White Paper

Don't Get Lost In The Sea Of ISVs: Think Outside The Box

Luis Artiz

By Luis Artiz, Group Product Manager, System Devices Group, Epson America, Inc.

In the last few years, point of sale (POS) ISVs have converged on the user interface as a main point of differentiation.  However, that advantage will not be sustainable because there isn’t a high barrier to creating good front-end apps.  In addition, some ISVs have been able to rely on first-mover advantage, larger venture capital funding, a strong regional presence, and sometimes, just plain luck to grow their market share. But these strategies only last so long. As the ISV market begins to consolidate, the focus needs to shift to providing real, and continual, value to the merchant and the consumer.

The global POS machine market will grow at a CAGR of 11.5 percent from 2017 to 2025, according to Persistence Market Research, reaching $144.2 billion. For ISVs to benefit from that high demand for new solutions, they will have to look for new ways to generate benefits for their merchant clients. That means establishing value-added capabilities that will provide competitive differentiation not just for the ISV in question, but also for the merchants who deploy the solution.

This alignment of business objectives – making the merchant a more appealing option for the end consumer – can increase sales for the ISV in the near term and establish stronger customer loyalty over a longer period. Three ways to provide that value are to create customer-specific solutions, work with partners that incorporate other features into the POS, and integrate the POS with the Internet of Things (IoT).

Build to The Business

ISVs that offer successful POS systems are building solutions that are very specific to the customer’s business. While some ISVs build general systems, others build for specific types of retail, such as boutique clothing, small electronics, ice cream shops, and nail salons. This targeted solution makes the merchant feel like the product is specifically built for them, as opposed to a general product that must be customized.

A hair or nail salon, for example, would need a POS that can manage employee-specific tipping, which is not a feature a grocery store would consider. Restaurants with high levels of staff turnover want a system that is easy to use so that new employee training can be completed quickly. A pharmacy solution has to comply with federal and state regulations, in addition to providing features like automatic prescription renewals or checking for medication conflicts. An auto body repair business will want to store detailed customer histories, manage insurance information, and conduct VIN look-ups.

Building to the business requires the ISV to go deeper into the customer pool and develop products that are specific to each customer. It's OK for an ISV to have multiple packages, but those packages should clearly appeal to particular customer segments.

Products and services that reflect a high level of domain expertise are going to be appealing to merchants. They are looking for partners and consultants that can “speak their language.” If the ISV can offer insight into the value of adopting new technologies like NFC (near field communication) or mobile payments, that’s even better – not every merchant has a customer base that is likely to use those payment solutions.

With vertical market expertise, ISVs can determine whether loyalty or gift card programs will be of value to the merchant and what approach or platform will be most effective. Will the business accept customer orders online or over the phone? Will managers need remote access to revenue data, inventory, or other information?  The answers to those questions will affect the design of the solution and will vary based on the type of merchant.

There are even more specialized sectors where vertical market expertise will be highly valuable. Healthcare organizations, for example, are not thought of as a traditional POS market, but they process plenty of payments. They also require specialized compliance and reporting functionality, as well as integration with medical software (electronic health records, etc.) that have their own privacy and compliance requirements.

Likewise, public and private school systems are increasingly turning to modern POS technologies for handling fees, tuition, cafeteria sales, and other applications.

Close familiarity with the needs of these types of customers can potentially open up markets that may otherwise purchase off-the-rack POS solutions or rely on the recommendations of other business software vendors. An ISV armed with industry knowledge and solid consulting offerings can quickly make an impact.

Strategic Partnerships Enhance POS Positioning

The ISV that is selling a POS system should focus on making sure that the solution is delivering excellent value. Functions like analytics, customer loyalty, inventory control, and employee engagement may be a critical part of the customer’s requirements, but these features can be built by third-party software companies that have demonstrated expertise in those areas.  Don’t be afraid to partner with these companies to create service bundles for joint customers, or to jointly develop new, integrated solutions.

For example, mobile POS is becoming a huge piece of the retail market. IHL puts mobile POS growth at 24.9 percent in 2017, driven by significant sales gains (in some cases, as much as a 25 percent increase per transaction when mobile is used) experienced by retailers that adopt the technology. For enterprise deployments, mPOS is largely an add-on. If an ISV doesn’t already offer mPOS, there’s little reason to build one from scratch. In fact, developing and marketing a new solution from the ground up may further delay time to market. Find a willing partner that wants to expand into your own markets and create a bundled solution that seamlessly integrates with the POS and the Omnichannel system.

Likewise, payment services providers can help unlock a multitude of features that can be integrated with existing POS solutions – including everything from managing gift card or loyalty card programs to mobile wallet acceptance to analytics.

Organizations that try to do it all in a single software package – often with limited development resources – could fail because they lose focus on their core competencies. Instead of spending resources to develop any or all of those other POS aspects from the ground up, they should work with somebody who has already done the work.

Integrate The POS with The Internet of Things

The Internet of Things (IoT) connects millions of devices and sensors to the network in order to provide real-time insight into the environment. Ultimately, it will include billions of devices – connected medical devices, phones, smart cars, smart homes, smart appliances, and in-store technology for retailers.

POS solutions will not only feed data into the Internet of Things, but will also leverage that data (using analytics) to help improve sales and merchant performance.

Some examples of how IoT can integrate with the POS include:

  • A point of sale system can be connected to security cameras. If there is ever an issue with a bad transaction, cashier theft, or fraud, the camera can provide a visual point of view of any given transaction.
  • Integrating POS analytics with digital signage will allow retailers to better manage the content in the signage and change it in real time, depending on business conditions. The signage could even change based on the presence of customers who are using the store’s mobile apps on their smartphones.
  • Deliver real-time coupons to consumers based on calendar and inventory levels.  For example, if the store purchases a large quantity of hot dogs, anticipating a strong summer BBQ season, but is not moving them fast enough, the system can send instant coupons to shoppers in the store reminding them to buy hot dogs (and ketchup, mustard, buns, charcoal, and other items).
  • Sensors placed around the establishment can track store traffic and compare it to transaction data. For example, on a football Sunday, store sensors can tell the merchant if there was heavy traffic in the beer aisle, and if not, store staff can leverage digital signage, instant coupons, employee suggestive sales, etc., to help ensure heavier foot traffic in that aisle the next time
  • Data from all of these systems, combined with POS sales information, can be fed into cloud-based analytics tools to help create more accurate forecasts, optimize inventory levels, and improve the timeliness and effectiveness of promotional campaigns.

Conclusion

POS solutions have proliferated, and in many sectors they have almost become commoditized. Merchants of all sizes can easily deploy a cloud-based POS system on off-the-shelf hardware, and many of these systems offer interchangeable feature sets.

Successful merchants, however, want more than just a way to accept payments. They need help navigating a confusing array of payment technologies and are looking for insights that can help leverage their POS to generate business intelligence and create appealing consumer experiences that will produce greater customer loyalty and higher sales.

ISVs will need to expand and enhance their own POS solutions to win in this competitive market. That level of differentiation will require improvements on many fronts – adopting new technology, working closely with partners to add new features/functions, specializing in specific vertical markets, and finding ways to link the POS to the emerging Internet of Things.

Hardware manufacturers like Epson can facilitate these partnerships to help ISVs find the right subverticals on which to focus and explore ways to successfully integrate new technology into their POS product sets. ISVs need to think outside of the box, align their solutions with merchant business goals, and prepare for a more competitive marketplace that will demand more flexibility and collaboration.