From The Editor | August 27, 2012

Retail IT Leaders Debate Free POS

Free POS is a hot topic in the retail IT channel, and it fueled a spirited discussion during the Industry Vision Panel discussion at RetailNOW 2012.

This year the panel was divided into two segments, a hardware-focused group and a software focused group. This excerpt includes the hardware-focused panel’s discussion of free POS.

Jim Roddy, BSM: I’ve been told by some folks in our industry not to ask this next question. They said, “Don't touch this point. It's just too much of a hot-button in our industry.” But since it hits a nerve, I think we need to talk about it. The topic is free hardware. From your perspective, are vendors who are offering free hardware, are they wrecking the POS channel or are they leading the charge of what's coming?

And then, are resellers who participate in free hardware programs gaining a competitive advantage or are they shooting themselves in the foot. Or, as some folks think, are they shooting themselves in the head?

Steve Cuntz, BlueStar: I want to thank Jim for throwing me a hand grenade. I tried to bring all my body armor for this. From my perspective, we all have to examine the value proposition that we bring to the ultimate businessperson in retail. Frankly, I think we have to do more and more. I don't think it's an either-or-if proposition.

In other words, what is to prevent a dealer from giving away credit card processing services and charging for the hardware? If everybody claims that the value of the processing services are more valuable than the hardware … has anybody put a pencil to that?

I think we’re in an open community. If it's a business model that works for an ISO, then so be it. But that doesn't mean that the dealer doesn't have the ability to reexamine that model and see what value-add they can add to it and see where the numbers come out and do a sales pitch to that end user.

Ray Carlin, HP: I was a little surprised about your question, actually. The last time I looked, there's no such thing as really free hardware. Our friends at Intel and Microsoft and others are certainly charging us something for the stuff that we manufacture. To Steve’s point, it may be more of a bundling tactic.

The other point is, this isn't a new concept. It's been a prevalent business model in the cell phone market. It wasn't that long ago that we saw companies like SalesForce.com talk about the end of the software. They've been very successful, but certainly, it isn't the end of the software.

I think that it's really an opportunity to let value to shine through as an individual organization sees it in terms of what's the best fit of their strengths to an individual customer situation. I think that's what's critical.

It doesn't have to be either/or. A few years ago, when StoreNext was being introduced, it was a hybrid-type model. It was a combination of hardware sales and software and a subscription model. I think there’s a lot of room for folks to work within.

Ted Clark, IBM (Toshiba): Anything that's unknown or different always causes a certain fright, and to raise a point, this business model has been around for centuries. When Apple made the iPhone 4S available and with it making Verizon a carrier in addition to AT&T, Verizon sold a ton of Apple iPhones for $200 which Verizon bought at $600.

But in the end, some number of months later, that financial equation will balance out in favor of the provider. You get a free razor, you buy the blades. You get a free printer, you buy the ink. You get a free chariot, you have to buy the horses, right? It's been around forever. Think about basing your own business model on how you could combine things.

The key point is about value. What is the whole value that brings to the table regardless of how it's packaged. And can you find something that you can add to the value or provide better value? That's where your energy really should be.

Paul Constantine, ScanSource: What really strikes me is that it's the merging of payment processing and the point of sale that's allowing this phenomenon to happen. Ten years ago, when you had ISOs selling payment processing and you had POS dealers selling point of sale, you didn't have the opportunity for this to become a challenge.

Now that ISOs are selling point of sale and point of sale resellers are selling payment processing, you can take that string of income or revenue from payment processing and use it to subsidize the point of sale system up front. What it really tells me – now maybe I’m just oversimplifying it – if you are a reseller and you want to try to compete with free point of sale, you've got to get involved in payment processing. The good news is it's a lot easier to have a reseller get involved in the payment processing revenue stream to deliver a fully integrated solution to their end user that’s not just the point of sale. It’s also the payment device and the processing. It's being able to take advantage of that revenue stream that's enabling the system to be subsidized. That’s the challenge for most of the resellers in this room.

Justin Scopaz, Ingram Micro: I agree with everything that was said. I agree that payment processing is a great opportunity for VARs, so if you're not involved with that today, you should be. Free hardware is really a marketing opportunity or financing opportunity, and you need to understand it. Understand what they're offering against what you're offering, and how you can sell against it.

A couple of the comments have been here towards energy and frustrations. I would advise to put your energy into trying to understand something as opposed to trying to push against it because if it's a business model that works for them, it's not going to go away. If they're making money, they're not going to go away. Understanding what it is and how to sell against it would be critical.

Jim Roddy, BSM: To highlight a point that was brought up here, I attended the KPI (key performance indicator) discussion held yesterday afternoon, and the most profitable resellers in this organization are making money with payment processing. That’s really enhancing their business and taking them from average to the most profitable resellers in the organization. So, that’s exactly true what you guys are saying. It is easier to adopt payment processing, and the successful VARs at this event are doing that.

The hardware-focused panelists included:

  • Steve Cuntz, Chairman/CEO, BlueStar
  • Ted Clark, Global Business Partner Channel Leader, IBM Retail Store Solutions division (now part of Toshiba Global Commerce Solutions)
  • Paul Constantine, President, ScanSource POS/Barcoding
  • Ray Carlin, VP and General Manager, HP Retail Store Solutions Global Business Unit
  • Justin Scopaz, General Manager and VP, Ingram Micro Data Capture/POS division
  • Moderator: Jim Roddy, President, Jameson Publishing and Business Solutions magazine

RetailNOW was held July 29-Aug. 1 at Mandalay Bay in Las Vegas. For more information on RetailNOW 2012, including more excerpts from the Industry Vision Panel, go to www.BSMinfo.com/InsideRetailNOW.

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