Unraveling the Many Mysteries of the POS System
It seems a lot of florists are a bit overwhelmed when it comes to choosing a POS system or even understanding what a POS system is. We put our technical expert James Dion to the task and had him answer the basic questions you had. Hope this helps!
What is a POS system in layman's terms?
A Point Of Sale, or even more importantly, a Point of Service system, is a computer that is used instead of the old fashioned cash register. It’s a personal computer (PC) connected to a receipt printer, cash drawer, credit/debit card reader and bar code scanner.
What can a POS system accomplish?
A good POS system achieves two goals. First, it makes the entire process of paying for an item simple and fast. This is achieved by scanning the item with the bar code scanner, (instead of keying in long numbers), getting the customer’s phone number (so you can tie each sale to an individual client) and totaling the purchase and accepting payment easily (the credit/debit card reader automatically dials the bank and gets approval in seconds). Furthermore, if the customer wants to "multiple tender", which means pay part of the bill with cash and part with a credit card, the task can be accomplished quickly and easily. A good POS system will also allow you to suspend a transaction which is invaluable for those times when a customer forgets their wallet in the car or has to run to the back of the store for something they forgot while two or three customers are waiting to check out. With transaction suspense, you can simply touch one key, take care of the other customers in line and when the first customer returns, retrieve the transaction and complete it without re-entering all the items.
The second goal of a POS system is to keep track of what your customers are buying and who they are. A good system will give you reports on what’s selling, at what times of the day or week, to which type of customer and by which sales people. A good POS will also allow you to have reminder dates for each customer so you can call or email them prior to an anniversary or birthday or any other event that they would appreciate that you track for them. Sales information by price point tells you what your customer will spend within a classification or event. Sales by vendor reports tell you which vendors are performing. The more information you can capture, the more efficiently you can control your business and your buying.
Why do I need a POS system?
Ten years ago it was probably possible to run a retail store without a computer. Today, it’s impossible. Your competition is using the POS information to better serve their customers and if you delay they will be using it to better serve your customers!
What's available on the market and how do I choose the system that's right for my store?
At last count, there were over 300 POS products on the market and this number grows almost daily. Choosing the right system amongst all these choices is not easy. I would suggest the following criteria for selecting a good system.
1. Is the system used by at least 2,000 other (insert your store type here!) stores? You don’t want to be the guinea pig for a new system. You must to ensure you’re dealing with an experienced company that has sold the technology to other retailers, particularly retailers like you.
2. Will the company give you the names and phone numbers of at least 10 other stores like yours that are using the software so you can call a fellow retailer No one will give you the real story about software or hardware except a fellow retailer. Make the call.
How much can I expect to pay?
The average price for a one-register store including all hardware, software, training, installation etc., is around $15,000. You can spend less, but you will get what you pay for. This is your future of your business, don’t try to cut corners. Buy good hardware that has on-site warranties, good training and lots of help. That $15,000 investment over five years is only $3,000 per year depreciated. Don’t be confused by the low price of PC’s today and expect to pay a couple of hundred dollars for your POS equipment. Quality costs money and you want the best hardware that you can get, you will save more in the long run with less down time and fewer service calls. Also, a large part of your budget is for training and whatever you do, never skimp on training yourself and your staff on the system.
I'm not good with computers, how will I ever learn to work a POS system?
Computers are still not as easy as cars to use. That fact has changed only slightly in the past 20 years. It will require you to learn a new skill. Is it that difficult? The answer is yes if you try to do it by yourself. The answer is no if you buy from a good company that offers training and instruction.
Do I need a different system for computerized inventory and for a customer database, or can I use the same one?
Only one is necessary. As a matter of fact, all of my comments up to now on POS system really meant a fully integrated system including inventory, purchase order and customer database controls. The good systems are fully integrated and one of the most important components is the customer database program which allows you to identify which customers purchased what items. These databases tie every SKU to a customer’s name and allow powerful queries/questions to be performed. A customer database can be used in limitless ways. For example, it can list all the customers who purchased a certain type of product, and send them an offering on a related item. Or it can send your 100 best gross margin customers a nice gift at Christmas, and send your lowest 50 gross margin customers a pre-clearance sale notice, as you know that sale merchandise appeals to them. It can also track important dates for each customer and allow you to be pro active in reminding your customers of upcoming birthdays and anniversaries.
How does a POS system assist me with my buying?
