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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.


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3 Comments | Read Android Is About To Truly Kill The POS Business Model

  1. Rajan Says:

    I agree that with tablets specifically becoming cheaper, they do offer a form factor that can be used in the retail environment. But, I still see the adoption happening slowly before it becomes ubiquitous.

  2. Chris Roon Says:

    Classic sides squaring off here: existing POS providers want buyers to believe tablet-based POS is discontinuous innovation with whole product risk – where to get service if not from one vendor, industrial grade?, theft, etc. Tablet suppliers will dis-intermediate the incombants by positioning their innovation as re-segmenting the existing POS experience with continuous innovation for forward-thinking retailers. Here is my thesis.

    Why limit POS to front of store where we only do mind-numbing checkout. That was yesterday’s need for yesterday’s problem – expensive POS that had to be fixed to the floor.

    I would position the tablet enabled buying experience as solving a much more valuable retail problem… 1:1 service at scale with increasing cart size and margin per customer. “Our tablet based enabler allows your professional customer service personnel to meet the client in the aisles, help them with style, fit, selection, accessories and use rich media to explain the premium price value. Our version 2 moves from transaction enablement to relationship mgmt whereby customers prior purchase history is available to accessorize and extend with each visit, no matter which tablet toting retail assistant they greet.”

    I have seen one great example already of this discontinuous innovation: Chair lift boarding in Utah ski resorts! Smart tickets are sensed at the turnstyle and lift attendants in snow and cold alternate holding the iPad. Season ticket holders, instructors and out of town guest pictures are displayed to the attendant who can:
    1) recognize a large picture and eliminate season pass fraud
    2) get warnings when fast skiers return to queue too fast and can suggest more challenging terrain where slower skiers are at less risk
    2) greet out of towners and offer lunch reservations with discounts onto their day pass.

    Its not about how the tablet does the existing mind-numbing checkout cheaper. Its about how the iPad allows higher end retail and mass retail to sell more premiums, increase avg sale, move excess inventory, and change a trx to a relationship. Big box competes on price and must rely on volume inlane checkout at minimum wage. Tablet enabled experience is for everyone else. I see the future world where you will endure the big box for commodity purchase at lowest cost. For considered purchases, we will favor friendly, more personal experience at retailers who know your persona, sell with deeper product content/comparison, and check out in aisle much like Hertz and Avis do today.

    If your readers or retailers want to discuss enable the vision with new positioning, please call or write:
    chris@couloir.net or 650-868-7440.
    chris roon

  3. welcomestranger Says:

    I see the flight of smaller service and food vendors to tablet based checkout happening right now in the burgeoning Hayes Valley shopping district.

    However, to completely displace the traditional POS *software*, payment acceptance is only part of the requirement.

    What is holding back the rest of us is the lack of a viable software solution for inventory-driven businesses. Square just doesn’t cut it, at least the last time I looked at its capabilities. Inventory management and reporting, purchasing and invoicing, as well as multiple location and channel capabilities are some the features that force us to the much maligned legacy POS solutions.

    There doesn’t seem to be a middle ground between the entrenched, large scale POS solutions and the agile ‘startup merchant’ apps that run on tablets or iphones.

    Furthermore, as demonstrated by the recent Carrier IQ scandal, there are real security and transparency concerns around the use of cutting-edge products like the iPad. Once these wifi,bluetooth and cell-enabled devices become ubiquitous as a payments platform, I think we’ll see some consequences of having their much larger attack surface. So much more to hack than that old wired POS!

    But to steer back to the original subject, I agree that the fossilized, register-centric POS will be inevitably much of their market share to the new breed of retail-enabling hardware, but find that in my personal experience its the software, not the hardware that is limiting the progress.
    cheers,
    david

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