adds, a retailer could set automated alerts to cashiers based on particular strategies. If a store wants to increase the percentage of product warranties sold with high-priced TVs, for example, it could set automated messages to POS terminals for particular types of customers. Those who have bought warranties might get a reminder of their past interest, while those who have not purchased warranties might get a special incentive to purchase one.

That`s just how Bloomingdale`s, for one, is using web connectivity at its POS system. Bloomingdale`s POS integrates with a CRM application from Blue Martini Software Inc. called Message@POS which provides real-time cross-selling recommendations to clerks at the POS terminal while a customer`s order is being prepared, says Al Falcione, director of product marketing for Blue Martini.

While the benefits of web-based POS systems may be easy for most retailers to recognize, realizing them requires taking several steps of preparation-starting with identifying realistic goals, experts say. At the same time, retailers need to figure how to approach building an infrastructure to support web-based POS, covering the extent of integration between individual stores and a central office and the method that each store will use to connect to the Internet or corporate intranet. "A big challenge is providing data and system integration to capture data in a central place, rationalize it, and integrate it into other applications like merchandising, marketing and inventory replenishment," says BearingPoint`s Burdette. "A big technology barrier retailers face is the ability to organize and use store POS data in a home office and to operationalize this very large set of transactional data and patterns of data into home-office merchandising and marketing systems."

The right processes

And once a web-based POS infrastructure is in place, retailers must supplement it with business processes to assure that the technology doesn`t go to waste due to lack of use by managers and employees, experts say. Not only do managers at headquarters need a plan for leveraging POS data, but they also need a clear plan to train store employees. "Lack of employee training is one of the biggest reasons these types of things fail, because they`re seen as a technology exercise solved with a piece of technology," Burdette says. "Some retailers believe that if they put in some new technology, the employee culture will just magically fall into place. But it doesn`t."

A key aspect of training, experts say, is to let employees build their confidence in using POS data that has been integrated with other applications. Once they reach a level of trust that a system will report accurate inventory status or recommend cross-selling opportunities that customers are likely to appreciate, they become more willing to extend such information to customers, experts say.

One of the advantages of web-based systems, however, is the ability to distribute computer-based training sessions to employees, a tactic that Pacific Sunwear will use, Ehler says.

Employee training can even extend to changing employee behavior at the checkout counter. Grocery stores, for example, may train cashiers to begin bagging a customer`s products while waiting for a credit authorization under traditional dial-up systems, says Cathy Corby Parker, senior vice president of marketing, Vital Processing Services. But with web-based transactions that take only few seconds for authorizations, stores will probably want clerks to finish the payment transaction before turning away from the register to bag items, she says.

New incentives

In addition to employee training in the way a retailer wants to leverage new POS systems, retailers also need to address how to provide incentives for employees who may have to share credit with employees in other departments. "The trick is to find a way to motivate employees based on a retailer`s overall objective," Burdette says.

For instance, he says, real-time integration of POS data with inventory management systems can help inventory managers better meet their goals of not running out of merchandise while not overstocking to the point where stores will have to mark down prices to move inventory. Achieving such a goal may require incentive programs for inventory managers based on margins and sales, Burdette says.

It`s also important for retailers to launch a web-based system at a time that fits their near-term as well as long-term needs, allowing them to build out an integrated infrastructure accordingly, experts say.

Pacific Sunwear, for instance, is turning to web-based POS when its profile as a retailer is changing. For years, its stores operated at steady levels of customer activity that could be handled by the company`s legacy POS system and relatively slow credit card authorizations.

But rapid growth has caused stores to perform at different levels, requiring the company to upgrade the way its highest volume stores serve customers. "We used to have cookie-cutter stores and the volume didn`t range much," Ehlers says. "But now some are doing $3 million a year, while the average store does $1 million."

Daily monitoring

So Pacific Sunwear is doing a pilot in 60 of its highest volume stores of central web-based credit card authorizations. "We want to see how many transactions we can drive in any given day in those stores," Ehlers says.

In time for this year`s holiday shopping season, Pacific Sunwear will be able to monitor daily POS activity in each pilot store and compare those figures to year-ago figures to judge the impact of merchandising and marketing efforts on year-to-year changes in sales.

Eventually, Pacific Sunwear will explore how its web-based POS system could produce additional benefits by integrating POS data with back-end applications like inventory management and customer relationship management, he adds.

Pacific Sunwear can already reap some of the benefits of integration between its POS and other applications on its existing non-web-based system. Software at the store level, for instance, can provide some cross-selling recommendations on a POS screen based on historical transaction data. And stores facing an out-of-stock situation could help a customer find a desired product by dialing up to a central application to check on cross-store inventories.

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