Technology supporting the checkout process at the point of sale is so important to retailers that many are afraid to tinker with it. Thus, they're content to leave well enough alone -- but that approach can't last forever.
"Supermarket at the point of sale hasn't changed much in the last 10 years," said Greg Buzek, president of Franklin, Tenn.-based IHL Consulting, which tracks trends in retail technology. "That's the big problem that we've got out there." According to IHL Consulting's 2003 North American Retail Point-of-Sale Terminal market study, 22% of the installed base of POS terminals in supermarkets are well over a decade old.
Indeed, there is plenty of evidence that food retailers are aware of the problem and are beginning to change their tune. In SN's Ninth Annual State of the Industry Supermarket Technology Report (Feb. 10), 50% of respondents said that POS systems would be a high priority this year, making it the most frequently cited high-priority technology. It was also at the top of the priority list for 2002, with 44% of respondents selecting it. Also, 63% of the retailers surveyed said they would upgrade their POS software on some scale in 2003, with 61% indicating that they already had upgraded their software in some way in 2002.
Buzek concurs with SN's figures, estimating that approximately 60% of supermarkets will need to replace their POS hardware within the next two to three years.
Why has POS become such a back-burner issue for supermarkets, with the average cycle for POS installs running 10 to 12 years? In part, said observers, it's because supermarkets have traditionally favored proprietary POS solutions from such established vendors as NCR, Fujitsu and, especially, IBM. Such systems offered reliability and service, but came with a steep price tag that made the cost of chainwide rollout considerable, and therefore caused investments to be postponed.
In recent years, however, the general trend in retail -- and to a growing degree in food retail in particular -- has been away from proprietary solutions to more open systems that offered the flexibility of choosing best-of-breed components from a variety of vendors. As a result, at this juncture retailers in the market for new systems face a choice: Continue with more traditional approaches and systems; or test the waters of openness, with all the new bells and whistles attached. Retailers willing to venture into open systems can select from hardware that is much "thinner" than before (requiring much less processing power in the lane), as well as from applications that offer speed and ease of use, and operating systems that make all of this possible yet don't require paying Bill Gates a license fee.
Hannaford's Daring Move
The operating system most often talked about in this context is Linux, the "freeware" system with the famous penguin logo. In the food industry, Hannaford Bros., Scarborough, Maine, has become the clear leader in testing Linux at the POS. Hannaford Bros., a division of Delhaize USA, made a splash at this year's Marketechnics show in February by announcing it would become the first supermarket chain to roll out a Linux-based operating system as it replaced its old proprietary ISS400 POS system from Fujitsu Transactions Solutions, Frisco, Texas. (SN, Feb. 24.)
Hannaford's new checkout system comprises a host of vendors, including a Linux OS from Red Hat, Raleigh, N.C.; thin-client Beetle /s terminals from Wincor Nixdorf, Austin, Texas; and StoreLine POS software from Dallas-based Retalix. To date, the system is up and running in five stores, and Hannaford is on target to complete rollout to a third of the chain by the end of 2003, said Bill Homa, chief information officer.
"We're a little on the edge of the envelope here, but we believe that Linux has proven that it is ready for prime time," Homa told SN. Since most retailers only replace POS systems every 10 to 12 years, he added, if the chain hadn't done something new and cutting edge now, it may not have had the opportunity for another decade.
Homa said his decision to move to a Linux-based OS was based on the lower cost of the system and an expectation that it will enable faster throughput at the checkout and easier cashier training. He said with only five stores installed, it's hard to fully evaluate how the rollout is going, but added that everything seems on target to meet those expectations. Thus far, he said, the technology is "rock solid," and is performing as expected.
While Homa acknowledged that Hannaford is in uncharted territory where few retailers are willing to go, he said he's seen a lot of momentum building around new operating systems such as Linux. He is also seeing much more interest in stripped-down, thin-client hardware terminals that require fewer components and memory than traditional terminals. "Everybody is going to thin-client. Whether the thin-client is Windows or Linux is a different decision, but I think everybody is moving toward very thin-client point of sale," said Homa.
Microsoft, Redmond, Wash., has released a low-cost, thin-client operating system, Microsoft XP Embedded (XPe). The Microsoft solution has gained in popularity among vendors as Fujitsu has announced it is offering the XPe system for the Team PoS 2000. The XP Embedded OS is customizable to eliminate unnecessary components, enabling a retailer to reduce total cost of ownership, said Cathy Boss-Fessel, director of channel marketing at Fujitsu.
NCR, Duluth, Ga., also offers the XPe OS on its newest generation of terminals, said Rock Wight, director of solutions marketing for the vendor. Early this year NCR introduced its RealPOS 80 terminal, with XPe available, as well as a new 6.0 version of its Advanced Checkout Solution (ACS) software, which runs on both the XPe and Windows 2003 operating systems.
Meijer, Grand Rapids, Mich., has announced through NCR plans to install the NCR RealPOS 80 terminal and ACS 6.0 software in 29 stores (the operating system was not named). The rollout is scheduled to be completed by the end of August. The retailer expects the new terminals to enable the implementation of additional applications and provide faster checkout service, said Kevin Holt, senior vice president of operations for Meijer, in a statement.
Staying With the Familiar
Even IBM, with its market-leading operating system, software and hardware for retail POS, has embraced Linux, investing a staggering $1 billion in hardware, software and services related to Linux across industries in 2001. IBM believes in open systems, but is just beginning to see the emergence of Linux-based POS for supermarkets, said Ralph Jacobson, retail food industry marketing executive for the company.
Indeed, while it is making headway in headquarter servers, Linux remains a dot on the food retail radar screen when it comes to POS. IHL Consulting's latest study pointed out that the supermarket industry still favors 4690 operating systems from IBM, the clear market leader.
So when Pathmark, Carteret, N.J., looked to upgrade its aging POS system, it stuck with IBM because of its familiarity.
"We were pleased with our older application, which was an early form of the POS application from IBM," said Bob Schoening, Pathmark's senior vice president and chief information officer. "What we decided we wanted to do was an implementation in a phased format where we could replace all the hardware first, and then come back after the fact and replace the POS software at a future date."
With IBM's 4680 operating system already running in the company's headquarters and file structures, Schoening decided to upgrade the chain's decade-old hardware with compatible IBM equipment.
Pathmark began its POS overhaul a year ago with an installation of IBM's SurePOS 750 terminals in all of its stores. Since then, the chain upgraded to IBM's 4690 operating system. As part of the phased implementation strategy, Schoening also rolled out self-checkout units from Optimal Robotics, Montreal, in 70 stores where volume justified installation.
Now, Pathmark is in the process of working with IBM to customize its SurePOS Application Client/Server Environment (ACE) software to complete the front-end transformation started a year ago, Schoening said. The development and installation are on target to be completed by the end of 2004. Schoening argues that the ACE solution from IBM falls into the category of open systems, though he admits some would probably disagree. Yet he said he has reservations about open systems because they may leave a retailer vulnerable to threats from computer viruses that have been attacking many Windows-based products lately, he pointed out.
In general, he said, he's not convinced that the experiments with open-system implementations are going as well as the buzz would indicate. Schoening's approach, indicative of the approach of many supermarket retailers, is more conservative and focused on finding tried-and-true technology that will serve the business needs of the chain, rather than experimenting with leading-edge technologies.
"While from an IT standpoint it's nice to be a trendsetter and do something radically new, if the radically new is not going to offer something significant to your business, I have to question why you do it," Schoening said.