RSR Research: Why Not Mobile POS?

Apr 05, 2011

Through a special arrangement, presented
here for discussion is a summary of an article from Retail Paradox,
Retail Systems Research’s weekly analysis on emerging issues facing retailers.

a recent study, RSR found that for 74 percent of retailers queried, the top
business challenge is that “consumers expect retailers to provide
a more seamless omni-channel experience.” But that challenge, at least
as it relates to payments, is complicated by the different speed of adoption
coming from consumers in different channels.

RSR recently conducted interviews
with retail executives to understand the impact of consumers’ cultural differences
on retailers’ payment offerings.
a sampling of what we heard:

  • “The payment world [in any channel] is driven to some level by what
    the consumer expects. They’re not evolving very quickly in the store environment.
    But they are [evolving quickly] online.” – Director of IT
  • “Our demographic expects us to keep up with them and they move very
    quickly. While I don’t expect many in-store customers to use PayPal [mobile]
    in the short term, we get tons of positive feedback for being so forward
    thinking and customer friendly.” – CEO
  • “That 90 percent of our in-store customers opt for an email receipt
    shows that customers are more than ready to embrace eCommerce functionality
    in a retail setting.” – CEO

With payment systems shifting from cash and checks as the primary tender in
favor of credit and debit, stored value and gift cards, and even innovative
payment structures like PayPal, eBillMe and new form factors (for example
“smart” mobile phones equipped with near-field-communications for contactless
payments), a larger question looms: What is the future of point-of-sale (POS)?

POS, as we
have known it (that expensive, stationary collection of gear physically attached
to a LAN and back-office redundant controllers), is there to do two things:
1) decrement inventory, and 2) take money.

Consumers who shop at the Apple
Store have experienced where the physical and digital worlds meet — mobile
POS. Apple’s iPod touch POS system enables
store employees to quickly check inventory, accept a credit card transaction
and issue a digital receipt right on the sales floor. That functionality is
fundamentally no different than a web-based customer order process. Since late
2009, rumors have circulated that Apple will sell its POS system to other retailers.
In the meantime, other technology companies have emerged that want to enable
Apple-like capabilities.

Retailers should ask themselves, “Why not?” Payment
systems are traditionally the most over-engineered part of a POS system, because
retailers never want a piece of technology to get in the way of taking customers’
money when it is offered. But the truth is that mobility works for payment
handling and gets better every day. That’s 50 percent of the traditional POS
system’s functionality. For the other 50 percent (decrementing inventory) to
“go mobile,” solutions
providers and retailers need to deliver a scalable, fast and cost effective
alternative to stationary scanning and tie that to the customer order fulfillment
rules used in non-store channels. When that happens, in-store POS will be a
part of a consistent customer order management across all the channels — and
omni-channel payment processing will have led the way.

Discussion Questions: Is retail and the consumer ready for mobile POS? Do you see payment handling or inventory management as the bigger hurdle toward rolling out mobile POS?

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11 Comments on "RSR Research: Why Not Mobile POS?"

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Paul R. Schottmiller
Paul R. Schottmiller
10 years 1 month ago

We won’t get there with a one size fits all transformation, however, the technologies are there and some consumer segments are ready. Re-engineer the process for the next generation of speed and convenience and you will see steep adoption curves. Apple putting NFC in the new iPhone (not official but expected) will help push innovation in this area.

No paper receipts and no plastic cards during checkout are within reach.

Bill Bittner
Bill Bittner
10 years 1 month ago
The whole discussion of payment systems drives me bonkers. If you really think about how your time is spent when taking a purchase from the store, very little involves the “payment process.” Much of the time is spent compiling the total, preparing the merchandise for travel (i.e. bagging), and handling point of purchase discounts (frequent shopper card, coupons, etc.). You may consider the POP discounts as part of the payment process, but as long as there are FSIs there will be special handling requirements. Comparing the Apple experience to general retail is dangerous. First of all, there are many times I walk into the Apple store and there are more sales people than customers. Their whole foundation is based on the “customer experience.” They have a limited product line that their staff knows inside and out. The staff can guide each individual customer through their whole selection process and purchase. It only makes sense that the staff person who has “clinched the deal” would follow through with recording the sale. The whole area of contactless… Read more »
Fabien Tiburce
Fabien Tiburce
10 years 1 month ago

The problem with mobile POS is that it is shaping up to be extremely fragmented. Customers may be reluctant to be treated as guinea pigs as 10 different retailers try 10 different mobile payment systems. Now is the time for a large enterprise vendor to spear-head an “open” mobile payment protocol that will benefit all. Customers want a simple way to purchase goods using their mobile, they won’t want another Betamax vs VHS, Blu-ray vs HD DVD, etc….

