Upgrade Time: Changing the Point of Sale

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Now that the holiday sales rush is over, merchants are starting to look more closely at game-changing sales models like Amazon Go as models to reinvent their own point of sale.

Checkout-free shopping, portable payment systems and self-service kiosks are a few examples of how technology is revolutionizing the in-store experience and helping make the traditional checkout process obsolete. Other up-and-coming options such as robotic assistants and biometric payments also have the power to radically transform the way people shop.

“Retailers need to think about how they improve the end user experience—how can you leverage technology to provide the best possible guest experience,” says Aman Narang, president and co-founder of Toast, a Boston-based company that makes point of sale software for the restaurant industry.

“The next five years should be really interesting in terms of the types of innovation we see within retail,” says Narang, who focused on business intelligence and e-commerce at his previous employer Endeca (now a unit of Oracle) and still follows the retail space closely.

As these changes are happening, it’s a prime opportunity for savvy ISOs to help their merchants make smart and long-lasting technology decisions that can change the face of their businesses going forward.

“The more tech savvy a sales rep is, the better merchant sales representative they will be, and the better the margins will be,” says Drew Freeman, president of Freeman Consulting in Fort Lauderdale, Florida.

A changing retail landscape

Changes in the retail space are largely being driven by customer desire for increased speed of check-out, convenience and data security, industry participants say.

“For the first time in a long time, customers are starting to push the envelope on the shopping and the buying experiences and merchants have to respond,” says Marc Castrechini, vice president of product management at Boston-based Cayan LLC. “Customer preferences are changing. They will actively gravitate toward merchants that offer what they want and avoid ones that don’t."

Certainly, checkout-free shopping is one of the ways retailers are looking to shake up the customer shopping experience. Amazon set the ball in motion late last year when it announced the opening of a new 1,800-square foot storefront in Seattle. Using the Amazon Go app, customers simply enter the store, take the products they want and go. Amazon then charges the customer’s account and sends a receipt for the purchases. Amazon beta tested the store with employees and has announced plans to open it to the public in early 2017.

Amazon’s not the only company pursuing this approach. An AI company based in Cork, Ireland, is on the verge of introducing its own version of checkout-free shopping using proprietary technology it calls 0Line.

Everseen, a seven-year-old company, already works with a handful of the world’s top 10 retailers to decrease errors during the checkout process. Its proprietary technology can detect non-scans in real-time and reduce losses for merchants. Now Everseen has developed an offering that it hopes will be an alternative to Amazon Go.

Alan O’Herlihy, founder and chief executive of Everseen, hopes the convenience of checkout-free shopping will draw consumers and that ultimately his company will convince large retailers to adopt its 0Line technology for their own stores.

“Retailers see Amazon as a threat right now. We want to position ourselves as the alternative to Amazon,” O’Herlihy says.

Everseen plans to launch its concept store in Cork this spring. The small convenience store will be called Evershop and is similar in size and scope to a typical 7-Eleven in the U.S.

While the concept of checkout-free shopping is still new, O’Herlihy predicts it has the potential to completely transform the customer experience.

“It’s unbelievably convenient. That’s what’s going to drive the retailers to adopt this quickly,” he predicts. “At the moment, it’s a nice-to-have. But as soon as more retailers adopt the technology, it will be a must-have.”

Mobile point of sale

Most brick-and-mortar merchants today have a relatively traditional checkout process where customers scan their items and pay at some type of register near the store's exit before leaving. But many forward-thinking companies are exploring ways to make the sales process more portable and user-friendly.

“One of the worst things about shopping is waiting in line to check out,” says Justin Guinn, point of sale market researcher for Software Advice, a division of Gartner that focuses on reviewing and researching software applications for small-business owners.

Nowadays, thanks to newer technology, customers don’t necessarily have to wait in long queues. Instead, using portable, tablet-based payment systems, clerks can circulate through the aisles and help customers compare prices, research products and ultimately check out from wherever they are within the store.

