RETAIL RETAIL S NEXT POS: HOW TO MAKE IT FUTURE PROOF SPONSORED BY PRESENTED BY

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1 RETAIL S NEXT POS: HOW TO MAKE IT FUTURE PROOF PRESENTED BY SPONSORED BY

2 RIS RETAIL MATURITY LADDER Maturity Ladder: Future-Proof POS The RIS News Retail IQ Report Maturity Ladder is a diagnostic measurement tool for a retailer s state of technology advancement in a specific category. There are four key phases: 1. Basic minimal capabilities, 2. Intermediate mostly basic with some advanced capabilities, 3. Advanced mostly advanced capabilities with some limitations, and 4. State-of-the-Art comprehensive capabilities are fully integrated and up to date. Note that it is possible to be on more than one step of the ladder simultaneously as specific technology components and processes are upgraded in phases. 4. STATE-OF-THE-ART Brands adopt mobile POS configurations, an effort that puts smart devices into the hands of front-line employees. The devices are used to upsell, conduct clientelling, and deliver more personalized service at the store-level. Retailers synchronize and integrate order management capabilities within the POS, enabling users to monitor all ordering processes, regardless of where the customer orders merchandise, or how she chooses to procure it. Retailers incorporate point-to-point encryption and tokenization into POS payment processes. 3. ADVANCED Retailers trade legacy-based POS solutions for unified commerce platforms designed to provide a common view of an order. This gives customers and associates the ability to conduct transactions seamlessly across all channels. Unified platforms enable POS users to gain a consolidated, accurate real-time view of inventory, customer profiles, order status, pricing files, and loyalty files, among other mission-critical operations. Retailers begin deploying mobile-based POS systems. 2. INTERMEDIATE Retailers create multi-channel experiences, enabling consumers to shop online or in-store. However, experiences remain segregated. Retailers begin to break down the silos existing between databases, as well as retailing channels, making way for the new omnichannel POS to become the heart of the store. Supporting an always-on shopping experience, the POS transitions from a transactional-focused device to a customer service portal. 1. BASIC Traditional point-of-sale systems are transaction-focused, designed merely to process an order and tender payments. Retailers add functionality to POS units, including access to loyalty programs as a means of identifying a customer and providing discounts. POS terminals remain data collection devices, as customer loyalty information, product and pricing data, and payment information is shared between devices and the corporate office. Eager to improve the customer experience, retailers test solutions that deliver insight into enterprise information, including inventory and financial reporting. 2

3 Consumers have spoken: the store is an important piece of the omnichannel retailing experience. To keep their brands relevant in this evolving marketplace, retailers must ensure their point-of-sale solutions are flexible enough to support this new business model at store-level. While many continue to upgrade systems to meet today s business needs, these efforts are not enough. 17.7% Retailers up-to-date on the EMV mandate; 55.9% are actively working on implementation. Source: RIS News, Security First Strategies By taking steps to future-proof POS systems, including adopting more flexible architectures, order management, mobility, and payment processing, brands are ensuring front-end devices will sustain current business needs, as well as be prepared for emerging functionality. The Internet has been the linchpin for the evolution of retail, but in a completely different way than expected. The initial introduction of e-commerce had many brands panicking that online competitors would mean the demise of the traditional retail store. Fast-forward to the first decade of the 21st century, and instead, the web has simply become a component within the current retail business model, albeit a significant one. The Internet plays an important role in every aspect of the consumer s shopping journey, across every channel both virtual and physical. It has also created a digitally-savvy shopper, one who demands her favorite brands adopt more web-based tools if they want to earn and keep her loyalty. Two-thirds of online consumers visit a physical store before or after the transaction, according to On Solid Ground: Brick-and-Mortar Is the Foundation of Omnichannel Retailing, a report from A.T. Kearney, compelling retailers to accept the value of digital customer-facing tools. From webbased kiosks, digital signage and self-checkout, to smart handheld and tablet-based ordering solutions, these touch points deliver the value that web-savvy shoppers crave. Conversely, their functionality has also made many existing POS systems obsolete. As retailers begin to take a hard look at how their current POS systems will play a role in the new retailing business model, many are discovering their current systems indeed fail to meet the needs of the omnichannel shopper. Key Components of Today s Point of Sale While many retailers used to focus on improving checkout speed to deliver 3

