A new study says 85 per cent of retailers that recently modernized their point-of-sale systems found the investment met or exceeded their return-on-investment expectations, as businesses increasingly shift toward cloud-based technology.
The report, Retail POS Modernization: Strategic and Financial Case for Transformation, conducted by Coresight Research and sponsored by Aptos, surveyed 150 global retail decision-makers involved in POS strategy, selection and modernization. It found that retailers that have upgraded their systems reported improvements in store conversion rates, average transaction values and operational performance.
“Modern POS platforms, typically characterized by cloud-native deployments, microservices-based architectures, mobile-first development and API-driven integration, help retailers adapt to the changing role of stores as well as shifts in consumer expectations,” the report states. “Retailers that view POS modernization as simply a checkout upgrade risk undervaluing its strategic and financial impact.”
Conversion and transaction gains
Retailers that had modernized their POS systems reported an average 1.2-percentage-point increase in in-store conversion rates and a 4.3 per cent increase in average transaction value, according to the study.
The research also found that 68 per cent of retailers operating cloud-native POS systems reported a moderate-to-high positive impact across operational efficiency, inventory visibility, customer experience and sales performance.
Coresight Research also modelled the potential impact for a hypothetical retailer generating $1 billion in annual revenue from 750 stores. The model estimated annual cost savings of $4.4 million and an annual revenue increase of $39.6 million following POS modernization.
The estimated savings came from lower hardware, software, maintenance and IT-support costs, while the revenue gains were attributed to higher average transaction values, increased in-store conversions, network uptime and omnichannel orders.
Many retailers have yet to modernize
Despite the reported benefits, the study found that a significant share of retailers continue to operate POS systems that do not use fully modern, cloud-native architecture.
Twenty-two per cent of retailers surveyed operate hybrid or fully on-premises POS environments, while another 36 per cent use cloud-hosted systems that lack some of the flexibility, modularity and continuous-update capabilities associated with cloud-native platforms.
The core POS systems currently in use have been implemented for an average of 4.3 years, while 30 per cent of respondents have systems that are at least five years old.
The study also compared the outcomes reported by retailers that have already modernized their systems with the benefits expected by retailers still planning to make the investment.
The largest gaps were reported in store productivity, where 49 per cent of modernizers achieved the outcome compared with 24 per cent of planners expecting it. Mobile checkout enablement was reported by 44 per cent of modernizers, compared with 20 per cent of planners expecting it.
Similarly, 44 per cent of modernizers reported improvements in store conversion rates, compared with 27 per cent of planners expecting them, while 50 per cent of modernizers reported improved real-time inventory visibility compared with 36 per cent of planners.
Integration remains key challenge
The research found that implementation, rather than the ability to justify the investment, remains a significant hurdle for retailers undertaking POS modernization.
Integration complexity was the most commonly cited challenge, with 45 per cent of retailers that had modernized their POS systems ranking it among their top three implementation obstacles. Difficulty justifying the return on investment to senior leadership was the least commonly cited challenge, at 19 per cent.
“Retailers have moved past debating whether POS modernization pays off. The data and real-world results settle that question,” said Deborah Weinswig, CEO and Founder at Coresight Research. “As the conversation shifts from ‘why’ to ‘how,’ we see leading retailers investing in cloud-native POS platforms that are built from the ground up to streamline integration and partnering with vendors that can support their POS transformation end to end.”
David Bruno, Director of Retail Industry Insights at Aptos, said the findings reflect feedback from the company’s retail customers.
“This report confirms what we hear directly from our retail customers: the ROI is there and the path to capturing it is clearer than ever,” said Bruno. “POS modernization can directly and positively impact nearly every aspect of retail operations. The key to capitalizing on the opportunity is to select the right vendor who can guide you through the process and help you capitalize on the financial and operational benefits of modernization while minimizing disruption.”
When transforming the store technology footprint, it’s not enough to justify the expense by saying, “We need to replace our aging systems,” or to focus solely on reducing costs. Investments have to support store growth and drive revenue,” said Nikki Baird, VP of Strategy and Product at Aptos.
“It’s about identifying pockets of value. It’s not necessarily about just driving a higher conversion rate. It’s about sending people over to the shoe wall because there’s more traffic over there. It’s about positioning a store associate at the front of the store to intercept returns during the post-holiday season, helping ensure shoppers continue throughout the store with money already in their pockets. It’s more about unleashing the flexibility and creativity of store associates to take advantage of the opportunities they see than about waving a magic wand across the whole business,” she said.
Sometimes hardware investment is holding retailers back from fully modernizing.
“Retailers haven’t fully depreciated their hardware, and hardware is a more expensive part of the overall store investment than software or implementation. It’s all too easy for retailers to try to eke out another six months or one more year from it. But we find that these retailers also haven’t fully considered the total cost of ownership—or what modernization could unlock in their stores. To some degree, they’re trapped by the sheer amount of capital required to refresh their hardware,” said Baird.
“Integration considerations are a huge deal. A lot of the revenue-driving value that retailers seek comes from expanding omnichannel use cases. One key driver is being able to support in-store returns of eCommerce orders. So you have to have POS to order management system (OMS) integration to be able to look up those orders. But if you want to make that return seamless, you want to enable return to original tender, and that means you also have to reconsider your payment solution choices. A lot of retailers selected a different payment provider for online because they wanted higher anti-fraud protections. If the provider for store payments and the provider for eCom can’t talk to each other, then you have a gap already built into your process before you take your first eCom return.
“I expect AI to accelerate the need for cloud-based POS . . . We’re too early on that journey. There are way too many questions related to security and control.”
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