What is a POS system?
‘POS’, ‘EPOS’ or ‘point of sale’ is the IT that enables modern physical and multichannel retail in stores. POS systems provide the IT function that enables stock to be sold, inventory to be checked, payments to be made, transactions processed, customer data collected, sales and performance monitored and all the other business processes necessary to run an estate of retail stores.
Modern POS systems also offer a wide range of point of service capabilities including clientelling, cataloguing, customer orders and customer services. They bring websites and online services into stores, on fixed and mobile devices, to give customers access to everything a retailer can offer. And they give shop staff a real-time view of stock and customer data, empowering them to increase sales, and retailers to streamline operations.
As well as point of service, the term ‘POS’ includes the software that runs store ‘back office’ – capabilities such as live KPI dashboard, store inventory, reporting, time and attendance, staff performance, training and email.
Modern POS systems include and are run by central management applications typically located at a retailers’ head office but which also may be run remotely on hosted servers. At the heart of the system is a database which holds system and estate-wide configuration settings and rich product, price and promotion data. The central applications will control and manage system communications across the retail estate, provide management and reporting tools, and are a platform for integration with other central software packages, such as payments, eCommerce and financial systems.
Why change POS system?
The business drivers that justify investing in new POS systems centre on improving customer experience, streamlining operations and increasing sales and profitability. Here are some of the things to consider when choosing POS systems:
- Changing consumer habits: physical and digital retail continue to converge. Customers expect to be able to browse, order and purchase items online, in store and on mobile devices. To capture these sales opportunities POS systems have to deliver common and integrated business processes across a retailer’s customer touchpoints, offering capabilities that allow the store to be at the centre of a brand’s multi-channel retail offer.
- Delivering great customer service. While human interaction is at the forefront of successful retail, staff need systems that help them know their customers and which allow them to give targeted and compelling incentives to increase sales. This demands rich function across POS and selling applications, providing clientelling and loyalty, queue busting, assisted selling, endless aisle and customer orders etc.
- Modern technology is essential to stay ahead of competitors. An IT infrastructure built on open, ubiquitous and interoperable technologies is crucial to create a platform for future innovation which allows new business initiatives to be brought to market quickly and for less cost.
- In a competitive retail environment the need for streamlined operations has never been greater. Improving the use of store real estate – monitoring performance and maintaining accurate and always-online stock levels across the entire retail estate – enables POS systems to optimise which inventory is used to fulfil orders to maximise efficiency and profitability.
The top 5 things to look for when starting a POS systems review
If your business is ready to conduct a POS systems review, what should you look for? Here are five of the most important things to consider.
1. Retail sector
POS systems are designed for specific retail sectors. Fashion, specialist and luxury, DIY, department store, supermarket and hospitality all have distinct functional and technical requirements. Specialist and luxury retailers need assisted selling capabilities that can present rich product data on mobile POS devices. Department stores typically require extensive customer-facing capabilities such as clientelling, endless aisle, customer orders and customer services, and the ability to manage inshore concessions. Supermarkets need systems with high system availability and very high transaction processing capabilities. When assessing POS systems it’s wise to look at a vendors’ install base in your business’ sector.
Retailers upgrading legacy systems typically want to retain existing processes while also adding more capability. How can that be achieved?
Broadly there are three ways to acquire new functionality, listed here in ascending order of complexity and cost: (i) buy a ‘package’ system and configure it; (ii) configure and then customise a package system with selected developments; or (iii) build an entirely new system. The latter is usually only a sensible option for the largest retailers with sizeable IT departments.
Modern ‘package’ POS systems often include a powerful system configuration tool accessed by a graphical user interface, making the process of configuration at least partly accessible to non-expert users. Access to this tool during selection can help buyers of POS systems understand the system’s capabilities – assuming the tool shows function that has actually been built!
Extensive system configuration can be a substantial project. Retailers looking to minimise cost and who are prepared to adopt alternative business processes by choosing a ‘vanilla’ package can save considerable cost, time and effort by working with a largely pre-defined configuration. Working this way also helps to ensure that the system can be implemented far sooner than would otherwise be possible.
Most retailers have at least some processes that are particular to their business. For these areas of function there are two main choices: commission the build of new function or wait for the software vendor to develop it as part of their development schedule. A software author’s roadmap can help you to assess whether the latter is a realistic option for your business, and whether their software provides a good fit now and in the future. It’s worth talking to the clients of shortlisted software vendors to understand their track record in the delivery of customisations – did they build function that met requirements and was it delivered on time and to budget?
Retailers reviewing POS systems need to consider the technology choices software vendors have made during the design and build of their systems. These choices matter for reasons of interoperability, performance, scalability, security and cost.
POS systems are one part of a retailers’ IT ecosystem. Finance, merchandising, inventory and human resources are other examples of turnkey retail systems. For those with an online and multi-channel presence, web and store systems will need to be tightly integrated into this ecosystem.
It is smart to take a strategic view about choice of technology to ensure interoperability, now and in the future. While it is possible to integrate applications built with different and legacy technologies, it is far quicker, easier and less expensive to integrate common and compatible technologies.
As with other enterprise software, designers of POS systems have for several years utilised industry-leading software platforms, or frameworks, so that they don’t have to build underlying generic function, but can instead re-use and extend pre-written standardised function. This helps reduce development cost and time to market, offering benefits that are passed on to clients. If the software platform is also open source rather than proprietary, there are further benefits: lower hardware costs, no vendor lock-in and a licence that allows the software to be modified being examples.
New technology can make it possible to leverage new hardware platforms such as tablets and smartphones – lower cost hardware devices that helps enhance customer service and which brings operational efficiencies. Where challenges around hardware do exist, they may focus on POS system support for particular peripherals.
POS systems are distributed across point of service devices and store back office machines in multiple stores, run from central servers at head office or on remote servers: as such they are an example of distributed enterprise computing. Since the advent of POS systems, designers have adopted different architectural approaches to address the challenges of delivering business processes across the multiple nodes of a retail operation.
The development of service-oriented architecture (SOA) and internet technologies such as web services has given designers of POS systems tools that are ideally suited to the requirements of distributed computing in retail. Building software using SOA sees business processes broken down into small pieces which can be exposed via interfaces, creating services. These services communicate with each other by passing data between them. This architecture, especially when designed for the web, is well-matched to the requirements of POS systems. Enterprise applications built using SOA also provide a platform that enables simpler integration and so helps to future-proof your software investment.
Modern web-enabled POS systems leverage the wide availability and reliability of broadband communications and help to circumvent some of the constraints of past generations of POS systems. Point of sale that is delivered via a thin client or web browser can be run on a greater variety of hardware devices. POS systems built using a web-enabled SOA may offer alternative deployment choices and can be co-located on the same device as a product, price and customer database – offering a resilient thick client option.
The purchase of enterprise software is a decision your business is likely to live with for up to a decade. What will your business look like in 5 to 10 years? What are your growth plans? Will growth come from store expansion, from online trading or from acquisitions? These questions have implications for POS systems: how easy is it to set up and deploy new stores? If growth is to come from online sales can your shortlisted systems integrate easily with eCommerce platforms? And if growth will come from acquisitions, does your shortlisted system support multiple company entities and trading fascias? Will it support a doubling or quadrupling of transaction processing?
POS system scalability is a function of technology, architecture and functionality. To understand whether a POS system is right for your business now and in the future, prospective buyers need to know what lies beneath the surface.
MWC Partners specialise in helping retailers select and run the IT that drives their store systems. For advice and guidance on choosing POS systems, email firstname.lastname@example.org or call us on 01908 683830.