4 2/3 Online consumers that visit a physical store before or after the transaction. Source: A.T. Kearny, On Solid Ground: Brick-and- Mortar Is the Foundation of Omnichannel Retailing a higher level of in-store customer service, that is merely table stakes in an omnichannel world. Today s POS system is the cornerstone of omnichannel retailing, and must support a consistent user experience between digital and physical channels, as well as integrate the many expanding ordering and fulfillment options. Among the changes currently stretching the functionality of today s POS platforms include: EMV Compliance. With data breaches becoming a dangerous cost of doing business, retailers need to ensure they can protect sensitive customer data, especially their payment information. Too often however, brands POS systems and payment devices are key infiltration points for savvy hackers. The fast-approaching Europay, MasterCard, Visa (EMV) standard hopes to reduce many of these incidents. The upcoming EMV Liability Shift requires retailers among other industries to implement solutions that accept and process chip-enabled payment cards. Unlike traditional magnetic stripe cards, microchip-embedded cards are nearly impossible to duplicate. Effective October 1, 2015, the mandate requires retailers to be able to process EMV compliant smart cards or be held financially responsible for any credit card fraud committed in their stores. However, a good news/bad news scenario continues to play out. The number of issued chip cards is expected to reach 600 million by the end of 2015 and a substantial number of POS terminals will be enabled in the same timeline, said Randy Vanderhoof, director of the EMV Migration Forum. Yet, a mere 17.7% of retailers are up-to-date on the EMV Mandate requirements, with another 55.9% actively working on implementation, according to Security First Strategies, a report from RIS News. Omnichannel Integration. There is no secret that omnichannel retailing is considered the new standard retailing model an issue that is prompting 55% of companies to make omnichannel integration one of their top store priorities, according to RIS News The 12th Annual Store System Study 2015: Making Stores Matter. However, as retailers continue to bring more digital customer touch points into the selling experience, brands need to ensure POS systems can support every omnichannel operation ranging from sales tracking, inventory management, promotion management, strategic planning and budgeting, accounting and loyalty management, as 4

5 INSIGHTS PETE CATOE Founder, President, & CEO ECR Software Corporation (ECRS) A single synchronized database for items, sales, vendors and customers is at the core of the modern system. The system extends seamlessly to the web, and to thousands of stores, and excels at transaction processing as well as detailed and historical reporting. ECRS provides an end-to-end retail technology suite, built with modern system architecture, that delivers comprehensive enterprise automation for the most demanding of retail environments. The ECRS solution suite includes: point of sale, self checkout, mobile technology, inventory management, supplier integration, ecommerce, P2PE payment processing, back office analytics, centralized multi-store management, warehousing, customer loyalty, and more. To learn more visit, www. ecrs.com or call (800) Next-Gen Enterprise Systems Combine Disparate Solutions, Removing Hand-Offs Q: What does the next-generation POS look like and how do retailers need to change their model? PETE CATOE: Well, it might be better to call the next generation retail system an enterprise system rather than a POS system. Even the best of previous generation systems forced the retailer to cobble together a collection of systems from multiple vendors to manage registers, the back-end, reporting, loyalty, labels, customers, and so on. The next generation system combines these into one and removes the hand-offs within the business that causes delays, mistakes and lost profit. The retailer becomes more agile, more competitive and more profitable. The modern system allows the retailer s HQ to control every aspect of the cashier and user POS experience. These systems can run offline without losing a step, bring front-end transactions to the back-end without delay, create e-coupons based on customer activity immediately, and flash price changes to every terminal without delay. For the technically inclined, a single synchronized database for items, sales, vendors and customers is at the core of the modern system. The system extends seamlessly to the web, and to thousands of stores, and excels at transaction processing as well as detailed and historical reporting. It seamlessly provides a high performance transaction engine as well as powerful OLAP cubes to enable smarter retailer decisions. Q: What role are mandates such as PCI DSS and EMV playing when it comes to future-proofing POS upgrades and new omnichannel POS models? CATOE: PCI DSS, EMV, e-wic and P2PE mandates are making it necessary for the retailer to rethink how they select credit authorization providers. These new mandates require the POS vendor, credit card authorization platform, PINPad or card reader makers to work in a highly coordinated fashion. If retailers choose systems dependant on a single authorization provider, they ll find themselves held hostage to the provider. Coordinated and certified direct interfaces, with the biggest and the best, allow retailers to use market forces to keep credit authorization costs down and minimize switching cost. Q: Why should retailers be looking at Amazon s retailing/checkout model for inspiration? CATOE: Amazon clearly has set a new standard in streamlining the shopping transaction experience. Much of their success comes by way of eliminating steps within the transaction, an addictive two-step click and ship process, which consumers love because of its speed and ease-ofuse. Retailers need the transaction experience to make the consumers shopping life hassle free. In regards to strategically confronting the 5