It will tell you what you sold last year/season, which is a tremendous help when planning for the coming year. A good computer system can allow you to look at inventory on a daily basis, identify what items are not selling and focus attention on problem areas, identify hot items and confirm that there is enough stock on hand and on order to meet the demand. You will soon discover, however, that you will also need an additional piece of software called a spreadsheet (Lotus or Excel) to prepare your open-to-buy budgets.
Won't it be a lot of work to SKU all my products?
Yes it will. There is no way around it. If you sell by the SKU you have to buy by the SKU and make sure that every item in your store has a bar code. The good news is that many suppliers are starting to put UPC bar codes on their products and this saves us money by not having to put them on ourselves.
If my sales are only $200,000, is a POS system right for me?
If you want to stay at $200,000, then no you don’t need a POS system, just a funeral director who will wait a few years for you to arrive. Just kidding! Even at current sales of $200,000 the $3,000 a year investment that I talked about earlier is only one and a half percent of your sales. This percentage is what most retailers spend on technology today.
What if my staff doesn't want to learn how to use the system?
Convince them that it will not only make the store better for customers, but will also make them more effective in serving customers.
How much will it cost me to train them?
Depends on the system and the person. Figure at least $500 per employee for basic training and up to $2,000 for complete full system training. Most of your employees will only need the basics and you can implement a ‘train the trainer’ format where you go and get the training and then give it to your staff. Also, look for companies that have good software manuals. This reduces training costs.
Can a POS system track internal theft?
It can track theft and inform you of how much you’re losing, but it can’t tell you who’s doing it. Only a video camera can do that. You also have to be careful of human error which can cause what appears to be theft, but are actually bookkeeping errors. For example, if you receive 36 items that are supposed to sell for $45 each and a price label falls off and it’s sold for $40, the system will report a $5 shrink. Human error accounts for over half of most stores’ shrinkage.
Are all POS systems the same? Can a system designed for a clothing store work in a hardware store?
No, one size does not fit all. It’s best to go with a software company that specializes in your type of store. The main reason is not that the clothing software won’t work for you (it probably will as clothing software is amongst the most complex due to size and color issues) but rather that any new developments in the software may not be built around your shop needs. You’ve heard the old cliché, "There is strength in numbers". This is especially true in software. The main customer base will be heard long before the few other stores that use the software.
Good luck. If you need more information, check out my Web site www.dionco.com for links to software companies and the latest technology information.
James Dion is the owner of Dionco Inc., The Future of Commerce. He has an extensive background in retail selling, information technology, marketing, training, buying and administration. E-mail James at jimdion@dionco.com.
They Really Should Call It Point Of Service!
Point of Sale, often referred to as POS should really be called Point of Service. In any company, if you really want to understand what is happening, look at where the money changes hands. All too often this critical moment that is the culmination of all our marketing, advertising, store design and layout, inventory management, assortment planning, in store signing, sales associate training, pricing and merchandise presentation is not a pleasant experience for our customers. In all the excitement of the threat of the new e-tailers it is becoming even more lost in the shuffle.
Abandoned Baskets
As a matter of fact, one of the least talked about statistics on web sites are "abandoned baskets". Unless you are a grocery store, you may have never heard of this statistic. In a grocery store we look at how many customers came into the store, filled or partially filled a basket and then abandoned it before they reached the Point of Sale. Often, if this number of abandoned baskets is high it is a pretty strong indicator that our lineups were too long at POS and the customer got frustrated and left. Now, this is not the reason for every abandoned basket, some are due to genuine emergencies that customers have (such as forgetting their wallets!). The same statistic is tracked on the web. In this case, it is the measure of how many customers filled their shopping baskets and did not complete the order. In the case of the web, abandoned baskets are not felt to be caused by "long lines" but rather by sticker shock when the customer sees the delivered price after shipping and handling has been added. In supermarkets if you had ten percent abandoned baskets you would have a serious problem, on some web sites abandoned baskets can approach 30% or higher. Clearly showing a real problem with that Point of Sale.
Multi Channel vs Pure Play
Despite all the hype about web retail and virtual retailers the reality is that most business is still being done by "brick and mortar" retailers. For most categories, even in the next five years, web retail will not exceed 15% of total sales. What we are seeing is that the slow-to-web brick and mortar retailers are now beginning to adopt a multi channel approach. This approach is widely believed to be the one that will win more customers than pure virtual retail or pure brick and mortar. The multi channel approach is very simple, it is saying to the customer, "Any way that YOU want us to serve YOU, we will." This means that the customer can shop in our store, call us on the phone to order products, browse our catalogue (if we have one) and visit our web site to shop there. We are available in one way or another twenty four hours a day, seven days a week, 52 weeks a year.
