View Slideshow

They’re not as stylish as a multicolored Louis Vuitton shoulder bag, or sexy like a Victoria’s Secret teddy. But point-of-sale upgrades are what’s in at retailers nationwide.

Saks Fifth Avenue, Liz Claiborne, Louis Vuitton, Limited Brands, Nordstrom and Gap are just some of the stores that are installing sophisticated systems that, unlike the old ones, go well beyond processing a transaction and recording sales data.

The latest POS systems have graphical user interfaces, more memory and faster processors, all of which make it possible to run a wider variety of applications than before. The new systems support:

This story first appeared in the September 1, 2004 issue of WWD. Subscribe Today.

  • Faster checkout.
  • Real-time product and pricing information.
  • Various forms of payment.
  • Cross-channel shopping, so something bought off a Web site can be returned to the store, or someone shopping the store can decide to buy online.
  • Training and scheduling.
  • Recording personal information on customers to assist in future selling — anything from birthdays, to favorite brands of golf shirts, to when they last bought a suit and tie.
  • Applications that previously ran in the back office, such as e-mail, Web browsing and merchandise forecasting.

Advancements in radio frequency identification technology, known as RFID, will further drive POS changes. So will self-checkout. However, both of these technologies are still in their early test phases, and implementation on any kind of broad scale is well off in the future.

It’s safe to say that retailers are at a turning point with the latest POS technology. They now view POS as a critical component to providing improved customer service and to managing their businesses better, although the most obvious service advantage remains speeding transactions and reducing the wait at the wrap desk.

“Point-of-sale has almost become a misnomer,” said Dawn O’Brien, senior director of retail systems at the Washington, D.C.-based National Retail Federation. “The computers do more than just process a sales transaction.”

She said they act as “online learning environments” that incorporate portions of the employee handbook as well as product information. They can illuminate what’s on hand and available to customers, as well as provide details about design, fabric content and price.

There are further reasons many retailers seem possessed by an urgency to change their POS systems. Some stores simply haven’t upgraded for a decade or longer, and the hardware is wearing out. In other cases, as POS expert Greg Buzek, president of the IHL Consulting Group in Franklin, Tenn., observed, it’s been almost five years since retailers upgraded to foil the feared Year 2000 bug, and certain sectors routinely upgrade every four or five years. Buzek also said that POS systems are coming down in price, particularly since Dell and Hewlett-Packard recently began selling direct to retailers as well as through computer resellers and integrators.

And executives are anxious to track sales and inventories with as much accuracy as possible, in light of the Sarbanes-Oxley Act of 2002, which requires them now to sign off on financial reports. [For more on Sarbanes-Oxley’s impact on IT departments, see page 18.]

“In 2004 and 2005, there will be three times the average normal POS replacement rate,” Buzek said.

He believes that of all retail sectors, department stores and groceries are “the cheapest” when it comes to spending on POS, and they have the oldest technology, he adds. As indicated by an exhaustive POS study by IHL completed last March, several retailers, such as Hecht’s and Robinsons-May department stores, have POS units “older than many of the cashiers operating them.”

On the other hand, soft goods specialty retailers replace POS systems faster than any other retail sector, Buzek said. It reflects the overall specialty store mentality of trying to provide better service, and a desire to have what it takes to predict and exploit emerging trends. “They’re constantly looking at trends,” Buzek said.

Category killers, too, tend to be eager to possess the latest POS systems, partly because such retailers tend to offer their customers detailed service agreements that require more advanced software, and partly because it’s in their retail DNA to convey that they have the latest in technology, particularly if they sell electronics.

As for costs, a single department store might spend $800,000 or more to replace 50 to 150 POS stations and get them networked and operational, according to the IHL study.

A recent IT budgeting study by the NRF and AMR Research surveyed 27 retailers with about 1,000 stores each and found that each plans to spend an average of $70 million on enhanced POS systems this year. That figure includes replacement hardware, new wireless infrastructure, interactive consumer marketing technology and store associate selling tools.