6 INSIGHTS Next-Gen Enterprise Systems Combine Disparate Solutions, Removing Hand-Offs (continued) The good news is that rip and replace is likely more affordable and easier to do than retailers expect. The best modern systems come pre-baked with features and functions based on years of learned best practices and smart use of new technology. PETE CATOE Founder, President, & CEO ECR Software Corporation (ECRS) Amazon impact, General Patton said it best; Hold em by the nose and kick em in the pants. Retail leaders should demand that POS and web transactions share the same business logic and data. A comprehensive, unified transaction strategy will help neutralize the pure play online retailer s strengths while attacking their current inability to provide same day product. I believe a unified consumer experience is key, leveraging the local footprint advantage that traditional retailers have over the pure play web retailers. Only a modern POS system can provide this type of strategic capability. Q: The next flavor of omnichannel POS is going to be much more Blended, integrating traditional with forward-looking options a role that requires significant investments. How can retailers avoid the cost of a rip-and-replace, yet still get their desired next-generation POS? CATOE: The bad news is that older POS systems put in place during the late 90s and early 2000s cannot provide a unified consumer transaction experience between the store and the web. More specifically, the older systems combined with 3rd party web carts have two different sets of business logic, so the customer can t enjoy the same benefits on the web as they do in the store, and vise-versa. The good news is that rip and replace is likely more affordable and easier to do than retailers expect. For one, software customization is drastically reduced or eliminated in the new systems. The best modern systems come pre-baked with features and functions based on years of learned best practices and smart use of new technology. Besides, optimal systems will often eliminate scores of 3rd party applications and/or services, or what I like to call technical debt, which the retailer may be using to complete the older generation store system. On a closing and important note of caution, many retailers, particularly in the grocery space, will use branded 3rd party shopping in delivery services, as a quick fix to meet growing consumer demand to shop over the web. Many will feel compelled to do this, because their existing POS systems are inadequate to meet the new challenge. I believe this is a monumental mistake; it s vital that the retailer retains the brand, relationship and technology between them and the customer and not abdicates to a 3rd party. Modern retail enterprise systems allow retailers to maintain control of their brand, customer relationship and technology, as consumers learn to use web and local shopping interchangeably. 6

7 40% Companies that consider mobile-enabled processes and apps key components of the omnichannel strategy. Source: EKN Research, State of the Industry Research Series Q4 2014: A Step-By-Step Approach to Improving Omni-Channel Customer Profitability summarized in The State of the Industry Report Series 2015: The Pointof-Sale Blueprint, a report from EKN Research. Currently however, 36% of retailers continue to struggle with how to use their POS to drive customer service, while 35% are challenged with how the POS can support the rising influence of the online channel on retail sales, the report said. Fulfillment. The omnichannel business model has also changed the role of fulfillment. No longer are there only two fulfillment options store-level procurement or home delivery. As tech-savvy shoppers began demanding more flexible fulfillment options from buy online-pick-up in-store and ship-to-store to traditional warehouse shipments or vendor drop shipping POS systems struggle to not only track order status but to manage the new generation of anywhere fulfillment. POS must be able to support fulfillment and returns in a non-linear buying process, yet many systems fail to meet these needs. Mobility. A connected offline/online experience clearly is a building block of a successful omnichannel experience, and mobility can be credited for moving the needle. While the first step in many retailers mobile journeys was to simplify mobile users interactions with online channels, retailers are now focused on a mobile-first environment that supports the customer experience and improves business efficiency. More specifically, 40% of companies consider mobile-enabled processes and apps key components of this strategy, according to EKN Research s State of the Industry Research Series Q4 2014: A Step-By-Step Approach to Improving Omni-Channel Customer Profitability. Legacy Systems Frustrate Retailers Omnichannel Efforts As companies try to accommodate these and other emerging services, they are quickly haunted by their past past POS decisions, that is. With the average POS lifespan teetering at 6.9 years, as reported in EKN Research s The Point-of-Sale Blueprint, report, chances are many companies existing POS systems pre-date the increasingly evolving omnichannel business model. It is an issue that not only has retailers struggling to address consumers increasing business needs, but also poses a new set of challenges. Besides the systems simply depreciating in value, each of the aforemen- 7

