Android Is About To Truly Kill The POS Business Model

Written by Todd L. Michaud
January 13th, 2012

Todd Michaud spent years leading retail technology teams for Dunkin’ Donuts and Baskin-Robbins and today serves as the VP of IT for a billion-dollar franchise restaurant company. He also runs Power Thinking Media, which helps restaurants and retailers with social and mobile challenges.

This year—2012—will be the beginning of the end for the traditional POS platform. Even though many analysts predicted that Apple, and its iPad, would be the David that finally took down the Goliaths, I’m here to state for the record that Google will land the fatal blow.

For years, traditional POS hardware vendors have had their prices threatened by lower cost consumer products. Retailers wanted to know why they should pay double for a single POS terminal than they would for a powerful PC available to anyone. The vendors have justified their higher prices by saying that it is “industry hardened” or “commercial grade.” If you wanted something that was tough enough for the retail environment, so their messaging went, you needed something with high-end features such as redundant disk-on-chip and earthquake-proof chassis that were built to take thousands of touches and handle spills and other abuses found in a retail environment.

That argument worked when tablets were $500 and even $400. But now that Android tablets have fallen below $100, the argument falls apart. You could have four spares in the backroom and still be ahead. It’s not even about mobile POS versus traditional; it’s purely about price.

If a $100 Android tablet with a free Square reader can handle 95 percent plus of the typical POS functions for 5 percent of the cost (that’s not a typo, but a 95 percent savings over traditional POS counterparts), how can vendors continue to justify their higher prices? The short answer is that they can’t.

It started in the restaurant world with companies like Sharp that, having transitioned out of the cash-register world, saw an opportunity to create a lower cost hardware approach to compete with the established POS vendors. After all, these companies were losing their strong-hold on an environment that cash registers had once ruled. They saw that POS was complex and high priced, and they worked to create approaches that were simpler and more cost effective. In many cases, these companies produced great hardware at a much lower cost.

But the traditional POS vendors fought back. First, the argument was about future-proofing: “This platform might meet your needs today, but what about loyalty, CRM and all the other stuff you told me you want to do in the future? This low-end platform just won’t be able to scale.”

They continued the Fear, Uncertainty and Doubt tactics with: “If you have different vendors for hardware and software, then there will constantly be finger pointing between the two about who is at fault. And you will have challenges getting these issues resolved.”

The argument was good, once. Having run a retail technology organization that had to support thousands of such environments, this problem was a real one—and a massive headache. Sites could be down for days while trying to resolve a problem. CIOs everywhere evaluated the pain of managing two vendors, and many decided that the additional costs were justified by having a “single throat to choke” when there was a problem.

Then the Apple iPad was released. What was once this expensive technology (touchscreen) that retailers had paid handsomely for, was now available for as little as $500 and suddenly in the hands of millions of consumers. Retail and restaurant CIOs once again went back to their POS providers and demanded to know why an iPad was $500. And why were they paying so much more. “Why don’t we just use an iPad?”

Again, the POS vendors had an answer.


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.