Magazine Article | July 18, 2014

From Flat To Flourishing: The Smart Way To Grow POS Revenue

By Jay McCall

This retail VAR discovered innovative ways to bundle customers’ legacy POS equipment with professional and payment processing services, which is leading to $500,000 in projected revenue growth this year.

Many retail VARs still long for the good ol’ days of point of sale when it was more common to win a massive POS and peripheral rip-and-replace deal than it is today in the postrecession era. After surviving those lean years, food services and retail VAR Baystate Point Of Sale (Baystate) recognized that unless it wanted to embrace the “flat is the new up” motto, it had to make some significant changes to its business. Phil Bingham, owner of Baystate and a 30-year veteran of the POS industry, says it wasn’t easy changing some of his familiar business habits, but seeing other cash register dealers s hut their doors has a way of inspiring an old cash register dealer to learn new tricks. A couple of years ago, Bingham started implementing a few changes to his business that are finally paying off in a big way this year and leading to a projected 100 percent increase in revenue.

The Business Case For Non-Windows POS
Unlike some VARs that tout the rich features and functionality of Windows POS systems, Bingham has always preferred non-Windows terminals and cash registers. During the recession, when customer budgets were tightened and all IT purchasing decisions were looked at scrupulously, Bingham took a closer look at his sprawling line card and whittled it down to his top two non-Windows performers: Casio and Sam4s POS terminals. “Both vendors offer Android and proprietary operating system options,” he says. “And both systems have Ethernet cards, which allow us to provide remote management services, plus there are several benefits over Windows POS systems, including lower costs [not paying for Windows licenses], consistent performance, no worries about spyware or viruses, and better margins.”

Bingham also quips that with his POS systems, customers don’t have to worry about employees checking email or playing Solitaire on the terminals, and if there’s a power outage there’s no long rebooting process — the screen comes back exactly where it was before the outage. “Installations of these non-Windows POS terminals are much simpler, too,” he says. “If we need to add a new terminal, it automatically configures itself on the customer’s network.” These features, combined with Baystate’s limited inventory, make it much more efficient for the VAR to train its technicians and service clients.

Opponents of Bingham’s non-Windows philosophy point to the feature-rich applications such as real-time data analytics and customer loyalty programs that run on Windows-based POS systems. Two years ago, Bingham countered this point with the fact that the majority of his customers were in the concessions business (i.e., arenas, racetracks, and zoos), had limited menus, and neither needed nor wanted to pay for the bells and whistles Subscribe to Business Solutions magazineassociated with Windows POS systems. Since then, however, Baystate has expanded its footprint in the quick service restaurant market, where franchise owners do find value in capturing customer data and sales metrics at the point of sale. After some due diligence, Bingham found a way to continue selling low-cost, highmargin POS terminals and cash registers and meet customers’ business intelligence needs, too. In fact, his plan was so successful that he’s been able to go back to his concessions customers and sell it to many of them as well.

Cloud-Based Receipt Printers Unlock New Sales Opportunities
After meeting with his Casio rep, Bingham was introduced to Epson OmniLink printers, a series of intelligent printers that enable cloud services, Web-based printing, open-platform mobility, peripheral connectivity, and PC computing independent of other POS components. Casio also introduced the VAR to Livelenz, a vendor that offers a cloudbased, real-time data analytics service that integrates with the Epson OmniLink printers. The bundled solution can be connected to any cash drawer or POS terminal, and instead of capturing and computing data from the POS terminal, data is captured at the printer and processed in the cloud. “The value of this solution to customers is that they can gain all the benefits of a high-end POS system without replacing their legacy POS systems,” says Bingham.

