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October 27, 2014

Point-of-sale systems see major changes

Photo | CNN
Tim Phelan, president, Connecticut Retail Merchants Association
By Keith Griffin

Point-of-sale systems, commonly referred to as POS, are undergoing a revolution in Connecticut — and it's largely driven by the capital needs of small to midsize retailers.

R.J. Calio, a South Windsor consultant for POS technologies, says the change has come about because retailers are no longer willing to make the $40,000 or so up-front investment in the technology, which allows businesses to electronically track purchase orders and inventory and store key customer and employee data.

Instead, retailers want to assume the risk in lower monthly payments.

That's why New Haven Cash Register has gotten into the rental business for the first time in its 65-year history. Company president and CEO Arthur Rosenbaum said rentals are becoming a major factor in his Hamden-based business, which has peddled point-of-sale systems and cash registers to Connecticut retailers and restaurants since 1949.

Out of its last 25 POS system sales, 18 have been for rental products.

“That was surprising to me because I thought it would be 50/50,” Rosenbaum said, adding hardly anybody wants to commit to a long-term lease or buy equipment outright anymore. “We think it's the future.”

Andrew Testo, who owns the Off the Hook restaurant group in Fairfield County, said rental POS systems appealed to him because it meant less up-front, out-of-pocket costs.

“The software and price point is perfect,” Testo said. “We're small. We wouldn't get that savings from anything but a rental. That's really a big plus.”

Testo estimated purchasing a POS system could run from $5,000 to $20,000. “If you have three or more that really adds up for any startup, not just a restaurant,” he said.

Tim Phelan, president of the Connecticut Retail Merchants Association, says retailers are also increasingly moving toward cloud-based POS systems. Mobile platforms that allow retailers to swipe credit cards on smartphones are also becoming increasingly popular.

Retailers like the idea of their data being on a remote server because the information is available anywhere, anytime, Phelan said, adding that capital costs are a lot less for cloud-based and rental POS systems.

“There are different ways to pay for it and cost is always a factor. Obviously with hardware POS systems you have to pay for storage and that involves capital costs,” Phelan said.

Rosenbaum said New Haven Cash Register is one of the few POS companies in Connecticut to move to rentals. “It's easier for people to get into technology using this rental model. People wouldn't have been able to afford a high-technology system like this,” he said.

It's also helping his company, which employs eight, prepare for the future. Rosenbaum sees a day when his entire business is rental.

“You rent everything now,” he said, like alarm and phone systems. “No one asks for that big chunk of money upfront any more. The cost for rental is only a fraction and you get the same robust software.”

New Haven Cash Register's new rental program, which started nine months ago, hasn't seen any defaults yet, Rosenbaum said. Customers put roughly 10 percent of the cost of the POS down and then make monthly payments for a three-year commitment. “If you close the business,” he said, “you return the equipment and software license. No worry. I can use the equipment again.”

Calio said companies that transition to selling rental POS systems can have a tough time initially, but it should ultimately pay off in the long term. “It becomes more profitable once they hit critical mass with recurring revenue. It's a greater revenue stream than they would have received,” he said.

Further innovations in POS systems are also being driven by chip-enabled credit cards, Calio added. Retailers need to invest in POS systems that safeguard customer data, and a lot of those services exist in the cloud.

“A retailer has to look for a compliant system to avoid vulnerability. Otherwise you could be shut down by Visa and Master Card,” Calio said. “That's driving a lot of activity. The industry has really exploded over the last three or four years.”

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