Smart money is on the retail store brand names that customers recognize because they see them every day and are available for quick shopping trips when necessary and also available to deal with returns and adjustments. It has been noted that when the CLUMPS (Computer literate upwardly mobile professionals) no longer dominate web purchasing, as they do now, and middle America begins to trust and shop the web, that the majority of customers will choose stores that they are familiar with. Don’t you think that it will be more likely that a customer will remember Sears.com or Wal-Mart.com and not wehaveeverythingintheword.com?
Where It All Happens, Point of Service
As we noted in the beginning of this article, today we have to be where our customer wants us to be and provide the service that they require. There is probably no more demanding space than the last three feet in the store, when we consummate the transaction with the customer. Have you ever stood in a grocery store line, or a line at the Gap or Toys R Us? Most of us have, and what we notice is that most of the time the process moves relatively quickly. What we often fail to notice is that one of the reasons for this is the hardware that these companies use. POS hardware is often the most overlooked and under planned component in almost all independent retail businesses. Often the owner or manager selects a PC based POS system and then makes the mistake of believing that one computer is the same as another, and price becomes the determining factor.
So they go off and buy a low priced PC, often with the standard keyboard that comes with the machine (about a $10.00 part, by the way) and then add the cheapest receipt printer that they can buy (which also takes about five minutes to change/add new paper), a LED scanner that has to touch the bar code to read it, and add a cash drawer. Then, when confronted with the credit card dilemma, often opt for a free standing credit card approval box that is separate from their PC system. Is it any wonder that after a few months the keyboard begins to stick, the scanner no longer works, the credit card machine falls off the counter, the printer jams or produces receipts that are all but unreadable?
Sleeping with the Enemy
I have always found it fascinating that many retailers turn into just the type of customer that they themselves do not want in their own stores. A customer that is not interested in quality or service, just price. I call it "sleeping with the enemy." As retailers we try to impress upon our customers the folly of trying to get something for nothing, and the lesson that quality and functionality do not come cheap. How often have you wanted to grab a customer, shake them and tell them that you can’t pay $12.00 for an item and expect it to perform and last like a $50.00 item?
Our POS hardware should be the last thing that we have to worry about in our store. It should be rock solid, easy to repair (this means that service and parts are easy to come by), fast and durable. You don’t get all this by paying the lowest price! Receipt printers should be ultra fast and today, thermal is often the way to go. Scanners should be laser and be able to read a bar code from at least six inches away, keyboards should be heavy duty and have a built in card swipe for credit cards. Many retailers are also not providing customer pole displays and this is often a mistake. Today, customers are very interested in what items are scanning at, and a customer display is a great service to the customer. How many of us have to wait to read the receipt to know that we were charged the wrong price?
A great POS system can add a substantial amount of money to a retailers bottom line. By reducing the time for customer check out, we can sell more customers with less staff time and in high transaction environments, even with fewer lanes. Additional benefits will also come from fewer items mis rung, lower maintenance and repair costs, less down time, faster inventory turnover and better replenishment of sold merchandise. A study that we did a few years ago demonstrated that automated POS increased profitability by over 25% in a gift store.
Point of sale is where it all takes place in a store. If I can’t quickly and efficiently collect the sales dollars from my customers, they will go elsewhere. Have you ever wondered why the major retailers have those great big, heavy-duty cash registers at point of sale? You might figure that they could just get away with a low price PC and cash drawer. What the big retailers have discovered is that well made POS equipment and software pays for itself in a very short period of time. They seldom have any bottlenecks at point of sale and their hardware and software stands up to very tough use. This quality and reliability costs money. A good PC and cash drawer configuration is only about 50% more expensive than the low price models, but the peace of mind and service to the customer is always worth much more.
Recognize that quality costs money and training takes time and money. We often do not ever compute the cost of all the breakdowns on the cheap products and the extra time spent self teaching ourselves the wrong way to do something on our machines. If we spent a little more for hardware, software and training we would be amazed at how much productivity we would gain. Expect to pay up to five to eight times the price of software to learn how to use it properly and up to 50% higher for better quality hardware. Then you can and will get huge increases in productivity that will more than pay for this small investment.
New POS machines are also making it easier to set up and change peripherals. The new USB ports are making it very easy to add not only receipt printers, but also report printers, scanners, scales, customer pole displays, cash drawers and other devices that we may need to change quickly. A good rule of thumb for POS is that it should be easy for our staff to learn and use and fast and almost transparent for our customers.
