Point of sale systems, (POS), are the largest single technology investment for the vast majority of retailers. The capital investment required for these systems, even in modest sized retail chains easily reaches high six figures, more often millions. In the past, these investments were made with the mindset that they were required investments, despite their complexity and expense. POS behemoths like NCR, IBM, and Fujitshu controlled the lion’s share of the market and enjoyed healthy margins.
Today that is less true. Mobile technology is emerging and an increasing number of consumers are adapting to PayPal, Google Wallet, and other mobile payment solutions. Early adapting shoppers like the flexibility of payment without a credit card or check. Not surprisingly, with alternative payment alternatives emerging, the incumbents are not simply standing by.
IBM and NCR are amping up their internal capabilities to adapt to mobile payment systems, knowing full well the once healthy margins related to selling billions of dollars worth of checkout systems are a thing of the past. BIG POS is also gobbling up targeting and loyalty solutions to position themselves to offer a more holistic solution to their retail clients. The NCR/Retalix acquisition is a perfect example of two solid past performers understanding they need to combine forces to effectively compete going forward.
Despite these efforts, the entrance barriers into the POS marketplace are melting away. Google, Microsoft, Datalogic, Motorola, Intermec, and countless other smaller application providers are pitching their solutions to retailers and gaining market share.
Enter the consumer.
Mobile POS is on the move because shopper’s adaption rates are increasing. Estimates of growth in mobile POS is conservatively placed at around 12% annually. I would not be surprised to see this rate increase rapidly over the next five years. In a recent study, the IHL Group touted estimates of spending on mobile POS systems in North America will pass $2 billion this year, with 28 percent of North American retailers planning to adopt mobile POS by the end of the year. Further the research found that specialty retailers are deploying about 45 percent of all tablets shipped to retail for POS. It is just a matter of time and and consumer demand for on-line shopping, home delivery, and in-store pick up, before supermarkets and mass merchants follow the specialty and department stores into this new age of payment.
The IHL Group study also predicts that retail mobile POS devices will replace 12.4 percent of traditional POS shipments in North America by 2016. The highest areas of replacement will be department stores and specialty retailers. Translation, NCR, IBM, and Fujitsu current dominant share of food, drug, and mass (FDM) is at risk.
Unfortunately, many retailers in the FDM channel are still dealing with the monumental task of herding the cats when it comes to establishing communication and unity between their customer transactions, their accounting, and merchandise billing and inventory databases. Changing or layering a new POS system to accommodate mobile is just one more project they have little time or resources to tackle. Accordingly, I do not anticipate a mass exodus from the incumbent POS systems overnight…..but I do see those retailers that innovate and deliver mobile POS solutions to their shoppers as winners, and those that do not, will PAY the price.