Aug. 1, 2013
By Robin Arnfield
Mobile point-of-sale devices are no longer just a tool for micro-merchants to accept card payments. Increasingly, large U.S. retailers are equipping associates with smartphones and tablets that let them accept customer payments from the sales floor.
According to the Yankee Group Technology Roadmap report "Revolutionizing Retail With mPOS," mPOS devices are transforming the retail industry in a way that few technologies have done before. “Retailers which have eschewed cumbersome cash wraps in favor of a mobilized checkout are already reaping increased savings, sales and customer satisfaction,” said the report, written by Yankee Group analyst Jordan McKee.
A cash wrap is a counter, typically about 15 square feet, which contains a POS terminal, scanning equipment and space for bagging purchases.
In December, PayPal president David Marcus wrote in a blog posting that point-of-sale terminals would become increasingly mobile in 2013, with the traditional cash wrap starting to disappear.
McKee agreed. "I see point-of-sale terminals going mobile," he told Mobile Payments Today. "In the next five years, the majority of retailers will be using mPOS systems." He added that large retailers initially saw mPOS devices as a way to reduce checkout lines at their cash wraps (known as "line busting") but they "now realize that mPOS goes far beyond line-busting, as it can help improve the customer shopping experience and also free up floor space for product promotions."
A Yankee Group IT decision-maker survey from March found that 32 percent of U.S. merchants with more than 500 employees have already deployed mPOS, while 29 percent plan to do so within the next 12 months. Only 23 percent reported no plans to install mPOS, while 16 percent will deploy but have not set a timeframe.
McKee believes U.S. retailers will accelerate mPOS use during this year's holiday shopping season. "There will be retailers using mPOS devices for the first time to help them cope with Christmas shopping," he said.
Large retailers are installing more sophisticated mPOS systems than the dongle-and-smartphone combinations typically deployed by small merchants. "(Their) mPOS solutions are sturdier than the Square dongle that micro-merchants use," McKee said. Provided by vendors such as VeriFone and Ingenico, these solutions offer more than just payments acceptance; additional features include inventory checking, ordering, sales associate training and product information.
According to the research firm IHL Group, 28 percent of North American retailers of all sizes, particularly department stores and specialty retailers, plan to implement mPOS by the end of 2013. And IHL's "Mobile POS: Hype to Reality" study forecasts that North American mPOS hardware and software sales will total $2 billion in 2013.
Across North America, IHL added, retail mPOS devices will cannibalize 12.4 percent of traditional POS shipments by 2016, with department stores and specialty soft goods retailers the highest areas of replacement. However, the report said, over the next three years, 85 percent of larger retailers will use mPOS devices as additional transaction points in their stores, not as outright replacements for traditional fixed POS stations.
McKee agreed that most U.S. retailers will pursue a hybrid model, retaining traditional cash wraps while deploying mPOS technology. "There will always be a need for traditional cash wraps, for example for serving customers who are not comfortable with mPOS," he said.
IHL also cautioned that 33 percent of North American retailers have no plans to implement handheld mobile POS devices within the next three years. "These are retailers with high volumes of transactions such as supermarkets," IHL president Greg Buzek told Mobile Payments Today.
Apple has received a lot of publicity for taking card payments with iPod touch devices in its retail stores. Other early adopters of mPOS devices include the home improvement retailer Home Depot, which began issuing mPOS devices to all U.S. staff in 2010, according to Bloomberg. Home Depot's mPOS devices combine inventory management with payment card acceptance.
During the 2010 holiday shopping season, The Yankee Group report noted, U.S. retailers such as Urban Outfitters began using mPOS to decrease customer lines at cash registers. Last September, according to Business Insider, Urban Outfitters CIO Calvin Hollinger told analysts that the clothing chain will replace its fixed POS terminals with iPod touch devices and iPads.
Other big-box retailers deploying mPOS technology in favor of cash wraps, according to Yankee Group, include J.C. Penney, Nordstrom and REI.
J.C. Penney said in March that a quarter of its point-of-sale transactions were now take place via mPOS devices, and McKee said the company has gone on the record as saying it wants to give all of its employees an mPOS device.
The outdoor goods retailer Moosejaw Mountaineering announced in March 2012 that it was equipped to perform customer checkouts from anywhere in its stores, and Mobile Commerce Daily reported in May that the company now conducts 70 percent of transactions via mPOS.
But IHL’s Buzek said a vast majority of North American retailers are taking a slow and methodical approach to using mobile for POS. He warned that key operational issues must be resolved in device and merchandise security, cash handling, payments, bags, customer service levels and traffic flow; otherwise, he said, mPOS devices will be disruptive in a negative way for retailers.
"Over the last year, we've seen larger U.S. merchants install mPOS solutions so their staff can take payments from customers while walking around the store," McKee said. "This unchains the staff from the cash wrap, and allows them to interact more closely with customers on the sales floor."
It is generally held that mPOS devices with inventory management capability will improve the customer shopping experience. "Sales associates equipped with an mPOS device can help a customer find an item they are looking for, and then they can accept payment for that item," said Arkady Fridman, a senior analyst and consultant with Aite Group.
"Staff can use their mPOS devices to check whether products are in stock," McKee said. "If these products are not in the store, they can order them and have them shipped to the customer’s home."
Deploying mPOS solutions enables retailers to differentiate themselves from traditional retailers that have yet to adopt mobile technology, McKee noted, and also to compete with online retailers.
According to the Yankee Group report, retailers that have mobilized some or all of their checkouts are achieving significant cost-savings. The report estimates that large retailers will spend $20,000 and need around 75 square feet of floor space to install five fixed checkouts. But providing five fully-loaded iPod touch devices to staff will cost just $2,500, with no loss of floor space. And McKee pointed out that replacing cash wraps with mPOS devices allows retailers to liberate floor space to display product lines.
Yankee Group estimated that a high-end retailer with 50 stores, producing $525 in sales per square foot, could generate $1.2 million in additional annual sales by replacing three cash wraps with mPOS.
The card networks have mandated that U.S. merchants must migrate their point-of-sale card readers to EMV by October 2015 or face a fraud liability shift.
With that in mind, Yankee Group recommends that U.S. retailers deploying mPOS devices future-proof their investments by ensuring that their mobile card readers are EMV-compliant. In addition, given that EMV is expected to facilitate NFC payments at the point-of-sale, Yankee Group said merchants should consider introducing NFC-enabled mPOS solutions.
Learn more about mobile POS.