Delivering a New Level of Customer Engagement Through Next-Generation POS

JUNE 2014

ROADMAP Charting the Path That Links Technology and Business Goals

Today’s technology-savvy shoppers are connected to a retail brand in many ways beyond a store’s four walls. So many, in fact, that it has become both a major challenge for retailers to do it successfully, as well as a new opportunity if you get it right. The challenge is that consumers believe stores should deliver the same “anything, anytime, anywhere” experience they get online when they visit a store. The opportunity is that by adopting a flexible, full-featured point-of-sale (POS) platform retailers can actually deliver on this powerful promise. Next-generation POS platforms are able to support personalized selling functions, provide access to enterprise inventory visibility and CRM data, and integrate with a wide variety of touch points throughout the store to deliver a new level of customer engagement.

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he point-of-sale (POS) system has always been described as the central nervous system of the Tretail store since it first debuted in the 1970s. It not only acts as the engine that executes customer transactions, which is an essential role in itself, but it also feeds data to more than 30 departments and applications throughout the enterprise. Financial services, marketing, merchandising and the supply chain are all virtually dependent on POS data that is sent in overnight batches or trickle fed throughout the day. Just as importantly, the POS occupies a place of unique importance in the retail landscape because it 33.6% comes into play during a crucial shopping phase — during the shopper’s in-store search, browsing and More than one- purchase phases. If a retailer believes it is strategically third of retailers are either upgrad- important to optimize every tool available to influence ing POS right the last mile of the shopper’s journey — and most do now or will begin — then the POS will continue to play a critical role. upgrading by the For these reasons, POS upgrade activity is currently end of the year. at historically high levels in the retail industry. More than one-third of retailers (33.6%) polled in the RIS News “24th Annual Retail Technology Study: New Direction for Retail” are either upgrading POS right Source: RIS News,“24th now or will begin upgrading by the end of the year. Annual Retail Technology Study: New Direction This is a sizable slice of the industry. It is an espe- for Retail” cially impressive figure when you consider that re- placing the POS is nearly always the largest single tech investment a brick-and-mortar retailer will make within the tech stack. With so much POS activity taking place, it is a good time to look at critical factors and milestones to consider when the time comes to embark on a POS upgrade journey.

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Untether POS from Fixed Stations Fixed checkout lanes and cash-wrap stations are not going away, but retailers understand that mobile POS opens up a new world of options, espe- cially for sales associates to deliver better customer service when and where it is needed. For example, mobile POS systems can help speed up checkout during heavy-traffic hours (line busting) % or take payments outside the four walls of the store during special promotions and seasonal events. 50 Mobile POS can do price checks in an aisle at the moment a customer needs it, plus it enables associates to access a host of sales support applications that range from loyalty programs to checking up on a customer order in transit. Other important mobile POS functions include sav- ing the sale — the ability to place an order and take The percentage payment for a product that is not in the store because of retailers who it is out-of-stock or because the product is not normal- say they will ly part of the store’s assortment mix but is available in deploy mobile other channels. POS in two years. Mobile POS should also be able to manage split orders with a single swipe of a credit card. For example, Source: RIS News/IHL Group, if a business outfit’s pants are in stock but the shirt is “11th Annual Store Systems Study 2014: Store Reinvented” out-of-stock, the mobile POS should be able to accept payment for both items while enabling the shopper to walk out of the store with the pants and then receive shipment of the shirt at home. The number of retailers who say they will deploy mobile POS in two years will quintuple, according to the 2014 RIS News/IHL Group “11th Annual Store Systems Study 2014: Stores Reinvented.” Today, 10% of retailers say they have fully rolled out mobile POS to their stores. If retailer projections are correct, the figure will rise to 50% in 2016.

