Mobile POS: The Brave New World of Retail

Mobile payments and mobile POS systems are transforming the conventional idea of retail checkout processes.

mobile pos

In the beginning, there was the cellular phone. Then arose a new kind of phone, from whence sprang generation upon furious generation of increasingly intelligent smartphones. Today, we are beset by a menagerie of portable devices, their displays ranging in length from thumb to forearm, but, crucially, each embedded with a radio transponder or five. Welcome, Human, to the brave new world of the mobile device—and mobile POS.

According to the International Telecommunications Union, between 1990 and 2012, cell phone subscriptions grew from 12.4 million to more than 6.8 billion. It was only a matter of time before smart mobile devices would infiltrate the retail ecology and precipitate a shift in processes and interaction modes.

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Now that consumer-grade mobile devices have the power and adaptability to be pressed into service for a wide variety of retail industry uses, for many retailers they’ve come to be regarded as a kind of retail Swiss Army knife. Mobile devices have considerable utility for internal-facing work, such as training and inventory management, but the reason they are being deployed en masse is to carry out one overarching commandment: “Thou shalt provide superior customer service.”

Mobile smart devices are being rolled out as customer service tools because they have the potential to shake to the core the way many retailers approach customer interaction. “A good example is an electronics retailer that we worked with,” said Alan Dabbiere, former chairman of mobile device management company AirWatch. “They used to train their employees on all the products that would come in and hope that they learned enough to be able to service the customer. But they realized it was a losing battle. Electronics were changing too quickly for their employees to keep up with everything. 10,000 new SKUs every month was just too much.

“So they reversed the process, providing employees with mobile technology equipped to look up all the information they would need,” explained Dabbiere, “Instead of expecting them to learn the ins and outs of each new wave of gear, just taught them how to look it up. Teach a man to fish as opposed to give a man a fish. And they were able to greatly improve their customer service.”

Armed with a portfolio of product data, images, related products, and promotional videos, all a finger tap away, a sales associate becomes a product prodigy—if not in truth, then at least in appearance and ability. The salesperson is equipped with an arsenal of new tactics, from video demonstrations to enhance upselling, to using a customer’s loyalty card to look up her purchase history and tailor individualized recommendations based on her aesthetic, brand, or price preferences.

Many surveys show that two of consumers’ biggest complaints with retailers are:

  • Why does it take so long to give you my money, and
  • Why don’t your employees know anything about the product that I came in to buy?

A mobile device in the hands of a properly trained sales associate can immediately address both of these problems. It provides access to a wealth of knowledge about the product of interest, and, should the customer make a purchase decision, it lets them immediately check out. Many of the most important benefits of smart mobile devices, to retailers and consumers alike, are transactional—they’re dependent upon the mobile device functioning as a point of sale (mobile POS).

The Mobile Point of Sale

“What exactly is mobile POS? I think it differs in definition from retailer to retailer,” said Karl Langhorst, former senior director of loss prevention at Kroger. “During discussions with other folks in the industry, it quickly became evident to me that mobile POS solutions in the eyes of one retailer were not the same solutions in the eyes of another retailer.” Indeed, the term “mobile point of sale” has been used to refer to any one of a family of technologies that introduce a mobile device into the process of completing a retail transaction. However, only two arrangements have seen much commercial use as yet.

The most widely known variation features a smartphone or tablet equipped with hardware to accept a credit card. This allows a sales associate to roam the floor, provide customer service as normal, close a sale, and then complete the transaction then and there, using the mobile device’s camera to scan the item and swiping the customer’s card to pay. This saves the customer the hassle of waiting in lines and dealing with other employees, while also providing a more personally tuned customer experience.

Such an arrangement works beautifully for an apparel retailer or other retail segment with characteristically small numbers of items purchased per transaction. As the number of items increases, however, the system becomes more cumbersome, to the point that counter space, bagging stands, and two free hands begin to sound like increasingly good ideas. This is why the grocery industry typically has a different system in mind when they refer to mobile POS. This second system can be seen as an extension of the self-checkout common today in many grocery stores. After the customer takes an item off the shelf, she’ll scan the barcode using an app provided by the retailer and running on a smart device. Then she’ll put the item in the cart, bagging it as she goes. When she’s finished shopping, she’ll pay at a self-checkout by waving a barcode displayed on her smart device at the kiosk. Customers get to avoid checkout lines, bag their groceries the way they prefer, and enjoy features such as the device displaying a running total of everything scanned. Retailers benefit from customer-driven automation of their operation. And they also benefit from giving their customers options.