Among department stores, Saks Inc., which operates Saks Fifth Avenue as well as regional department stores such as Parisian, Proffitt’s, McRae’s and Carson, Pirie, Scott, has held off upgrading its POS systems for more than 10 years.

However, in August the company completed a major software upgrade through all of its 356 stores to 16,000 POS registers. The rollout began in spring 2003. A major byproduct of the initiative is that Saks Inc. staff now refer to their checkout counters as “service stations,” reflecting a new, holistic approach.

“The idea is that we deliver service to our customers. We’re not just making a sale,” said Bill Franks, Saks Inc.’s executive vice president of information technology and chief information officer.

The new software was built to run on the IBM registers already in Saks stores, as well as on forthcoming POS systems that may be installed later, if Saks so chooses. POS specialists Cornell Mayo Associates provided the transaction processing portion, and Saks added the advanced software programs, “which allow us to do all sorts of things and provide services for our customers,” Franks explained.

For example, there is a clienteling system. “Let’s assume that I made a sale to you and you shared with me that this was a birthday gift for your wife. I can record that in the ‘client smart’ system, and a year later I could call and remind you that your wife’s birthday was upcoming, and ask you if you wanted me to pull together a few gift suggestions,” he said.

The Saks system also allows the associate to record other information about the customer, such as a cell phone number and designer preferences. The system can remind the associate to send out trunk-show invitations for a favored line.

The clienteling system replaces the salesperson’s manual black book, and nobody has access to this information except the associate, Franks said.

Another innovative feature suspends and resumes transactions so that a Saks customer can shop several departments but just sign one bill at the end of the shopping trip, rather than having to pay in each area and handle several receipts.

The system also enables preselling. In the event of an upcoming sale, an associate can call up a favored customer and preshop for him or her, then suspend the transaction until the day of the event. The merchandise is held for the customer to check out when the sale begins, Franks explained.

In addition, the system lets associates monitor the status of alterations and quickly locate merchandise anywhere in the company and ship it to a customer’s home. There is also a gift registry.

“At some point we will upgrade registers, but this has given us the benefits of advanced functionality without making the investment of hardware,” he added, noting that server capacities were increased to minimize the need to upgrade the registers themselves. He declined to say how much Saks Inc. spent on the upgrade.

Nordstrom, one of Saks’ competitors, started a POS rollout in March 2003 that should be complete by the end of this year. “The prime objective is to make things more convenient for sales associates and customers,” said Deniz Anders, a spokeswoman. The system can accept debit cards; transactions are faster; it connects to; it has easy-to-use touchscreens, and it has a merchandise search feature, among other functions.

Before the merchandise search feature, customers would leave their name and phone number with a sales associate, who would then call several stores. Now the associate can use the register to quickly find out where the desired merchandise is. It can then be shipped directly to the customer, or transferred to the store for pickup for a small fee that’s less than the usual shipping cost.

Nordstrom’s new POS system also has clienteling software, which lets sales associates record customer requests and merchandise holds and transfers, in addition to tracking alterations and recording personal information, such as birthdays.

Anders added that the new service stations reflect wider technology improvements over the last few years that Nordstrom has implemented under its “perpetual inventory program.” It’s geared to help buyers make smarter buys and replenish goods effectively.

As for the clienteling software, Nordstrom views it as a “relationship-building tool,” Anders said. “We consider [it] a ‘people’ initiative rather than a ‘technology’ initiative. This new tool tracks customer requests and needs online, ensuring better accuracy and more consistent, timely follow-through.”

Limited Brands is taking a different tack with its POS upgrade. The retailer is engaged in potentially a multiyear rollout involving proprietary performance-management and labor-scheduling systems, new POS registers, traffic counters and experimental “wireless stores.” The strategy helps the central office and store managers devise staff schedules, position top-selling employees in peak periods, examine conversion rates and see data on how stores are performing in real time. The result is that Limited Brands can react quickly to meet sales objectives — by the hour and by the shift — and provide better service, including quicker checkout.