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Q: What customer service trends are prompting retailers to take a harder look at the service their point-of-sale (POS) delivers? John Pruban: If I had to sum it up, I would say the customer expects to shop on his or her own terms. This could be buying online and returning merchandise in-store, or searching for product on mobile devices while shopping in store aisles. This trend is conditioning customers to expect more personalized and informed service in-store. Meanwhile, brand loyalty is declining due to increasing usage of digital touch points, yet, there are growing issues around privacy. Cutomers also want to mix new, innovative solutions with traditional needs, such having options around how they want to pay for “Companies have purchases. Retailers need to have solutions ready. to determine how Q: What challenges are retailers still facing with their existing POS systems, and to bring their POS how are these issues jeopardizing service and customer loyalty? and e-commerce Pruban: Retailers’ biggest problem is their inability to migrate off of a legacy platform. platforms together to Retailers have a good grip on where they want to go and how to address the customer better. When discussing the physical systems, the key is to look to how form factors are process sales under evolving and how fast it is happening. The inevitable form factor is mobile. It is not a matter a single brand, not of how it will happen, but when. through individual Q: Knowing that POS is considered one of the most expensive IT investments and channels.” undertakings, what role has the sluggish, often volatile economy played in upgrade decisions? John Pruban Pruban: The economy has definitely played a role, but there are two perspectives on its president, Level 10 impact. First, the sluggish, volatile economy has had a hand in slowing upgrades of existing hardware. Conversely, because of the volatile economy and the need to integrate new POS technology, more cost-efficient mobile deployments have increased. The downside of this expansion is that many mobile POS deployments may have been done hastily, or less thought out in hopes of making the technology available to shoppers. And companies are torn on the proper path to follow. There are plenty of companies still waiting on the sidelines to see how mobile plays out, and to learn how to best implement the technology in a POS setting.

Q: Looking ahead to a more flexible POS, what does this configuration look like? What are the pre-requisites or criteria that retailers have for a new system? Pruban: Retailers have to take traditional POS hardware and replace it with a mobile eco- system. It is a form factor that allows users to detach that tablet and use it to engage shoppers throughout the store. That is the physical side of the technology. Then, from a software perspective, companies have to determine how to bring their POS and e-commerce platforms together to process sales under a single brand, not

Level 10 is one company, every- through individual channels. That still remains a challenge. thing IT. With increasing IT challenges, we recognize retailers Q: If you had to define three best practices that retailers should implement when need fewer partners to do more. By strategically bundling our adding a next-generation, flexible POS system, what would you advise? services—hardware procurement, Pruban: The first one is to partner with an agnostic solution provider that can assess and software development, asset management, maintenance, field tech- strategically advise on the POS system and beyond, because they will be able to consolidate nician support and service desk the process of research and testing. support—we act as an extension of retailers’ IT teams throughout The second is companies should consider how to create a terminal that supports both their technology and mobile de- traditional and mobile transactions. Every retail environment is different. Some cases are ployments, store openings/clos- great for mobile technology, but others may not be. Segments that require merchandise ings/remodels, and in-store support work. bagging and removing loss prevention tags may not work seamlessly with mobile. Retail- 50ers word need description terminal flexibility, udignimos and conem technology volorehendit is available etus quito ditenable qui blatus.these tasks. As que percipsamAnother importantet quis sincto step velluptatis is to determine autenit how adi e-commerce utestis modios and volorum in-store retailesedis platforms ele- can sequiaebe integrated aspid atquam POS aut through ut eiciat. a common Fugit hit setqui ofoptis web cum services. fuga. ParumeFinally, retailers voluptibus need to be eiumthinking rehendusaes about shorter dicae returns rero onmi, investments te plaboris forabo. these Catem deployments. et qui omnis The doluptium days of long 5-year qui dipictur renda solorit ad ulpa returns on investment are over.

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Tap into the Power of the Enterprise In the past, the POS was primarily a sender of data that was used throughout the enterprise, but increasingly it is becoming a receiver of enterprise data as well. To deliver the high level of service that shoppers demand, it is important for the POS to be able to access such key information as inventory vis- 65% ibility, loyalty program profiles, previous purchases by the customer, and other CRM information relevant to specific shoppers. This information can be displayed The percentage of at either a fixed POS station or on a mobile POS device retailers that are and be used by sales associates while they are talking responding to to shoppers. consumer demand Savvy retailers often merged shopper information by providing enter- into an application (often called clienteling) that sales prise applications associates access during customer engagements. through the POS Used successfully, clienteling applications optimize to deliver better service as a strong upselling and cross-selling opportunities by enabling defense against on- associates to make highly relevant and personalized line-only suggestions during the last mile of the shopper’s jour- retailers. ney. Intelligent suggestions made at this time have proven to have a high conversion rate. Beyond clienteling, retailers are looking for their next POS to deliver overall sales support. This might Source: EKN Research, “State of the Industry Research Series: The include delivering information about competitive pric- Future of the Store 2013” ing, deep product information, a catalog or lookbook of photos, and customer ratings and reviews depend- ing on the retailer’s market niche. Making enterprise information like this available through the POS will give associates the tools they need to do a better job. By giving associates the power to tap into applications through the POS, retailers are satisfying a deep customer desire — to get service from a knowledge-

