Microsoft Pursues the Smallest of Retailers

Written by Evan Schuman
May 18th, 2005

Microsoft Corp. formally unveiled Microsoft Point of Sale on Wednesday, marking the Redmond, Wash., company’s official entrance into the low-end POS market with a product designed for small retailers and especially those with only one store.

Although there are many niche products in the low-end POS market, Microsoft Corp. is competing with only two: Intuit Inc.’s QuickBooks POS line; and the low-cost, somewhat reliable ECR (electronic cash register), which is still popular among many small retailers.

It’s that ECR category that has the most potential for either vendor, with today’s low-end retail space wide-open. There are some 1.7 million small retailers today, defined as those with fewer than 10 stores, said Steven Aldrich, Intuit’s general manager for QuickBooks POS. Of that 1.7 million, Intuit is the market leader with barely a 2 percent share (about 35,000 retailers), he said.

That leaves 98 percent of the market up for grabs with both Intuit and Microsoft offering relatively similar products. ECR products come primarily from Royal Consumer Information Products, Inc., Casio Inc., Sharp Electronics Corp. and Samsung Electronics.

Both Microsoft and Intuit are trying to leverage their popular software?Microsoft’s Office suite and Intuit’s QuickBooks accounting package?as more seamlessly integrating with their POS. Users suggest that those claims may be academic. The QuickBooks open-software developer’s kit makes it easy to integrate QuickBooks with other applications. It should also be simple to take a number out of any POS package and drop it into an Excel spreadsheet.

Mike Dickstein, director of POS Solutions within Microsoft’s Business Solutions business group, argues that Microsoft’s package is friendlier to small retailers. “We looked at this market and think that this is the only POS that has been designed for small retailers,” and the Microsoft package is better “than either a cash register or a POS that is really too complex for the level of service required,” Dickstein said.

“Most of the systems out there are far too complex,” Dickstein said. “It requires five or six steps to enter a transaction for many of these, and they are not intuitive. You need to understand these cryptic codes to process a credit card transaction.”

Microsoft’s position is that its new POS package has a much simpler interface and that “the product works like Office.”

One distinction with Intuit is that Microsoft is pushing an informational wall between employees who take the money and employees who count the money. “We separate the cashier role from the manager functionality,” Dickstein said. “It can make shop owners nervous having the cashiers with access to accounting. We specify what everyone can have access to.”

Microsoft is promising to ship its POS line June 1 and chose to announce a suggested retail price of $799 per checkout lane, which is the exact same price that QuickBooks POS sells for.

Intuit entered this market in fall of 2002 and has found that the conventional small retailer attitude?”It’s working, and I don’t have the extra time nor the inclination to monkey with it right now”?has been daunting. Like any other move that involves software automation, the theoretical promise of better profits is carefully weighed against the certain pain of transition.

That’s even true with retail chains of as many as nine stores, Intuit’s Aldrich said, if the owner treats each store independently and doesn’t want to consolidate operations.

Just like Microsoft, Intuit argues that its software knowledge translates into a sophisticated understanding of the small retailer. “We have the best insight into small business,” Aldrich said. “At the end of the day, retailers are going to be focused on things like easy-to-track inventory. They’re not going to buy [POS] because it can dump data into Excel.”

Customers who had been using either the Microsoft or Intuit products tended to say they like the one they’re using, but had not compared the two because they did not have the resources to test one against another. Often their choice comes down to emotional feelings about the vendor itself, rather than the product.

For example, Jason Coble, who owns a bike shop in Denver called Pedal Pusher Cyclery. When he was debating which POS system to use, he was considering Island Pacific’s Retail Pro POS and liked its strong CRM components, Coble said, but he found the $10,000 price tag “cost-prohibitive” and found Intuit was willing to put together a hardware-software package together for about $1,200. Retail Pro’s people “were willing to be flexible, but they were unable to meet my budget.”

Since then, he’s been happy with the integration with QuickBooks Pro, he said, and added that he would be very hesitant to switch to Microsoft. “If they have the best product, I will get it,” he said, but added that “I don’t believe that Microsoft’s approach leads to simplicity.”

“My computer crashes all the time, and I’m tied into running Windows XP. Everything in my life is Mac-based except for my POS at work. Every time I’ve interacted with Microsoft applications, I tend to run into problems, whether it’s crashing or producing something I don’t need. Having worked with Microsoft applications before, I don’t think they are the best in the market.”

But Intuit has its share of detractors, too. Tracie Hiemstra owns Bella Rose Fine Gifts & Furnishings in Microsoft’s Seattle back yard. She has been beta-testing Microsoft’s POS package and says she has liked it, thus far. But Intuit had promised her the new version of QuickBooks Pro when she opened her store in November 2003, and they failed to deliver.

Hiemstra said she then went to her local Costco and purchased an electronic cash register that “was supposed to interact with QuickBooks. It never did. It would not interface.”

“When I first started out, I thought the cash register would be adequate. I wanted to save money,” and the ECR she wanted was purported to work with QuickBooks. “It was supposed to automatically download from the cash register to QuickBooks. QuickBooks [support] said it was the cash register’s fault, and the cash register company said it was QuickBooks’ fault. After a few hundred dollars [of consultant costs], I gave up.”

As for her experience with Microsoft POS, she said that “99 percent of the time, it works absolutely fabulously” but that it still has “a couple of little hiccups” such as “an occasional time when the credit card wouldn’t go through.”

Hiemstra said Microsoft’s POS has proven “highly intuitive” and that she likes its ability to automatically update inventory records.


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