Gap Inc. is also engaged in a POS rollout, but the company declined to provide details other than saying that it involves all store divisions, and that the divisions are at different stages in the initiative.

NRF’s O’Brien characterized POS as a priority expenditure, often taking precedence over back-office upgrades. It’s critical because it’s the technology that most directly affects the customer, she said. Upgrades can lead to better comp-store sales performances by providing an enhanced and faster shopping experience, encouraging customers to return to the store for more shopping and capturing some sales that might otherwise have been lost because of long lines or difficult-to-find items. “It’s all about customer service and driving sales,” she said.

More retailers are using measurements to determine if the POS enhancements are worth it, said O’Brien. For example, they might compare how long it takes customers to get through a checkout line, or for a sales associate to ring a transaction, on old versus new platforms. After an installation, they can also compare comp-store performance.

Last month, Liz Claiborne announced that it will overhaul its in-store systems and software to improve operational efficiencies and sales visibility throughout the stores, and to free up store management and other personnel to focus on improving customer service. The company is moving onto the Microsoft Smarter Retailing Initiative platform, and it plans to install more than 1,000 Fujitsu TeamPoS 2000 terminals running Microsoft Windows XP Professional and NSB Group’s Connected Retailer Store Solution in Claiborne’s 335 U.S. stores.

In addition, each store will be equipped with a store manager workstation running Windows XP Professional, plus a variety of other store management and performance applications, including e-mail. The store manager workstation will be located on the sales floor, rather than in a back office, and managers will also be able to access applications at the register so that they can spend more time on the floor assisting customers and associates.

Employees can quickly upload inventory data to Claiborne’s computers using handheld scanners from Symbol Technologies running Microsoft Windows CE. In the past, employees would spend two days manually logging product data into the system.

“In this case, store management and employees will be much more visible and available to interact with customers, rather than being tied up in the office doing paperwork and managing inventory,” said Brian Scott, general manager for the Retail & Hospitality Industry Solutions Group at Microsoft.

A different approach was taken by Louis Vuitton. The luxury brand installed Dell computers running Retail Pro POS software in its flagship on Fifth Avenue and 57th Street in Manhattan, with an eye toward aesthetics. The company wanted something unobtrusive and sleek. The equipment sits beneath a custom-designed wood counter that integrates with the rest of the store’s interior and doesn’t distract from the store’s upscale ambience. There are no ugly backs of CRT screens in customers’ faces.

“Technology was to have a major presence in the store, but not be openly visible to our customer,” the company said in a statement.

Vuitton was looking for faster systems that would get customers through checkout more quickly. The system’s graphical user interface also offers sales associates a shorter learning curve, Vuitton said. Enhanced security requires users to reenter their passwords after the system sits idle for a few minutes.

The upgrade to the Windows-based version of Retail Pro began in May of last year, and the decision to upgrade was in part based on the unique needs of the flagship, though all Louis Vuitton North America stores are now using the new version of Retail Pro. In addition to enhanced speed and performance, there’s 100 percent uptime and “a secure and scalable architecture for future wireless projects,” according to the company.

The POS hardware includes 15-inch touchscreens from Elo TouchSystems, Dell computers with GX 270 processors, and handheld Symbol scanners. Sales associates use the handhelds to scan merchandise at checkout. The system records the SKU, price and item number.

Vuitton considers the system user-friendly, since it is menu-driven and has touchscreens. Associates see a beautifully designed screen that looks like a Web site, complete with a Louis Vuitton ad, shots of accessories and other products and menu options with icons.

The new systems are also nicer for customers. Vuitton switched from dot-matrix printers to laser printers, so both receipts come out printed on one page, and bearing the Louis Vuitton floral motif.

Score Vuitton some style points, even at the point of sale.