The second system can be seen as an extension of the self-checkout common today in many grocery stores. After the customer takes an item off the shelf, she’ll scan the barcode using an app provided by the retailer and running on a smart device. Then she’ll put the item in the cart, bagging it as she goes. When she’s finished shopping, she’ll pay at a self-checkout by waving a barcode displayed on her smart device at the kiosk. Customers get to avoid checkout lines, bag their groceries the way they prefer, and enjoy features such as the device displaying a running total of everything scanned. Retailers benefit from customer-driven automation of their operation. And they also benefit from giving their customers options.

Vast Potential

One of the early appeals of mobile point of sale in retail was “line busting,” meaning easing the pressure of long checkout lines. Having mobile-POS-toting employees dynamically respond to changing line length would keep customers from enduring their dreaded long wait, while at the same time making more efficient use of store labor. Another benefit touted in the early days of mobile POS adoption was the physical space it was possible to repurpose by scrapping some of the fixed cash registers in exchange for mobile devices. Valuable real estate on the sales floor could be reclaimed from what has always been a sort of necessary evil.

But the reason many retailers are enthusiastic about mobile POS has less to do with reactive damage control like line busting and more to do with proactively enhancing, or even reinventing, the mode of interaction between customers and store associates. It has less to do with scrounging an extra few pitiful square feet of floor space for product display and more to do with linking the physical retail space to the vast potential of virtual, networked space.

“So much of traditional retail,” said Dabbiere, “is the salesperson doing all this work to get the consumer to the point of purchase, and they’d go stand in that line and have second thoughts or run out of time or get frustrated and you’d end up with tons of merchandise left there in the checkout line. It’s valuable to be able to move that sales transaction to part of the normal customer-service selling process as opposed to the very disjointed function of first help your customer, get that product into their hands, then point them to a register, or drag them to the register that may or may not even be available.”

A lifetime of habit can make it seem odd to complete a sale away from a register, but making a payment directly to the sales associate who has personally been helping you, rather than to some other employee across the store in cash-register-land, does make a this-is-how-it-ought-to-be kind of sense. The act of transferring ownership, as the last action of a customer before leaving a store, can help to solidify the customer-salesperson relationship, increasing the value of that relationship. And the employee suddenly has a much easier time upselling or cross-selling. “By having this window into all of this product information, and possibly past purchase information, a customer service representative becomes a more effective tool to the consumer than they were before,” said Dabbiere. “They can recommend related products—the McDonald’s ‘Would you like to supersize that?’ situation. They’re able to sell more, provide better customer service, and get a higher close rate through these mobile technologies.”

And when a customer is looking for an item that’s not in stock, or has her heart set on style number 6312, even though it’s not normally available in her region and would have to be special ordered, mobile devices can save the sale. “You can use this technology to show SKUs or other versions of those products that are not in stock,” Dabbiere explains. “Imagine not just having a couch in inventory, but being able to hold up your tablet beside it and cycle through the 30 fabrics it comes in. Or if you’re selling jewelry, you might not have all your jewelry SKUs in one store, but you can take the smart device and flip through everything else that’s available. So now you’re taking expensive, limited retail space and making it much more productive relative to the breadth of product line. It’s the integration of multichannel retail onto the selling floor.”

Suddenly the mobile device becomes a conduit, a portal, linking the physical space of the brick-and-mortar sales floor to an enormously more vast virtual space. The customer could have visited that particular corner of virtual space from her home computer, of course, just as she could have visited billions of other corners. But now the salesperson can pick up that one corner most relevant to both the customer and the retailer, and place it right into the customer’s hands.

