Six Key Drivers for POS Upgrades in 2010
It's hard to believe that we will very shortly be rounding the ten year anniversary of the 'millennium bug' which was going to shut down our computers, the power grid, our cars and even our economy. I began to wonder about all that computer equipment and software folks put in place in the late 1990's to avoid the Y2K catastrophe. Although accountants estimate a useful life of five to seven years, we all know retailers continue to run depreciated Store Systems and POS equipment as long as possible. Doesn't it seem like we are due for the next wave of store systems replacements? What factors will emerge as key drivers for these upgrades as we enter the next decade? Here are six reasons which come to mind:
1. Customer service issues - Long lines at the checkout are a sure sign of customer frustration. Customers expect immediate authorization of debit/credit and gift cards, seamless check processing, 100% scanning rates, price accuracy and the world's most competent store associate who greets everyone with a smile. Delighting the customer is even harder and generally involves intimate marketing, matching specific products and services against an individual's propensity to purchase those items. World class retailers will even source products from their competitors to satisfy customers and build loyalty. Not very much of the technology from the 1990's will support this vision of customer service.
2. Equipment failures or high maintenance costs - Store systems take a beating and like all electronic and mechanical equipment, it tends to break more often as it gets older. Besides the obvious impact on customer service (see above), repair costs creep higher over time until they demand attention. More than a few retailers have been able to trade up a generation of store systems by matching the declining cost of new technology against the higher cost of maintenance on older equipment.
3. Error rates or training issues - A new generation of store associates is arriving as the baton is passed from Generation X, the Millennial Generation and soon to Generation Z. This new breed of associate has grown up with technology and expects an intuitive, easy to use, graphical user interface, along with context sensitive help so they don't embarrass themselves by having to ask a question. Associate exit surveys often mention the complexity of a retailer's POS system as a suggested improvement area, or occasionally as the reason for leaving. And you can bet they are telling their friends about your lousy POS system!
4. PCI compliance concerns - The Payment Card Industry Security Standards Council (PCI SSC) was formed in 2004, and in December of that year, the major credit card issuers aligned their individual policies and released the Payment Card Industry Data Security Standard (PCI DSS). Retailers have been scrambling since then to meet these standards, often with 'bet the company' vigor. Concurrently, these standards continue to be refined and customers become increasingly more concerned about their private information. No retailer wants a breach of privacy and this will certainly drive equipment and systems upgrades in store systems.
5. New customer service initiatives - The combined impact of PCI compliance, Customer Relationship Management and Loyalty programs, and the desire to reach across selling channels while the customer is in the store creates a perfect storm for store systems upgrades. Self service kiosks, self checkout and even handheld shopping assistants allow a customer to control when and how they engage with a retailer. It's hard to believe that the POS equipment installed last decade would be capable of supporting these technology hungry applications. We don't exactly know what new service initiatives customers will demand in the coming decade, but it's a pretty good bet that it will involve delivering information across a variety of operating platforms and networks.
6. New delivery approaches - Cloud computing and POS as a Service offer significant cost savings and flexibility in a far flung retail enterprise. Like the computing models of the 1970's information is stored more centrally and delivered over networks when needed. Unlike that decade, today's networks are faster, cheaper and more reliable. As the privacy and redundancy issues get resolved in the coming years, these new delivery methods will certainly play a larger role in a retailer's store system architecture.
Boston Retail Partners is an independent retail management consulting firm dedicated to providing superior service to our clients. BRP combines its consultants' deep retail business knowledge and cross-functional capabilities to deliver superior design and implementation of strategy, technology, and process solutions, helping clients achieve their business potential. Visit us at www.bostonretailpartners.com
1. Customer service issues - Long lines at the checkout are a sure sign of customer frustration. Customers expect immediate authorization of debit/credit and gift cards, seamless check processing, 100% scanning rates, price accuracy and the world's most competent store associate who greets everyone with a smile. Delighting the customer is even harder and generally involves intimate marketing, matching specific products and services against an individual's propensity to purchase those items. World class retailers will even source products from their competitors to satisfy customers and build loyalty. Not very much of the technology from the 1990's will support this vision of customer service.
2. Equipment failures or high maintenance costs - Store systems take a beating and like all electronic and mechanical equipment, it tends to break more often as it gets older. Besides the obvious impact on customer service (see above), repair costs creep higher over time until they demand attention. More than a few retailers have been able to trade up a generation of store systems by matching the declining cost of new technology against the higher cost of maintenance on older equipment.
3. Error rates or training issues - A new generation of store associates is arriving as the baton is passed from Generation X, the Millennial Generation and soon to Generation Z. This new breed of associate has grown up with technology and expects an intuitive, easy to use, graphical user interface, along with context sensitive help so they don't embarrass themselves by having to ask a question. Associate exit surveys often mention the complexity of a retailer's POS system as a suggested improvement area, or occasionally as the reason for leaving. And you can bet they are telling their friends about your lousy POS system!
4. PCI compliance concerns - The Payment Card Industry Security Standards Council (PCI SSC) was formed in 2004, and in December of that year, the major credit card issuers aligned their individual policies and released the Payment Card Industry Data Security Standard (PCI DSS). Retailers have been scrambling since then to meet these standards, often with 'bet the company' vigor. Concurrently, these standards continue to be refined and customers become increasingly more concerned about their private information. No retailer wants a breach of privacy and this will certainly drive equipment and systems upgrades in store systems.
5. New customer service initiatives - The combined impact of PCI compliance, Customer Relationship Management and Loyalty programs, and the desire to reach across selling channels while the customer is in the store creates a perfect storm for store systems upgrades. Self service kiosks, self checkout and even handheld shopping assistants allow a customer to control when and how they engage with a retailer. It's hard to believe that the POS equipment installed last decade would be capable of supporting these technology hungry applications. We don't exactly know what new service initiatives customers will demand in the coming decade, but it's a pretty good bet that it will involve delivering information across a variety of operating platforms and networks.
6. New delivery approaches - Cloud computing and POS as a Service offer significant cost savings and flexibility in a far flung retail enterprise. Like the computing models of the 1970's information is stored more centrally and delivered over networks when needed. Unlike that decade, today's networks are faster, cheaper and more reliable. As the privacy and redundancy issues get resolved in the coming years, these new delivery methods will certainly play a larger role in a retailer's store system architecture.
Boston Retail Partners is an independent retail management consulting firm dedicated to providing superior service to our clients. BRP combines its consultants' deep retail business knowledge and cross-functional capabilities to deliver superior design and implementation of strategy, technology, and process solutions, helping clients achieve their business potential. Visit us at www.bostonretailpartners.com