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3 Tips to Rethink able sales staff, which was chosen by 65% of retailers POS Strategy who say they want to build a strong defense against online-only retailers, according to the EKN Research “State of the Industry Research Series: The Future of the Store 2013” report. 1 Integrate the Power of E-Commerce There is no doubt that shoppers love the infinite Reimagine stores as a hub for delivering digital options and convenience of e-commerce, but experiences. these benefits are still no match for the immediacy and personal experience found inside a store. Merg- ing the best elements of both channels is the goal of modern retailing and multi-channel POS is a critical enabler of this strategy. Shopping lists, for example, were pioneered on web- 2 sites but they have now become a way to offer shopper convenience and drive sales. Advanced retailers enable Weave digital experiences shoppers to create shopping lists at home or on smart- into the physical fabric phones and then access them through the POS either at of the store. a fixed station or through a mobile device. This is an online-inspired convenience that enables grocery shoppers to pickup recurring or fill-in products for the household. Retailers in the gift category use it to build wish lists in the POS to make it convenient 3 for shoppers to give gifts for weddings, house warm- ings or other special occasions. Home goods retailers Use applications to use it to create wish lists for back-to-school products combine human intuition to make it easy for friends and families to make sure with data-based consumer students are well stocked for the school year. insight to create a personalized relationship Of course, the POS should be able to access the cor- with the customer. porate website to check online products, prices and offers to level the playing field with smartphone carry- ing shoppers. Some retailers are adding more sophis- Source: EKN Research, “State ticated online capabilities to their POS solutions like of the Industry Research Series: The Future of the Store 2013”

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competitive price checking and matching. To help stores deliver a more online-like experience, the EKN Research report “The Future of the Store 2013” advises retailers to re-organize their strategy, people, processes and POS technology to: 1. reimagine stores as a hub for delivering digital experiences. 2. weave digital experiences into the physical fabric of the store. 3. use applications to combine human intuition with data-based consumer insight to create a 21% personalized relationship with the customer. The increase in Integrate Omnichannel Services profit that retail- What happens when a customer walks into a ers say they receive store to pick up an online purchase? The first from omnichannel thing she does is go to a cashier to check the status of shoppers compared her order. Can your POS access this information or is to multi-channel customers. the cashier instructed to tell her to go somewhere else to get her question answered? What about returns of online orders? Can credit be given in any checkout Source: RIS News,“2013 lane or are multi-channel customers treated like sec- Cross-Channel Tech Trends Study: Understanding the ond-class shoppers and redirected? Retail Singularity” Next-gen POS systems are able to access purchase information from any channel and treat their best customers with the level of service they deserve. Or at least it should, because omnichannel shoppers are 21% more profitable than single channel customers, according to the RIS News “2013 Cross-Channel Tech Trends Study: Understanding the Retail Singularity.” However, to make this happen in an accurate, re- peatable and scalable way, retailers will be required to consolidate disparate inventory and order management databases and tightly couple them with the

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POS. Currently, 40% of retailers still struggle with con- solidation and integration of back-office functions, according to “Customer Desires Vs. Retailer Capabilities: Minding the Omni-Channel Commerce Gap,” a report from Forrester Research. The goal of many retailers is to convert sales associates into trusted advisors that do more than simply ring up sales. The key to making this happen is to provide associates through the POS with all the power that shoppers have when they walk into a store armed with a smartphone that connects to the infinite options available online.