8 The number of issued chip cards is expected to reach 600 million by the end of 2015, and a substantial number of POS terminals will be enabled in the same timeline. RANDY VANDERHOOF, DIRECTOR OF THE EMV MIGRATION FORUM tioned factors continues to stretch the functionality and support of existing POS solutions. And this functionality will be a mere benchmark for the many more changes that are on the horizon. The reason existing systems are struggling to achieve retailers current needs is because of rigid, legacy-based operating systems. These solutions, which are often disjointed and operated in silos, lack the scalability and flexibility needed to handle enterprise-wide management of customer purchase history, inventory levels and logistics operations. Meanwhile, integrating these new solutions becomes a back-end nightmare, as disparate tools are cobbled together with band-aid solutions that add more complexity to an already intricate architecture. Based on these issues, retailers find themselves struggling to integrate the many disparate systems running across their omnichannel operation. Specifically, 35% of retailers reported disparate technology between online, mobile and store operations are a barrier to success, according to Customer Desires vs. Retailer Capabilities: Minding the Omnichannel Commerce Gap, a report from Forrester Research. While their gut instinct is to hand-stitch offline and online solutions together in hopes of achieving the proper level of connectedness, that is clearly only exacerbating the problem. Retailers that can avoid making these mistakes today will protect their systems from constraining brand growth and opportunities tomorrow. Unified Commerce Takes Center Stage The good news is six out of 10 retailers are in the market for a new POS platform, and will make a purchase decision within 24 months, according to EKN Research s POS Blueprint, report. Their top priority is an architecture that can support current and future needs. Next, the solution must be capable of combining a collection of best-of-breed systems on a centralized platform. Clearly, it must be designed to manage mission-critical transactional tasks, such as tendering, back-end operations, reporting and loyalty program support. Looking ahead, it will be a means of supporting multiple operations and integrated business processes in the omnichannel retailing model. 8

9 35% Retailers say that disparate technology between online, mobile and store operations are a barrier to success. Source: Forrester Research, Customer Desires vs. Retailer Capabilities: Minding the Omnichannel Commerce Gap Some call this concept the next-generation POS platform. Others define it as an enterprise retail system. In simplest terms, this new system is best described as a unified commerce platform. Providing a common view of an order and allowing customers and associates the ability to conduct transactions seamlessly across all channels is what makes the unified commerce platform a must-have for the evolving retail business model. Danier Leather kicked off its unified commerce platform journey in its flagship store at the iconic Toronto Eaton Centre shopping mall. Supporting a sleek hardware platform that enables faster, smoother POS transactions and offers versatile design and advanced performance, the new single platform enables the retailer to deploy consumer-focused applications, energy-efficiency, and tools that drive productivity and customer service. While the centralized platform currently integrates current transactional tasks, it is designed to support future enhancements, including new order management, omnichannel and mobile capabilities. The solution not only meets our technology and design requirements today, but positions us for a successful future as business requirements evolve, Danier Leather CIO Rodney McBrien said. Future-Proof Functionality The ideal unified commerce platform can effortlessly integrate missioncritical operations, as well as blend the largest influencers of the all-channel shopping experience. This combination will enable chains to use web and local shopping interchangeably at store-level a key differentiator as the digitally-driven shopping experience continues to evolve. While the process is still in its infancy, the biggest influencers for today s unified commerce-supported POS are: Mobile POS. Once considered an innovative way to modernize the cash wrap, mobile POS is becoming a priority for retailers eager to interact with shoppers at every stage of the all-channel experience. Using both handheld and tablet form factors, associates use the devices at a dedicated POS station, or right on the sales floor. Among the most popular processes of the new mobile POS configuration are transaction management, assisted-selling apps, ordering functionality, and access to customer profiles, inventory databases and clientelling services all capabilities that drive 9

