Editor’s note: Brian Kilcourse is managing partner at Retail Systems Research, San Francisco. This is an edited version of a post that originally appeared here under the title, “What will it take for commerce platforms to converge?”
We hear it all the time: “What’s the future of in-store POS in an omnichannel selling environment?” That’s a really loaded question. Coming from retailers, it’s almost a plea for some direction – in-store technology. From a technology provider, the underlying question likely as not is, “Why don’t retailers just use their (our) e-commerce platform as the in-store POS?” To be fair, the analyst community has hedged its bets when answering the question. It usually goes something like this: “Well, in low volume environments where there is likely to be only one or two POS stations – for example, a mall store, that might work. But for high-volume environments – grocery stores for example, there would likely be some challenges.”
For anyone working for a fast-moving consumer goods (FMCG) retailer in particular, that answer is likely to trigger a guffaw. You bet there are challenges, like multiple tills, high-volume scanning, scales, change counters, receipt/coupon printers, payment terminals, etc. Most POS systems were built with one thing in mind: that there would never be a single point of failure preventing customers from being checked out. But that point of view also underlines the shortcomings of POS in today’s retail environment – it is made up of checkout systems, not selling systems. And although they can and do interface with upstream systems, they are not integral to an omnichannel selling platform. The systems were designed specifically to be able to run alone if need be.
But there’s a bigger dynamic at work here, and that is that consumers often start their shopping journeys outside of the four walls of the store, and now it’s in retailers’ best interests to facilitate that, and not lose sight of the digital side of the customer path-to-purchase once she walks into the store. So whereas the POS of old enabled the end of the path-to-purchase and nothing else, the modern POS is hopefully at the end of a path-to-purchase that has been technology-enabled from the start. And that is why the question, “What will it take for commerce platforms to converge?” is an interesting one.
We conducted a benchmark study (sponsored by Netsuite). Here’s what we discovered:
- Retailers already understand that the digital realm needs to influence all consumer touchpoints and support all aspects of the shopping journey, and they understand that the experience they are delivering today falls far short of their desired experience.
- Retailers recognize the need for better services for today’s information-empowered consumers but they don’t want to spend more money on labor to accomplish that. They expect that more will happen when both store associates and consumers are able to leverage mobile technology as part of that engagement.
- Retailers also persist in thinking of store technology investments as POS – a highly mature technology category with few opportunities for innovation and little in the way of new ROI. They also resist to the idea of adding technology around the POS for fear it will make their store systems more complex, more expensive, and ultimately more complicated for store employees to use.
- In other words, when it comes to how to support that convergence of digital and the full shopping journey, retailers are stuck – waiting for something better to come along.
Catching up to the consumer
The new study, entitled Commerce Convergence: Closing The Gap Between Online And In-Store, found that fundamentally retailers are grappling with the fact that technology-driven change isn’t being driven from within the corporation but from the outside by consumers. While retailers’ perceived internal business challenges to investments in in-store technologies as daunting (no clear-cut ROI, rigid legacy technologies, lack of staff or concern about the stores’ ability to absorb rapid fire technology-driven changes), consumers expect retailers to be able to be at least as technology-enabled as they are.
In an effort to catch up with consumer expectations, many retailers are moving forward, prioritizing attributes of a converged selling platform. They want as little duplication of data as they can get; they want maximum visibility across inventory, orders, customers and products; and they want to deliver robust capabilities like assisted selling and in-store fulfillment all in the simplest way possible. Retailers don’t want to face having the pain of replacing their existing point-of-sale without at least some kind of upside benefit that justifies the investment. In short, they want a platform for customer engagement in the store.
This represents a huge opportunity for retailers to create a whole new way of engaging with consumers in stores, and opportunities for technology providers to help retailers envision and enable that future.
The practice of creating different brand experiences in different channels has gone beyond being an inconvenience to shoppers. It’s the central challenge that retailers are grappling with today. While all store-based retailers are basically in the same boat during this time of industry-wide transformation, winning behaviors are already emerging, and form the basis of several recommendations that we outlined in the report. They are:
Design a converged brand experience: There is no one-size-fits-all brand experience. Every retailer should define for itself what a “seamless experience” means in the context of the brand, and then design the total selling environment around that definition.
Recognize and account for differences: There are differences between in-store POS and e-commerce order management systems that must be taken into account. Force fitting e-commerce into the store is not enough, and retailers are not willing to take on more complexity. They want simple, consolidated and real-time solutions. Channel-specific differences shouldn’t be ignored but they should be considered in the context of the specific touchpoints affected. The digital and physical selling systems are not the same but much of the core functionality is, and should be synchronized.
Get relevant in the physical space: The drive toward more personalization of the brand’s value offering is the industry’s answer to consumers’ demand for relevant solutions to their lifestyle needs. Winning retailers define that as bringing more of the digital experience into the store, deeper engagement with personalized offers, and more personalized attention and service from employees. Consumers still complete most purchases in stores. So, how can retailers make it a truly enjoyable experience? Make it relevant to each consumer’s need.
Employees matter more: After years of dumbing down the job of the store employee, retailers now have to react to consumer demands for more and better service. This has to start with making the same information that consumers have at their fingertips available to store sales associates. But it also means using modern mobile technology to optimize non-selling functions too Retailers must train store employees to get the best use out of the new technologies implemented at store level.
Intangibles will drive the investment decision: Retailers are struggling to find the ROI for re-investment in store level technologies. Winners know that they need to look beyond tangibles and consider the intangible benefits of a harmonized digital/physical shopping experience. The most important one: consumers expect it.
Address “the visibilities”: Retail winners are aware of the pressing need to make three data types visible across the entire selling environment, in real time: inventory, product and customer. Those are huge undertakings, and RSR has noted in several recent studies that winning retailers are actively working to address them. There is a fourth which must be enabled across the enterprise: order. This requirement will require a true distributed customer order management capability – that is beyond the scope of this study, but nonetheless critical to success.
We surveyed 88 retailers to find out where they think the future of commerce is headed. Read the benchmark report entitled,Commerce Convergence: Closing The Gap Between Online And In-Store, sponsored by Netsuite and available to everyone.