A variety of POS benefits are available for retailers who make
the effort
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[ OPERATIONS]
Above and beyond
by Keith Reid
New technology usually comes at a cost. It's up to the retailer to determine if that cost will provide a sufficient return on investment, or if the current system and way of doing business is adequate. One decision being made by tobacco retailers today is the move to a more advanced integrated point-of-sale system with enhanced inventory and price controls, chain management, merchandising and customer-management capabilities.
An integrated system can take on several forms. A traditional POS system is focused on the cashier function (with newer enhancements like touchscreens and scanning) and a back office software package is focused on accounting.
Vendors in either area can provide the pricebook, inventory management tools and advanced decision support systems. Some companies offer all solutions.
Regardless of the route taken, the end results with a more sophisticated approach can be rewarding.
At the store level, POS features like a touchscreen can make training easier and enhance productivity.
"It's easier to train a cashier on the touchscreen (POS) than it is a plain old register," said Lonnie Richards, owner of Memphis, Tenn.-based Tobacco Discount. The company operates three stores with a fourth opening soon and uses POS technology from eRevolution, LLC, also headquartered in Memphis. "You can get a cashier up and running with the basics in 10 minutes. There are going to be a few things like returns that you show them as you go. But as far as using the system, all they have to do is scan the item and it comes up and gives them a subtotal. It has a selection of bills or they can key it in manually or touch the credit card or touch the debit or the coupon or whatever."
At the operational level, inventory and price management take on new dynamics.
"An electronic POS system gives me invaluable data that enables me to quickly identify theft in my store and even pinpoint who is doing it, and gives me much better control over keeping the proper inventory," said Bob Murdoch, president of LBC, Inc. The company operates seven Discount Tobacco Outlet stores in northern Alabama and relies on Madison, Ala.-based POS technology provider, ezMiner, Inc. "I can run 'in-time' inventory so I have what I need when I needed it, and it has reduced my out-of-stock items considerably. I can establish prices in a moment's notice, I can change buydowns throughout all my stores in a matter of minutes and raise a price or lower a price if I have to meet competition. I don't have to go out and price things on the shelf, I can do it all to the computer."
Sophisticated POS/inventory solutions can also provide smaller retailers with valuable piece of mind that helps improve quality of life.
"The biggest thing is the return on investment, when you should expect that and what actually goes into giving you a return on investment," said David Thomas, ezMiner president. "For a mom-and-pop store or even someone who owns two or three stores, being able to feel secure that you can leave the building for the weekend or know that things are going to run smoothly is important."
Technology providers are constantly improving their products and a variety of enhancements are underway with POS and inventory management technology. And, in many cases, plenty of under-utilized capability already exists that is now being used more broadly.
"As the users have become more comfortable with technology, they've started taking more advantage of what the systems offer," said Jeff Helland, general manger of Sauk Rapids, Minn.-based ARS Solutions. "Most of the software companies are probably ahead of our customers and as customers become more sophisticated they are starting ask how they can better use some of these capabilities that they've not been using previously. You're seeing things like customer loyalty programs and gift cards and all that type of stuff coming into play that the large-box retailers have had for some time. Not that it wasn't available years ago, but smaller retailers have been more interested in getting their inventories into the system and managing their data."
Centralized control
One driver in new POS technologies is the realization that a centralized operational model can offer many advantages to the multi-store operator, whether it's a small chain or one with dozens of stores.
"Being able to centrally manage my stores does make my life easier, especially when you have price changes," Richards said. "I can sit here at my office and control pricing at all the stores. It enables me to see what each store has done, control the price and the inventory levels at any location."
Two main approaches to centralized management involve using a server at the headquarters building or using an application service provider where the inventory management and back office software applications are remotely hosted. ASPs generally reduce the IT challenge for smaller businesses since most of the server and software maintenance is handled by the provider off-site. The tradeoff is that the retailer gives up some control over the data and that requires trust in both the short-term reliability of the service and the long-term viability of the company. Total costs to the merchant can vary with each approach, making the ASP model favorable in some cases and
unfavorable in others.
On the in-house front, Boise, Idaho-based Cougar Mountain Software is now fielding a new home-office software and server solution that it anticipates will reduce the IT burden with hosting the software in-house.
"Our new Single Point solution is a Web-based appliance server, where the whole box is tuned to our software," said Jim Stone, Cougar Mountain COO. "It can be plugged in and fully operational in less than an hour. The store users connect over the Internet as virtual PCs on the server and these remote terminals have lower hardware specifications – most POS terminals are supported. It is slightly more expensive from a hardware standpoint, but it provides significant savings from the IT set up standpoint."
A variety of changes are also underway at ezMiner. "We've added a virtual private network capability to our system," Thomas said. "If you have a group of stores, the data can be sent to us once a day or multiple times a day as needed, stored at our data warehouse and the retailer can access that information using a browser and run crystal reports at any time. We want to make sure that a retailer maintains control of the inventory and cash register and things at the store level, but with the option to view the data here in our warehouse with new reports and new data-mining capabilities."