Loss Issues

There is, of course, a broad spectrum of challenges to face with the adoption of mobile POS systems. From a loss prevention perspective, the most apparent initial challenge is the physical security of the mobile devices themselves. These are highly desirable, consumer-grade electronics that require a dedicated system to track and secure.

“It’s much different from conventional fixed POS units, which are screwed into the floor,” said Dabbiere. “These are roaming around, so you have loss issues around the device itself. Most people don’t have much use for a cash register at home, whereas if someone were to steal a smartphone or a tablet and wipe it, they might want to have it to do other things in their house. So now the POS device itself is a target for theft.”

Aside from the value of the device, unauthorized use, whether malicious or not, could expose sensitive information or provide an avenue into a retailer’s network. “When you’re handing these devices to employees,” continued Dabbiere, “and they have passcodes to get into even just the application layers, you always have to fear that one of them is going to end up doing something malicious. You just need to make that assumption, so that you’re ready if it happens.”

Securing mobile devices from the IT end is also important. A large deployment might involve thousands or even tens of thousands of individual devices, each of which needs to be configured, managed, and supported. A point-of-sale cash register is a single-use device. It’s configured once and then upgraded relatively infrequently, because it’s designed to perform a single set of tasks. But the mobile device, as a retail Swiss Army knife, has multiple applications and capabilities. It will have to be upgraded much more often, as any smartphone user knows. For something as mission-critical as money transaction handling, each application—and each update—will need to be thoroughly tested to ensure there are no security holes.

Cash Money

Another striking departure from a conventional point of sale involves how cash is handled. Cash-handling issues cause headaches today just as they did in 1879, when James Ritty patented the first cash register—“Ritty’s Incorruptible Cashier”—to keep his employees from pocketing the proceeds of his saloon’s whiskey sales. But the percentage of U.S. point-of-sale purchases made with cash has plummeted since then, down to roughly 25 percent in 2012, according to market research group Javelin Strategy & Research. Of course, consumer cash usage patterns will vary significantly among retailers, but the vast majority will need to maintain options for cash-using customers into the foreseeable future.

Almost every retailer deploying mobile POS systems plans to retain one or more conventional, fixed points of sale as an option for customers who prefer them. Cash customers could continue to use these, but it would be preferable to devise a way for mobile POS stations to more easily accommodate cash. Yet a sales associate with a mobile POS device might roam throughout the store and probably won’t be expected to carry a cash drawer or a lockbox along. Several vendors are developing technologies to solve this problem with solutions ranging from a mobile-friendly cash drawer to an express pay kiosk, but this is still an open issue and each retailer will need to address it one way or another based on their unique situation.

What Is To Come

If swiping your card on a phone, ignoring the cash register, and walking out of the store with your merchandise seems a little odd at first, examining the situation more closely may just make it seem even stranger. “What we realized, after a few conversations with some experts and visiting some stores and taking a look,” said John Aloysius, associate professor in the department of supply chain management at the University of Arkansas, “is that this breaks down the traditional transaction sequence—and some of this might seem pretty obvious—but when you really think about it, it’s really staggering. Retailers have a clearly defined set of processes they’ve accrued over the years, things ingrained into the public mind. And with mobile point of sale, you lose a lot of that.”

A transaction at a conventional point of sale is composed of a number of sub-processes, such as scanning, receipting, and validation, which are all elementary particles of a transaction, yet have complex implications for store operations. Mobile POS and mobile payment systems take these elementary processes, and the deeply ingrained cultural norms of how they are supposed to proceed, and shuffle them around.

In the lands of retail, in a vast kingdom ruled by plastic cards, there is disquiet—the stirrings of a revolution. In dark meeting rooms, shadowy figures speak. “The age of the credit/debit card shall fade,” they say, their hushed voices turning scornful as they mutter, “Can’t even tweet from one of those.” They watch their champion, these past years a constant companion of the plastic cards during ancient rituals, such as the triple-pocket-slap-keys-phone-wallet-check. It won’t be a violent revolution, they expect, but rather a gradual fading, much as with the cards’ disgraced predecessors, the personal checks. They watch their champion gain power and ability; watch the masses of humanity clamoring for a link. They watch…and they wait.

This article was originally published in 2013 and was updated April 25, 2017.

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