“Merchants can now bring the payment experience to the consumer,” says AnnMarie “Mimi” Hart, chief executive of MagTek, a Seal Beach, California-based provider of secure card reading and authentication technology. “That may be the dressing room, or the leather lounger, the adjustable bed, your doorstep or your table,” she says.

Some large retailers have been slowly integrating mobile point of sale systems into their stores for a few years, but the technology has not yet been broadly implemented. At minimum, it requires a POS system upgrade, and some merchants haven’t wanted to make the move or aren’t aware the option exists, explains Guinn of Software Advice.

However, Guinn predicts more retailers will start to move in this direction. Particularly as the battle between brick and mortar and e-commerce has intensified, retailers are recognizing the need to converge the two areas in order to shore up their customers’ business.

For example, if a particular item or color of a product isn’t available, a sales clerk can use a tablet to immediately check the store’s inventory and determine what’s in stock. It’s also an opportunity to offer the customer additional products that come up as part of the search.

“These upsell opportunities aren’t typically available at a traditional register,” Guinn says.

With mobile devices, in-store customers can buy an item online and have it shipped to their home if it’s not immediately available. For merchants, this is a boon because they don’t lose the sale, plus certain tablet systems can process online transactions with a physical card.

Card-present transactions are usually less costly for merchants than card-not-present transactions, so it’s a value-add ISOs can provide merchants, explains Greg Burch, vice president of strategic initiatives at Ingenico Group, a Paris-based payments technology company that operates globally.

Over the past few years, some larger retailers have installed self-service touchscreen kiosks as another way to cement relationships with in-store customers. These kiosks, strategically placed within stores, enable customers to search on their own for items, get product recommendations and make purchases. Self-service kiosks have been around for a few years, but newer models can be used with chip cards. Previous versions required customers to swipe their card or initiate a card-not-present transaction.

“If a customer is considering making a purchase and the physical store does not have the right size, color or specific item, many times that store location will lose the sale,” says Luke Wilwerding, director of retail solutions at Elo, a global supplier of digital touchscreen solutions.

However, with a kiosk, even if an item isn’t in stock, customers can purchase it and have it shipped to the store or their home. At a kiosk, customers can also search for similar or complementary products and buy them from the merchant on the spot. This gives merchants a significant upsell opportunity that a traditional register doesn’t afford, Wilwerding says.

A kiosk wouldn’t necessarily replace a tablet-based POS system; it would more likely enhance or supplement it, Wilwerding says. The advantage of a kiosk is that customers can peruse for items on their own and then buy them, freeing up employees to do other tasks. Employees can certainly help customers use the kiosks, but there’s also a self-service opportunity for those who prefer it.

Wilwerding says that traditional checkout options will continue to have a place in retail, but predicts that over time there will be a bigger connection between e-commerce and in-store sales. “I don’t feel that going forward, those two channels can live separately in different worlds,” he says.

According to Wilwerding, a merchant who has four registers today might have only two at the front of the store in the future. As another option for customers, the merchant might install a few self-service payment kiosks in strategic areas within the store, he says.

Testing new technologies for market

Some of the up-and-coming technology for reinventing the point of sale is still so new it hasn’t been broadly marketed beyond a small test market. NEC Corporation of America in Irving, Texas, for instance has a new technology called Object Recognition POS that it’s testing with a retailer outside the U.S.

Using NEC's technology, a customer places his or her items on the checkout counter and cameras identify the products so a clerk doesn’t need to scan each item. Once the items are recognized, a green halo appears on them so the clerk knows the items are ready to bag. The customer then pays using his or her normal payment method.

NEC is also testing Facial Payment, a cashless payment service that uses facial recognition to provide shoppers with a speedy and secure alternative to cash or credit cards.

Here’s how it works. A customer approaches the checkout area and is identified by NEC’s facial recognition technology. Then, as additional verification, a picture of the customer pops up on the cashier’s screen. The cashier visually checks to ensure that the customer matches the photo and allows the transaction to proceed. Payment is then charged to the customer’s account on file.