Cathy Hotka
10 years 1 month ago

Customers are ready now…unless they prefer waiting in line, and paying with credit cards with outrageous fees. (And now that retailers have forced the banks to reduce their interchange fees on debit cards, the banks are fighting back by raising fees on customers.) This is valuable research and should help persuade retailers to bring it on!

Max Goldberg
10 years 1 month ago

As demonstrated by the Apple stores, consumers are ready for mobile POS. The first time I experienced it at an Apple store, I was amazed at how quick and seamless it was. Mobile POS won’t work at every retailer (Apple has a limited number of SKUs ad does not keep their inventory on the floor), but it should be explored.

Gene Detroyer
10 years 1 month ago
Keep your eye on the customers. My elderly mother would think she is being cheated if she didn’t leave the store with a piece of paper confirming the transaction. My MBA students don’t understand why they can’t make all retail payments with their smart phones. The generation of my students will win. The retailers who don’t recognize that will lose. There is nothing in the POS process that can’t be done in a mobile environment. The purchase in the store can be no different than the purchase on line. There is no more functional requirement that a hard POS system must exist at the store level than there is when one purchases through their smart phone. The biggest hurdle to the development of these systems is the lack of imagination by retail executives. Technology will transform if not obsolete the store as we know it and many of today’s retailers are fighting it. Not necessarily purposely, but because they have no vision of what the future is bringing.
Ralph Jacobson
10 years 1 month ago

I am totally in favor of the Apple Store POS experience. Large transactions with multiple items will still require an evolution of the transaction process. I am more than open to innovative experimentation by the retailers, however!

W. Frank Dell II
10 years 1 month ago

One size does not fit all. We started with cash and the added checks. To this we added credit and then debit cards. To speed up the check out process (in theory) we have consumers self scan. Now we are seeing mobile POS from Apple. It works well for Apple as the typical customer only buys a few items. This will not work in a supermarket with 30 or 40 items. Mobile POS will likely be in the eating-away-from home market before wide use in retail. I think the next leap will be consumers using their cell phone for payment as a replacement for credit and debit, before we see wide use of mobile POS by retailers. It all depends on the retailer. Those with few checkout items can and will move first as they get higher productivity from the concept.

Larry Negrich
10 years 1 month ago

Communication with the merchandise mgt/inventory system or payment is not going to be the obstacle slowing mobile POS devices. Cost, as always, will be the major factor in the decision to deploy these into the store environment. However, we’re already seeing the prices drop substantially and durability improve so mobile is coming quickly. The decision as to which process (paper or electronic, stationary vs roving checkout) should be all about business need. Retailers should review what blended POS environment best fits their target customer need and expectation and get to innovating.

Bryan Shimko
Bryan Shimko
10 years 1 month ago

It is only a matter of time before we see transitional testing of mobile payment models. The struggle with other payment tokens has been the combined adoption by consumers and the cost of infrastructure. Now you have both in one form factor. Payment handling and inventory management will change but are not obstacles. There are several viable retail examples of payment acceptance notification and fluid inventory control. Two areas of interest for mobile POS are 1) the shift in payment processing costs to the mobile form factor and 2) the potential challenges to current payment security oversight. Benefits to retailers will be cost savings, redistribution of store associates, focus on in-store customer engagement and increased opportunity to differentiate merchandise. Issues include security, cultural shift of the check-out process and stakeholder evolution of current payment processing. With thoughtful leadership and a sizable and diversified consumer base we should see testing in the marketplace very soon.

M. Jericho Banks PhD
M. Jericho Banks PhD
10 years 1 month ago
I think Kilcourse has it all wrong. Retailers don’t avoid advances in POS for fear that something will get between them and collecting money. Instead, they avoid advances unless someone else is willing to pay for them. It’s been that way from the beginning (I was Ad Mgr. for Fleming when one of the first IBM POS systems was installed in the original Food 4 Less in Topeka) and it continues that way to today. Food 4 Less didn’t pay for that system and it was a tough install–we had to dig a hole in the floor and sink the IBM beast down into it). As a frequent speaker to NCR groups, VP Retail for Catalina, and consultant to Winn-Dixie during their side-scanner tests, one of the ongoing themes I encountered was that retailers don’t want to pay for POS systems. As they said at NCR, “They’ll keep them until they have to sweep them out the door in pieces.” Wholesalers have been known to subsidize the cost of POS systems, as well product manufacturers… Read more »

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