Earlier this year, Baystate won a large intelligent printer install with regional quick service restaurant and donut franchise Honey Dew Donuts. Following a successful pilot, the franchise owner committed to rolling out the intelligent printer solution to 145 stores. The way the solution works is that it captures a copy of the data stream between the electronic cash register (ECR) or POS terminal, uploads the data to a secure cloud data center, processes the data using customized algorithms, compares the results against millions of other data points from similar businesses, and delivers information end users can act upon. “The data is captured and delivered in real time, providing customers with lots of valuable metrics, including the ability to predict how many breakfast sandwiches or donuts to prepare for the following day,” says Bingham. With real-time analytics, Honey Dew Donuts can compare sales performance store-by-store, plus it can measure the effectiveness of its advertising campaigns. For example, it can track the sales changes for a particular product following a print, online, or radio advertising campaign to evaluate its effectiveness. “Honey Dew Donuts even plans to use the data intelligence to radically revamp its couponing,” says Bingham.

Baystate is also seeing a growing interest in the intelligent printer solutions among corporate dining customers. “We’ve currently sold the Livelenz bundles to 44 corporate dining customers (mostly of Fortune 500 companies), and some of the big selling points for these clients include the facts that they don’t need to change registers, scales, or scanners, and there’s no training required to get started,” he says.

Add Integrated Processing To Your Printer Offering
After experiencing success selling bundled intelligent printers, Baystate’s POS vendor partners challenged it to add one more valuable service: integrated payment processing. “We should have sold payment processing services years ago, but I was afraid it would be too difficult and complicated of an undertaking,” laments Bingham. “It was actually as simple as plug and play, and it’s been a key contributor to our tenfold growth in monthly recurring revenue.” Additionally, Baystate’s customers like the integrated payment processing feature because it’s much faster than their stand-alone credit/debit processing terminals, and it’s less labor-intensive. “With an integrated payment processing system, card transactions are verified in two seconds, and errors are virtually eliminated compared with nonintegrated systems that require cashiers to make data entries into the POS system and a second entry into the payment processing reader. One of our customers, Aramark Entertainment, was able to reduce its end-of-shift till-counting and reconciliation from 4 hours to 45 minutes after upgrading to an integrated POS system.”

Address Customers’ Payment Needs
According to Randy Vanderhoof, executive director of the Smart Card Alliance, “Only 10 percent of POS devices in the United States are EMV-capable.” One of the biggest reasons retailers are dragging their feet is that the cost to upgrade their POS systems is between $500 and $1,000, according to Javelin Strategy & Research.

Baystate’s research led them to an alternative solution that provides customers with EMV card payment capabilities at less than a third of the cost of traditional EMV upgrades. “EMV card readers from PAX can be connected to an Android-based Casio POS system, and end users have a PCI-compliant, EMV-certified solution with no ongoing rental fees or hidden charges,” says Bingham. “Many of our customers are moving forward with these upgrades, so they don’t have to stress over EMV-related mandates and deadlines.”

For many of Baystate’s customers, uptime is crucial, especially during the narrow windows where the majority of their sales occur (e.g., halftime of a sporting event). If a customer’s payment processing system goes down during these limited opportunities, the results can be disastrous. The traditional solution to this problem was to implement redundant Internet connections. Baystate once again found a viable option for its customers at a fraction of the cost of the alternative. “We sell a solution from Bolt POS that enables customers to continue processing credit and debit card payments even if the Internet connection is down,” says Bingham. “After alerting the cashier, the software goes into a ‘store and forward’ mode, enabling the cashier to continue processing payments.”

Moving Forward With Managed Services
To date, monthly recurring revenue accounts for 15 percent of Baystate’s overall revenue, and that number is continuing to climb. One area the VAR is focusing on next is managed services. “Currently, we don’t charge customers when they call us with problems that we’re able to solve over the phone, but we’re looking at how we can incorporate the managed services model into our business in a way that makes sense for us and our customers,” he says.

To be successful in managed services, Baystate will need to show customers the value of having their POS terminals, peripherals, and other devices proactively monitored and managed. And the VAR will need to show that the cost of the service represents a fraction of the cost of the downtime that results when you try to deal with IT issues after a problem occurs. If the VAR’s last two years’ performance is any indicator of future results, it will be building new incremental revenue streams and seeing healthy revenue growth for years to come.

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