Girish Nazhiyath, director of retail solutions at NEC, says people have been trending toward faster payment methods for some time now, but EMV has slowed things down. He predicts that biometrics will reinvigorate the sales process. “You can be prepped for payment even before you start unloading your cart,” he says.

NEC hopes to eventually roll out both technologies broadly. “At the end of the day, it’s about making life easier for the customer and it’s helping make retail operations easier.”

In the future, retailers may also take more advantage of “conversational commerce” opportunities in their stores. This refers to the convergence of brands, bots, apps and AI, where messaging is a transactional tool as well as a means of communication. This term was coined by Uber’s Chris Messina to describe the future of messaging within apps.

One example of conversational commerce in action is Mastercard’s partnership with SoftBank Robotics’ humanoid robot Pepper. The card network developed a commerce application that’s currently being tested at some Pizza Hut locations in Asia. With the app, customers can walk into a Pizza Hut, tell the robot Pepper their order and it will process the order and collect payments digitally.

In the future, robotics could be used more broadly by retailers to help customers check out quickly and efficiently.

“One could imagine this in any retail environment,” says Kiki Del Valle, senior vice president of digital payments and labs at Mastercard. If customers feel the line at a traditional register is too long, they can opt to pay another way. “It’s an additional way to interact,” she says.

Other technologies currently being used outside the retail space could also be adapted to this market. As an example, Narang of Toast points to an app The Eastman Egg Company built using his company’s API. The app uses geo-location and beacon tracking to send orders directly to Eastman Egg’s kitchen when the customer is around the corner from the restaurant, so the food’s hot when the customer arrives.

“Retailers can use this same model for just about any situation where a consumer wants to get in and out quickly,” Narang says. For instance, a one-hour dry cleaner could have a customer’s suit waiting at the register. The app could ping the dry cleaner as the customer is approaching and then facilitate payment as the customer leaves. Or at a pharmacy drive-through, the app could ping the store when a customer is in the vicinity, allowing for quicker distribution of medicine and without any payment hassle.

“The marriage of cloud-based POS, mobile payment and geo-location has the power to create a truly seamless customer experience,” Narang says.

Opportunity for savvy ISOs

With technology changing so rapidly, it’s important for ISOs to keep abreast of all the up-and-coming options and help retailers find the best solutions for their individual situations. ISOs need to know their customers, understand their needs and craft a solution to help them solve those needs.

“Today more than ever technology is there to solve these everyday challenges. But it remains confusing for many in business,” says Mary Winingham, a payments industry veteran who is now head of sales program management at iStream Financial Services, a payment processing and solutions provider based in Brookfield, Wisconsin.

“It’s the job of the ISO salesperson to research and then be in a position to recommend and implement a mix of solutions to their prospects that drive value,” she says.

Enterprising ISOs can help merchants by explaining to them how various technologies can improve their business and save money. For example, if retailers are unhappy with their POS, or are buying one for the first time, ISOs can make it known that from a cost perspective, many small businesses are moving in the direction of a tablet-based POS because they find it’s less expensive than a traditional POS system.

ISOs can also discuss the additional opportunities they’ll have to generate revenue.

“It’s something you can say not only is this a new POS, but it has this amazing feature where you can very innovatively change your store to where every customer interaction is a potential point of sale,” says Guinn of Software Advice.

Of course, ISOs have to be mindful that while many new technologies may sound cool to a retailer, not all will be appropriate for every merchant’s business. For instance, the checkout-free concept, while it’s captured a lot of attention, it not necessarily a solution for every merchant. The concept tends to work better with new retail space, since it can be more difficult and costly to retrofit existing stores, says O’Herlihy of Everseen.

What’s more, some merchants may not be interested in the idea of a checkout-free process because for some businesses the conversations that happen during checkout are extremely valuable. Also, for some businesses, tablets or kiosks may not be as appealing if, for example, they have a small store with only one cash register and limited space.

Indeed, ISOs have to be able to offer a host of options to meet the needs of their customers, according to Ingenico’s Burch. “ISOs and agents need to remember that it’s not one-size-fits-all.”

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