10 6.9 YEARS Average POS lifespan. Source: EKN Research, The State of the Industry Report Series 2015: The Point-of-Sale Blueprint customer engagement. Mobile POS is making such an impact that worldwide shipments grew by 77.4% in 2014, and this growth is expected to maintain this pace by year s end, according to Mobile POS Terminal Market Share, a report from IHL Consulting Group. One retailer contributing to this growth is Macy s. The department store s new handheld POS devices and tablets enable sales associates to engage customers more effectively, offer merchandise ideas and product information, and speed up transactions. Pilot stores are linking this mobile POS to kiosks that give associates and shoppers access to Macy s omnichannel assortments, interactive look book displays, and the ability to make a purchase via mobile devices. Currently, these solutions are available in select stores in Georgia and New Jersey, but are in the process of being refined and rolled out to additional stores. New Payment Option Support and Security. Between the introduction of mobile payments, and chip-based payment cards that satisfy the anticipated EMV mandate, retailers POS platforms must be designed to support and comply with all evolving payment options. Retailers top priority should be securing payment processing that occurs at the POS regardless of the payment method shoppers utilize. With more information flowing across POS systems, peripherals and networks, more retailers are creating a game plan to protect sensitive customer information and ward off data breaches. As a result, 44.1% of retailers are currently up to date on point-to-point (P2P) encryption technology, according to RIS News Security First Strategies, a process that encrypts data in a designated tunnel of sorts, between the POS and a third-party processor. Meanwhile 48.5% are using tokenization, or the process of replacing sensitive data with an identifier created from random numbers, the report said. By essentially removing sensitive primary account numbers from the retailer s network, brands minimize exposure of sensitive data to potential hackers, reducing the risk of compromise and unauthorized access to sensitive data. Both efforts will keep retailers in compliance with the upcoming EMV mandate. Order Management. As more customer touch points are adopted, each 10

11 77.4% Worldwide mobile POS shipment growth in Source: IHL Consulting Group, Mobile POS Terminal Market Share one must work part-in-parcel, accessing the same customer and product information that is managed in-store at the POS. This requires future POS systems to synchronize with all ordering processes of in-store and virtual digital channels, including pinpointing product availability, where it resides prior to being purchased, while it is in transit, as well as once it is in a customer s arms. Most importantly, Nuevo-POS platforms must be integrated with inventory management systems, as well as fulfillment processes, to streamline buy-online-pick-up in-store, ship-to-store and ship-to-home services. With 45% of companies expecting to improve or invest in buy online/pick up in store, ship-from-store, and inventory visibility services up significantly from 26% last year, according to The 2015 State Of Retailing Online, a report from Shop.org and Forrester Research, retailers POS platforms must be ready to support these and future services if they want to differentiate themselves in the omnichannel marketplace. Conclusion While retailers are focused on how to maintain a POS platform that can support today s evolving always-on shopping experience, the impact of mobility, EMV and new fulfillment options are beginning to take a toll on current POS functionality. By adding a unified commerce platform that supports emerging payment options and security, omnichannel fulfillment, and order management, brands will better position themselves to compete in an ever-evolving retail model. 11

12 RIS INFOGRAPHIC FUTURE-PROOF POS 17.7% 2/3 77.4% Retailers up-to-date on the EMV mandate; 55.9% are actively working on implementation. Source: RIS News, Security First Strategies Online consumers that visit a physical store before or after the transaction. Source: A.T. Kearny, On Solid Ground: Brick-and- Mortar Is the Foundation of Omnichannel Retailing Worldwide mobile POS shipment growth in Source: IHL Consulting Group, Mobile POS Terminal Market Share The number of issued chip cards is expected to reach 600 million by the end of 2015, and a substantial number of POS terminals will be enabled in the same timeline. RANDY VANDERHOOF, DIRECTOR OF THE EMV MIGRATION FORUM 40% 35% 6 10 OUT OF Companies that consider mobile-enabled processes and apps key components of the omnichannel strategy. Retailers say that disparate technology between online, mobile and store operations are a barrier to success. Retailers in the market for a new POS platform, and that will make a purchase decision within 24 months. Source: EKN Research, State of the Industry Research Series Q4 2014: A Step-By-Step Approach to Improving Omni-Channel Customer Profitability 6.9 Average POS lifespan. Source: EKN Research, The State of the Industry Report Series 2015: The Point-of-Sale Blueprint YEARS Source: Forrester Research, Customer Desires vs. Retailer Capabilities: Minding the Omnichannel Commerce Gap 45% Retailers Source: EKN Research, The State of the Industry Report Series 2015: The Point-of-Sale Blueprint expecting to improve or invest in buy online/pick up in store, ship-from-store, and inventory visibility services. Source: Shop.org and Forrester Research, The 2015 State Of Retailing Online