Point of Sale (POS) systems used to be what we all called electronic cash registers that weren’t much more than a cash drawer bolted on to the bottom of a PC. But as the systems have gotten more sophisticated, they now play an ever-increasing and important role in how a business can integrate its accounting systems, cut operating costs, track their inventory and improve the efficiency of their supply chain partners. The wrong systems can literally send customers out of the store in frustration, while the right ones can deliver higher levels of customer service and increased customer satisfaction. Here are some examples of how retailers have evolved their POS systems and how they are integrated into their overall IT operations.
>> ADD: One sign of how far POS has come is a recent announcement by CDW to offer merchant services from Chase Paymentech Solutions, along with integrated data capture and POS tools. The idea is to simplify installation and allow their retailing customers to have a more integrated approach for processing payments.
Last year, the POS of clothing designer Nanette Lepore was compromised by hackers, who had reconfigured the outdated firewalls and sold some stolen credit card numbers from their high-end clientele. This happened because the chain of retail stores had little or no security measures or proper procedures. “All of our store clerks were using the same password to access the POS,” says Jose Cruz, the network manager for the New York City-based retailer. “It was wide open. No one had ever thought to change passwords periodically, or even use different ones for each user. Prior to my arrival here, the emphasis on POS security wasn’t urgent. Needless to say, this all changed.”
Cruz got a call that no one ever wants to receive – from the FBI, telling them that several of their customers had received fraudulent credit card charges. This led to finding out that their Netopia DSL routers had been hacked, and their firmware had been changed to allow hackers inside their network. “At least three months’ worth of information was pulled from our networks. And given that our average transactions are several thousand dollars, they were clearly targeting us,” said Cruz.
Three of their stores had to close for a few days while they beefed up their security, implementing Sonicwall unified security appliances to protect their stores and branch office applications. In addition to the new security devices, they also have set up temporary accounts that have time limits for service and maintenance personnel and enforce the use of SSL VPNs for secure remote access. And they have set up password policies and have beefed up their procedures for using both their POS and credit card systems. “We have learned our lesson from the breach, but there are lots of other retailers that are still not as well protected as we are. For us, it was a matter of rapid growth that overtook the level of technology the company previously used. We are in a much better place now, to the benefit of our clientele, too,” says Cruz.
POS systems can play a big part in increasing or decreasing business sales and customer satisfaction depending upon the time it takes the POS register to ring up customer transactions. Golden Spoon Frozen Yogurt is a Thousand Oaks, California-based chain of frozen yogurt shops. Their long customer lines during their peak summer months, inaccurate register transactions, disgruntled customers and disparate systems, forced Rich Ferraro, the owner of the local franchise, to look for more efficient and automated methods to solve his problems. “I knew we had to increase our operational efficiency and speed up our order-to-purchase process or customers wouldn’t return,” he says. “We knew we had to replace our electronic cash registers because our most experienced and efficient employees took two minutes or more to process a credit card\ sale.”
Ferraro called in a POS specialty VAR CKS Business Solutions, who had developed a POS system based on Microsoft Dynamics Retail Management System that was installed at other franchisees of the chain. The system integrated and automated their POS needs and more importantly, the stores could add features when they needed them and could train their employees. “Now transactions take a maximum of 20 seconds and lines are shorter. The new system is swipe and go, and it is easier to explain and train employees.”
POS systems can also be used to consolidate a wide variety of information into a single place, and this can benefit even the smallest operations.
“I run an art studio teaching both adults and children and use our PayGo POS system as a consolidated database,” says Suzanne Gayle, the owner of Star Arts in Hayward, Calif. “It has everything in one application that I need to run my business. Sure, I could have developed my own Excel spreadsheets and Filemaker Pro databases and Word documents, but having the Paygo.com software – especially a Macintosh version – makes it much easier for me, and also keeps all this information much more secure. I even input the names and pictures of the caregivers that are authorized to pick up my students, so that eliminates any worries or uncertainties from my staff and their parents.”
Another place that a POS system has a big effect is in business intelligence and supply chain automation. Another clothing retailer, Bernard Chaus is using Skypad Business Intelligence, powered by QlikView. Integrating timely point-of-sale data directly with production and distribution data in visual dashboards, Skypad enables them to plan, adapt and move goods through their retail chain of several thousand outlets faster and better than ever before.
“We were dealing with a couple of issues,” says Ed Eskew, the CIO for New York City-based Bernard Chaus. “We wanted visibility at the point of sale to more efficiently track best and worst sellers. Using this timely data we were able to become more nimble in responding to inventory and replenishment levels, and quickly adding inventory when an item was moving well and reducing, discontinuing or re-allocating inventory when items were not selling as anticipated.”
Before the Skypad software, they could only get weekly summaries of transactions and “basically functioned in the dark. With the implementation of Skypad, we were able to determine what specific colors and sizes within a style were actually selling” and began to see the benefits of using the tool.
“Today, we are able to better assist and manage our accounts by virtue of our ability to call up a buyer and share with them our business intelligence data advising what to buy, and possibly when to relocate a style to another store based on activity in that store. Of course, the most significant benefit is in controlling our inventory levels. We no longer over cut, or manufacture goods only to sell them off at the end of a season at a loss,” he says.
Having a better understanding of their sales has also saved the operation money too. “Prior to the implementation of Skypad, unsold inventory might not be discovered until the end of a season, far too late to have a positive impact on salvaging our margins. Authorizing returns or deeply discounting our goods could cost us potentially hundreds of thousands of dollars significantly eroding our sell-through in any one season”.
There are other examples of how having the right POS solution can result in hours of accounting drudgery saved, such as in the consolidation and reporting of sales taxes collected, or doing a nightly cash balance to make sure that an employee hasn’t put their hand in the till. At the Golden Spoon yogurt shops, it used to take them hours to balance their cash deposits against their receipts because they had to do it manually each night, “but with the new Microsoft POS software it is just a matter of minutes as well as increased our accuracy,” said Ferraro.
Clearly, there is a lot going on with POS systems, and if you do any retail business at all it is worth investigating further to determine how you can more closely tie together different computing systems and leverage the near-real time information that is available from them.