POS System Pay Off

By David Strom  |  Posted 2008-11-26

Point of sale (POS) systems are what we used to call electronic cash registers, which really weren’t much more than a cash drawer bolted onto the bottom of a PC. But as these systems have gotten more sophisticated, they’ve played an ever-increasing and important role in how a business can integrate its accounting systems, cut operating costs, track inventory and improve its supply chain partners’ efficiency.

The wrong systems can literally send customers out of the store in frustration, while the right ones can deliver higher levels of service and increased customer satisfaction. Here are some examples of how retailers have evolved their POS systems and have integrated them into their overall IT operations.

Last year, hackers compromised POS systems of clothing designer Nanette Lepore by reconfiguring the company’s outdated firewalls and selling stolen credit card numbers from the retailer’s high-end clientele. This happened because the chain had few security measures or proper procedures in place.

“All our store clerks were using the same password to access the POS,” says Jose Cruz, the network manager for the New York City-based retailer. “It was wide open. No one had ever thought to change passwords periodically, or even to use different ones for each employee. Prior to my arrival here, the emphasis on POS security wasn’t urgent. Needless to say, that’s all changed.”

Cruz got a call that no one ever wants to receive—from the FBI—stating that several customers had received fraudulent credit card charges. This led to finding out that the company’s DSL routers had been hacked, and its firmware had been changed to allow hackers inside their network.

“At least three months’ worth of information was pulled from our networks,” Cruz reports. “Given that our average transactions are several thousand dollars, [the hackers] were clearly targeting us.”

Three of the designer’s stores had to close for a few days while security was beefed up. To protect the stores and branch office applications, the company installed Sonicwall’s unified security appliances, set up temporary accounts with time limits for service and maintenance personnel, and began enforcing the use of Secure Sockets Layer (SSL) VPNs for secure remote access. It also set up password policies and beefed up procedures for using the POS and credit card systems.

“We learned our lesson from the security breach, but there are a lot of other retailers that are still not as well-protected as we are,” Cruz says. “For us, it was a matter of rapid growth that overtook the level of technology the company previously used. We are in a much better place now, which benefits our clientele, too.”

Serving Up Customer Satisfaction

POS systems also can play a big part in either increasing or decreasing business sales and customer satisfaction, depending on the time it takes the POS register to ring up customer transactions. Take the Golden Spoon Frozen Yogurt chain based in Thousand Oaks, Calif. Long customer lines during peak summer months, inaccurate register transactions, disgruntled customers and disparate systems forced Rich Ferraro, owner of the local franchise, to look for more efficient and automated methods to solve his problems.

“I knew we had to increase our operational efficiency and speed up our order-to-purchase process, or customers wouldn’t return,” he says. “We had to replace our electronic cash registers because even our most experienced and efficient employees took two minutes or more to process a credit card sale.”

Ferraro called in CKS Business Solutions, a specialty VAR that had developed a POS system based on the Microsoft Dynamics Retail Management System, which was installed at Golden Spoon’s other franchises. The system integrated and automated the company’s POS needs, and, more importantly, the stores could add features when needed and train employees to use them.

“Now, transactions take a maximum of 20 seconds, and lines are shorter,” Ferraro says. “The new system is swipe-and-go, and it’s easier to train employees.”

POS systems can also be used to consolidate a variety of information into a single place. For example, Hayward, Calif.-based Star Arts, which offers art classes, uses a PayGo POS system as a consolidated database. “It has everything I need to run my business in one application,” says owner Suzanne Gayle.

“Sure, I could have developed my own Excel spreadsheets, Filemaker Pro databases and Word documents, but having the Paygosaas.com software—especially a Macintosh version—makes it much easier for me. It also keeps all this information much more secure. I even input the names and pictures of the caregivers that are authorized to pick up my students, and that eliminates any worries or uncertainties from my staff and my students’ parents.”

Integrating Intelligence

Another area in which POS systems can have a significant effect is in business intelligence and supply chain automation. Bernard Chaus, a New York City-based clothing company, is using Skypad Business Intelligence, powered by QlikView. Integrating timely POS data directly with production and distribution data in visual dashboards, Skypad enables the retailer to plan, adapt and move goods through several thousand outlets faster and better than ever before.

“We were dealing with a couple of issues,” recalls Ed Eskew, the CIO for Bernard Chaus. “We wanted visibility at the point of sale to more efficiently track best and worst sellers. Using this timely data, we were able to become more nimble in responding to inventory and replenishment levels, and could quickly add inventory when an item was moving well and reduce, discontinue or re-allocate inventory when items were not selling as anticipated.”

Before the Skypad software, they got only weekly summaries of transactions and “basically functioned in the dark,” Eskew says. “With the implementation of Skypad, we were able to determine what specific colors and sizes within a style were actually selling.

“Today, we are able to better assist and manage our accounts by virtue of our ability to call up a buyer and share our business intelligence data with them, advising them what to buy, and possibly when to relocate a style to another store, based on activity in that store. The most significant benefit is in controlling our inventory levels. We no longer overcut or manufacture goods only to sell them off at a loss at the end of a season.”

Having a better understanding of Bernard Chaus’ sales has also saved money. “Prior to the implementation of Skypad, unsold inventory might not be discovered until the end of a season—far too late to have a positive impact on salvaging our margins,” Eskew says. “Authorizing returns or deeply discounting our goods could potentially cost us hundreds of thousands of dollars, significantly eroding our sell-through in any one season”.

There are other examples of how having the right POS solution can save hours of accounting drudgery, such as in the consolidation and reporting of sales taxes collected, or in doing nightly cash balances to make sure no money has been stolen. At the Golden Spoon yogurt shops, it used to take hours to balance cash deposits against receipts, because the retailer had to do it manually each night. But with the new Microsoft POS software, “it takes just minutes and has increased our accuracy,” Ferraro explains.

Companies that do any retail business at all should investigate POS systems to determine how they can more closely tie together different computing systems and leverage the near-real-time information available from them.