Retail Technology Sales on the Rebound

By Lisa Terry
The new normal isn’t just about customers. The less loyal, more demanding attitude customers have cultivated through the recession is clearly rubbing off on retailers as well. Retailers are once again opening their wallets to spend on technology, but to win their business VARs must work harder than ever to add value that reflects each retailer’s unique and specific needs.

After a dismal 2009 that saw POS hardware shipments drop 12% and revenues fall more than 15%, 2010 has been downright refreshing. “This year has been very strong, at least through mid-year,” says Greg Buzek, president of the IHL Group. “It’s been stronger than we thought it would be.”

Analysts attribute the increase to PCI compliance requirements and pent-up demand from postponed projects. “Payment terminal and POS replacement is a huge part, and also backend software,” says Buzek, in particular software to help inspire customer loyalty and enable retailers to better analyze their businesses, such as business intelligence. Customer satisfaction was the number one action item for retailers in RIS News’ 20th Annual Retail Technology Study, conducted with Gartner.

VARs know all about satisfying customers, and they’ll definitely need to put those skills to work to win retailers’ attention. While things are improving, it’s not across the board; some pockets of retail continue to struggle and are proceeding with extreme care. More than ever, VARs must exploit not only their own industry knowledge, but leverage their relationships with other VARs, vendors and distributors to propose solutions that will convince still-cautious retailers to invest.

Earning the Business
That’s a formula that has been working for CAP Software, Fort Worth, TX, and its VARs.

“2010 has been an interesting year,” says Will Atkinson, president of CAP Software, which develops general retail POS software used in many specialty retail verticals. “At RSPA the talk was about how bad it’s been, but our dealers have seen a lot more activity since February. Year to date our channel sales are up around 40%.”

Behind that success is a formula for offering retailers what they want to buy-and how they want to buy it. Here is what’s resonating with CAP’s specialty retail customers:

Loyalty: Retailers who survived the recession are dusting themselves off and seeking new ways to resonate with more-demanding customers. Many are turning to loyalty programs, not just to reward customers for their business, but to amass data they can use to better understand customer needs and trends demanding analytical capabilities in backend software-and then market to them accordingly. “They have to take the data in their systems and use it to market to customers,” enriching those relationships, says Atkinson. Specialty retailers are particularly dependent upon loyalty to grow their businesses, he says.

Increasingly, loyalty efforts need to be tied into social media, according to the RIS report, and it’s essential that loyalty programs extend across channels, so customers feel valued and get rewarded in the ways they prefer.

Mobility: Mobility is all the rage across the retail spectrum, with Tier One retailers racing to debut  the best cutting-edge smartphone apps to keep customers involved and to promote their businesses across channels. At the SMB level, says Atkinson, mobility is more about taking the store on the road, using portable form factors such as tablets to enable POS at sidewalk sales, fairs, trade shows and the like.

Affordability:  Financing is also top-of-mind for customers, who may still face an uphill battle to win loans through traditional routes. To fill that void, CAP has been developing a credit card residual model to help retailers finance their investments. It’s a subscription model, but rather than delivering software as a service, the reseller still integrates a complete hardware and software solution to sell to the customer. The customer makes a deposit to cover the VAR’s upfront costs, and then pays a subscription fee that covers the balance as well as updates, patches and on-site support. “Some take that fee out of the monthly service charge from the credit card processor,” with or without additional financing points the reseller may choose to add, Atkinson explains. “Dealers know they’ll get paid because of the credit card stream.”

Burning Need: Much as we like to see retail businesses as basically all alike, each one has a unique value proposition and often, special needs that result. Something seemingly minor in the grand scheme of a retail POS or backend software solution can loom very large if it’s a defining feature of that business. More than ever before, investment-wary retailers need to see that VARs understand these needs and how important they are to the business, and tailor solutions accordingly.

For example, some of CAP VARs’ liquor store customers sell not only directly to the public, but to restaurants and bars as well. Big orders mean big receipts; one CAP user was printing and mailing 1,000 to 2,000 pieces of paper out a month in order to get paid. So the CAP software’s email receipt capability is gold to this retailer, not only saving on the labor, paper and mailing costs associated with that process, but speeding up the order-to-cash cycle since invoices can be issued more quickly.

Going the Extra Mile
For another CAP customer, the burning need was for bar code labels—very tiny bar code labels. CAP Software inherited a new account, Parkhill’s Jewelry and Gifts, when its reseller in the area closed up shop. The shop features a large retail space packed floor to ceiling with inventory, many sourced from local artisans. So the retailer faced a large number of SKUs lacking any item numbers or tagging from suppliers, each needing very small tags with readable bar codes. 

Fortunately, CAP’s SellWise Pro 7 software allows three-tier department structure, a level of granularity that allowed Parkhill to manage its many specialty items. CAP worked closely with Zebra Technologies to select an appropriate label type and printer model, the 2844, as well as a Honeywell 4600R 2D imager to read them. “We had to do some work on our side with the label printing to get the bar code to work on a tiny tag,” says Atkinson.  Other components came from Epson, Dell, MMF Cash Drawer, VeriFone, ID Tech, Motorola and CipherLab.

They also needed easy, user-friendly inventory receiving and maintenance processes for Parkhill employees, many of them older women who had never used a computer. CAP also spent time streamlining the POS interface to reduce the number of buttons and smooth the workflow, a move that satisfied its non-traditional staff and eased training for temporary and seasonal staff.

Parkhill’s corporate owner also insisted on robust backup and disaster recovery, addressed through CAP Backup remote backup and recovery service.
By taking the extra step to listen to Parkhill’s specific and unique needs, and then tailor the solution to suit, CAP was able to maintain a close relationship with the customer. “The close interaction we have with all of our end users lets us keep a finger on the pulse of the retail industry, and that in turn helps us develop better products for our resellers to offer their customers,” Atkinson says.

That approach to partnership also extends to CAP’s relationships with vendors, Atkinson adds. “We work particularly closely with Epson and MMF, as well as Scansource,” on marketing as well as customer-specific needs. VARs don’t always tap vendors’ business development and field engineers as much as they could, he notes. “Resellers don’t always have the time to step back and look at the opportunities available from vendor programs,” he says. “There are a lot of great materials and resources resellers are not taking advantage of to the extent they could be.”

Vendors need enterprising VARs as much as VARs need vendors, says Doug Strahler, account manager, strategic and commercial accounts, for Epson. When a vendor and VAR work together to understand and cater to customer needs, it’s a win-win-win for everyone involved. “It’s a buildup of loyalty and trust,” Strahler says.

Cautious Optimism
While no one is pronouncing the end to the recession just yet, a mood of cautious optimism is spreading in the retail tech community about prospects for 2010. IHL is forecasting a 4% rise in POS hardware sales, with PCI a continuing driver. Shoppers are more demanding, and now retailers are as well, driving their expectations of VARs higher than ever. But for the diligent and creative VAR willing to go the extra mile, there are positive signs. “We’re looking up,” says Atkinson.