Shift from a POS Solution to a Transaction Platform As retailers make multi–year plans and prepare Number of retailers for a POS solution that will take them into the future, who struggle with they understand that a POS model that was originally how to integrate designed to serve stores as the primary channel in the back-office technolo- retail organization will no longer be functional in the gies across channels. omnichannel world. Instead, retailers will need a new approach that oper- ates with omnichannel retailing at its core. To achieve this new approach, many retailers (31.6%) envision a hybrid commerce model emerging that converges POS and e-commerce functions into a single transaction platform, according to the RIS News custom re- Source: Forrester Research, search report “Your Last Traditional POS.” Another “Customer Desires Vs. Retailer 13.2% of retailers envision a hybrid transaction plat- Capabilities: Minding the Omni- Channel Commerce Gap” form where POS assumes the central role. There are other POS platform models emerging on the horizon including some where the e-commerce engine assumes the central role in a unified transac-

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ROADMAP Charting the Path That Links Technology and Business Goals

Requirements

Every major business initiative requires a detailed assessment that examines the project’s impact on internal processes, technologies, personnel, strategic alignment and costs. One goal of the assessment is to identify granular and high-level requirements that are essential elements in the project’s game plan. Managing and addressing these requirements is critical to success.

Requirements for Next-Generation POS

Strategy • Break down silos between channel-specific IT architecture, and replace with a single operating platform that all customer touch points, including next-generation POS, operate on. • Define POS goals from an enterprise omnichannel perspective to ensure that that all customer touch points, both inside of the store as well as digital options, operate consistently and offer the same services.

Technology • Create a master data file that synchronizes mission-critical information from various business sources, make it accessible to mul- tiple lines of business. • Adopt a single operating platform that manages enterprise-wide retail systems so they can deliver a truly transparent omnichannel business model online and in-store. • Adopt mobile devices to engage shoppers anywhere in the store, and manage the shopping experience from product discovery and research all the way through tendering and procurement.

Personnel • Chief executives and senior management embrace the transition from transaction-based POS to engagement-based POS. • Appoint an “enterprise customer engagement leadership team” that will manage this next-generation, all encompassing engagement business model and integrate all lines of business — and back-end systems — on a single platform.

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tion platform, and some where there is no POS at all in the equation. In these latter models, the e-commerce engine is fleshed out to handle store transactions and serve stores as a POS system in the cloud. Every retailer’s journey to a future POS system will be different, but the winds of change are blowing and the traditional POS model, which has served retailers well for 40 years, will no doubt operate more like a platform of inter-operable enterprise applications than a point solution that specializes in performing a dis- crete function. Conclusion Thanks to their growing adoption of personal technology, today’s shopper is demanding a streamlined shopping experience both online as well as inside the store. As a result, existing POS systems need to do more than process store-level sales. Retailers need to shift the focus away from a narrow transaction-based POS solution toward a flexible, feature-rich platform that can support and enhance an intimate, all-channel shopping experience. While retailers and software vendors are still exploring how to Retailers need to shift their focus away from a narrow make this happen, and do it in a transaction-based POS solution way that ensures security and toward a flexible, feature-rich accommodates new payment re- platform that can support and enhance an intimate, all-channel quirements, they understand that shopping experience . the traditional POS model they use today will not be the one they use tomorrow.

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JUNE 2014

ROADMAP Charting the Path That Links Technology and Business Goals Roadmap KPIs Infographic Omnichannel Inventory Optimization

Untether POS from Fixed Stations Tap into the Power of the Enterprise Integrate the Power of E-Commerce Integrate Omnichannel Services Shift from a POS Solution to a Transaction Platform 33.6% 21% More than one-third % The increase in of retailers are ei- profit that re- 50 ther upgrading POS right now or will tailers say they begin upgrading by receive from om- the end of the year. nichannel shoppers compared to multi-channel customers. The percent- Source: RIS News,“24th Source: RIS News,“2013 age of retailers Annual Retail Technology Cross-Channel Tech Trends who say they Study: New Direction Study: Understanding the for Retail” Retail Singularity” will deploy mobile POS in two years. Number of retailers who Source: RIS News/IHL Group, “11th Annual struggle with how to inte- Store Systems Study grate back-office technolo- 2014: Store Reinvented” gies across channels.

Source: Forrester Research, “Customer Desires Vs. Retailer Capabilities: Minding the Omni-Channel Commerce Gap”

The percentage of retailers that are responding to consumer demand by providing enterprise applications through the POS to deliver better service 65% as a strong defense against online-only retailers. Source: EKN Research, “State of the Industry Research Series: The Future of the Store 2013”

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