The company is also in the process of a major revision to its core software packages, by switching from the Microsoft Jet database engine to Microsoft SQL server for enhanced enterprise scalability.
An enhanced ASP solution is offered by eRevolution. It is enhanced since the site hardware can operate independently from the remote applications should there be a disruption in connectivity. The system fully updates itself for any activities that occurred during the disruption once the connection is restored.
"Even though our model is ASP, we don't have to have the Internet connected in order for the system operate," said eRevolution CEO Jacob Moskowitz. "We're able to sense when something is wrong, even before the merchant realizes something is wrong. They may be corruptible and rather than call the client we can connect to that store and make a correction ourselves. We tend have a very low volume of support calls because we take care of a lot of things before they even become an issue."
Inventory and price management
Although not new developments, per se, the pricing and inventory management capabilities provided by modern POS systems are being used by an ever-increasing number of retailers. There can be extra work up front getting a pricebook populated, and regular maintenance after it goes online, but once it is in place the ability to manage and control inventory, prices and promotions become much easier.
"It's kind of like building a race car," Thomas said. "You have a lot of parts to start with and as you bring it together and begin to fine-tune the engine, once you get it going it's not that much work to maintain. But you have to make a commitment to get there."
A primary advantage with moving to a central pricebook is that price changes that can be made by one person at the headquarters office and immediately transmitted to all the stores with virtually no effort required to implement those changes at the store. Many pricebook vendors offer product templates that make it easier to populate the pricebook with common store items. Some even link a "scan-in" process that allows a retailer to scan their existing
inventory into the pricebook off the shelf at a store.
One retailer who is happy to have made the move to inventory automation is Greg Betthauser, owner of The Cigarette Depot, a single-store operation in a Kalispell, Mont. He uses a solution from Cougar Mountain.
"When I looked at the system, I was using a regular cash register and doing all the inventory manually," Betthauser said. "I wanted something to make inventory as efficient as possible and that could integrate into the back office. The clerks now ring up more efficiently and accurately and the ongoing inventory maintenance is much easier. It has saved a lot of time."
Automation can be more directly extended to the supplier to encompass updating costs and replenishment. This involves some degree of electronic data integration between the merchant and the supplier. In the past, this has been an involved process usually reserved for larger retail operations, but a variety of solutions have been developed to make this easier for smaller retail operations.
"Inventory is now slowly being combined with the supply chain and that means that we now have the ability to handle automatic replenishment based on certain rules," Moskowitz said. "The inventory levels are automatically accounted for and when a certain inventory level passes a certain threshold, based on how long it takes a truck to deliver and how far the supplier providing the product is, it will make an assessment and generate the order based on these rules. Our customers can now compete with the level of sophistication of a Wal-Mart for a fraction of the cost."
For eRevolution, facilitating this automation involves working with suppliers to get them to run proprietary software that gives them a selling presence on the Internet. The company has worked to make both supplier and retailer participation as easy as possible. While not every supplier may choose to make this move, for those that do it creates a seamless relationship.
"We provide all our distributor partners with our software that they load on at their office," Moskowitz said. "This creates a presence for them on the Web where a merchant can hook up with that supplier through a customer number.
The hassle of having to create that relationship is virtually nil and it's a hassle-free order creation process for the client since orders are automatically parsed into the distributor's order-entry system."
Loyalty and new offers
Much of the effort put into new POS/back-office development has focused on enhancing basic business operations and traditional industry issues. However, a variety of new business opportunities are opening to tobacco retailers and the software vendors are working to bring those to the table. Loyalty is one and while it can be hard to implement in a low-margin operation (price is king in many cases) it can pay off if done correctly.
"One of the things that we've done is to try to look at how we can separate our system from all other systems in a number of vertical marketplaces," Thomas said. "We've added a complete loyalty program that is just a part of the basic package now. We have driver's license readers on the counter to read either a 2D or a mag-stripe ID and when you swipe that for age verification it asks if you want to have that customer as a loyalty customer. If they say 'yes,' you can have a plastic UPC-coded loyalty card that they can immediately swipe by taking all of the drivers' license information and transferring to the loyalty card.
From that point forward, every time they come in they are building points and the system itself can offer instant gratification coupons or points to redeem prices and a lot of different things that help you get benefits from it."
Check processing is another area that is getting consideration.
"A technology we will have with our newest release in October is Check 21, so, effectively, we're improving cash flow for the retailer," said Stone. "A check is scanned and, depending upon when the retailer posts it, could technically be in the retailer's bank account the next day. We're working on getting to where you go to the bank less often and where all your transactions can be posted electronically except for the actual cash."
Stone noted that Check 21 should reduce the cost of handling a check down to around 35 cents.
Because eRevolution has relationships with major manufacturers, it is using its technology to automatically facilitate special promotions.
"We work with manufacturers to provide real-time promotional opportunities to our clients," Moskowitz said. "For example, a customer comes in to buy a particular brand of chewing tobacco and that consumer can immediately be offered a free chewing tobacco from another manufacturer with the retailer receiving the full retail value of that item and an additional fee for running the promotion. So long term, not only is a retailer able to save money but they can actually make money through these promotions."
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