Point of sale (POS) technology in a modern enterprise solves a myriad of problems, from managing inventory to insights that improve customer experience and retention, as well as a host of other tools to support omnichannel retailing.
By Allan Dickson, independent chairman of redPanda Software
As competitive retailers hurtle ever faster into the efficiencies made possible by digitisation, it is prudent to consider the history of POS to get a clearer picture of how a “if it isn’t broken don’t fix it” approach represents being stuck at a juncture along the evolutionary journey of POS. Sometimes this is caused by a preference not to spend money on technology, other times it is because retailers are hindered by legacy infrastructure.
The cash register
To get a clearer understanding of this evolution, we must go back to the beginning. Little did Ohio-born James Ritty realise when he patented the first cash register in 1879 that he had begun a retail revolution.
His idea originated on a ship bound for Europe when he saw a machine that counted the number of times that the ship’s propeller completed a revolution. Using the same type of technology, he invented a register that could keep track of the sales in his saloon and keep his staff honest! This was the embryonic version of the cash register and POS as we know it today.
Ritty didn’t see much of a financial benefit to his invention, so he eventually sold his patent to John H Patterson who established the NCR Corporation in 1884. NCR’s sales and marketing expertise resulted in the initial mechanical cash register becoming a necessity for almost every retail business.
The first electric-powered cash register (the ECR) came out of NCR in 1906 and millions were sold over the next few decades. These early machines were little more than simply adding machines with a cash drawer.
POS
For many decades thereafter there were few innovations in ECR until in the 1960’s the advent of the electronic calculator facilitated the next wave of innovation – Epos or just POS.
The first POS system was developed by IBM in 1973. Even though it had limited features, the POS system was pioneering at the time because it represented the first commercial use of multiple new technologies such as the local area and token-ring networks.
Locally, Edgars stores successfully installed this system throughout the group in the late 1970’s.
During the next few decades technology spawned many other technical innovations for retailers. However, these evolved independently from POS. Some of the more notable innovations were in the areas of merchandise tagging and bank card payment systems.
Many retailers used the Kimball tag to control their stock. This was a cardboard tag that included both human and machine-readable data to support central punched card processing. This was widely used by the Edgars group until they introduced IBM’s magnetic tags as part of their retail stores solution. During the 1980’s, largely driven by the supermarket trade, the more universally accepted bar-coded tags (EAN or UPC) became the standard.
Payment systems
American Express introduced the first plastic credit card in 1959. The cardholder’s name, address and unique identification number were marked in embossed lettering on these cards. This enabled retailers to produce an imprint on carbon paper slips intended for the bank, merchant, and customer as proof of purchase. This introduced the affectionately termed Zip-Zap machine.
An electronic transaction authorisation system was created in the US in 1973, linking merchants to the Visa data centre in California. This led to the spread of electronic payment terminals connected to the Visa and Mastercard networks and ultimately to individual acquiring banks.
Integration
In both cases, the merchandising tagging and card payment systems were independent from the POS terminals, which led to the next wave of innovation – integration.
Unlike ECR’s, whose functionality was largely restricted by hardware, the ‘soft’, non-proprietary nature of emerging POS systems allowed new devices to be attached. This included laser scanners for tag-reading and handheld electronic payment terminals. In both cases, there were, and continue to be, technical iterations that add value to both retailer and customer.
This created a vendor environment categorised by:
* Vendors offering integrated POS solutions of both hardware and software, such as IBM.
* Those offering POS hardware, such as NCR.
* Those offering POS software that can be integrated with standard POS hardware, such as Flooid, who are currently conducting a ‘brain transplant’ at Woolworths South Africa by installing their feature-rich software onto existing POS hardware.
The pandemic and rapid digitisation
Technological innovation has doubtlessly changed the retail landscape. Retailing has become more competitive, and their customers are more technology savvy. The global pandemic has sped up many technological innovations.
Covid-19 has changed the way many consumers pay for goods and services. Consumers are using cashless and tap-and-go card payments far more willingly, driven by an aversion to spread the virus. However, this is only possible where the retailer can handle tap-and-go payments and the consumer has an appropriate card. In the US, PayPal adds QR codes to their cards to make them even safer by avoiding the ‘tap’ step of a payment transaction.
Contactless and mobile payments are continuously rising in usage, but the plastic card is still king in the UK. Cards overtook cash payments in the UK in 2018. In South Africa, card-based payments account for about 50% of all retail transactions.
Because of the shyness, some retailers demonstrate in spending money on POS technology, believing that what they have is fit for purpose, it is not surprising then that in the 2000s, and even today, there are still some stores with POS systems so old that they are jokingly referred to as old enough to vote! As far as these retailers are concerned, their POS platforms continue to function as they always have – just recording sales and taking cash.
The age of omnichannel
Newer POS provides a data aggregation layer for the retailer and its partners, such as improved inventory management, customer relationship management, marketing tools – including insights into customer behaviour – and other functionalities to support omnichannel retailing. For retailers unencumbered by legacy infrastructure, omnichannel retailing provides a better customer service and integrated shopping experience across various touchpoints.
It is clear how the evolution of POS has created many compelling reasons for retailers to stay abreast of POS developments. While newer systems offer retailers new functionality and a gateway to valuable data, it always must be balanced with the reality of what a customer is doing at the check-out desk – checking out.