Arron Lock, Director – Industry Solutions Strategist – Retail Industry, Strategic Ecosystems & Industry Solutions, VMware
Retailers are adopting digital innovations at breakneck speed. Some you’ll have experienced, like intelligent online shopping baskets or tailored delivery options. Others you probably don’t even notice like smart shelves or automated inventory checks. Then there’s all the exciting stuff coming down the line like augmented reality shops and virtual changing rooms.
And while it is these types of new – and potentially game changing innovations – that generate the news, there are big changes happening at a much more fundamental level of retail. Virtualized point of sale (vPOS) developments may not get headline writers jumping up and down, but that’s only because it is not wholly appreciated how influential and wide-reaching this technology is.
Flexible architecture crucial for continuity
Something all shoppers have encountered is cashierless checkout, which has now become a staple of the retail landscape – particularly in supermarkets where volume of goods and people are high. By automating the checkout experience with self-service kiosks, retailers can provide fast, safe, and convenient checkout options that today’s consumers demand. And behind it all is vPOS.
To stay competitive in a landscape where every retailer is looking for an edge to attract and retain customers, a flexible technical architecture that can easily handle change is crucial for business continuity, to which POS will be crucial. According to The Insight Partners, the global POS software market is expected to generate an estimated $20.13 billion in 2022 alone and is forecast to grow significantly over the next few years, hitting $42.49 billion by 2027. This report from Retail Consulting Partners suggests nearly 45% of retailers have or plan to use a self-checkout option, and one-third are considering self-service kiosks for customer returns.
Retailers ignoring vPOS at their peril
Despite these predictions, POS solutions are an often neglected part of the retail ecosystem. This happens for a variety of reasons including the massive capital expense associated with replacing hardware and the time consuming deployment project associated with rolling out a new solution. POS is often seen as an expense of doing business and not as a point of store innovation. The pandemic reframed the technology conversation around POS for many retailers as they recognized the need for digital transformation to continue serving their customers while providing them with new ways to complete transactions including curbside delivery, mobile ordering and other frictionless solutions.
Then there’s the issue of scale – retailers have thousands of existing terminals and the thought of changing their entire estate isn’t an appealing one. Not least when you add in the cost and challenges of changing or upgrading the operating system, supporting software and peripherals. In the majority of instances retailers are focused on adopting new-new technology (i.e. putting it where it doesn’t already exist) or upgrading and evolving existing platforms or use cases like their website or in the supply chain.
But retailers are ignoring vPOS at their peril. For evidence, look no further than start-ups that can deploy new technology and have an immediate advantage against legacy retailers. These recently established companies don’t have the technical debt and can enjoy the benefits of having the latest technology from inception.
Why virtualization matters
Above all else, vPOS can extend the useful life of on-site hardware terminals in a store by around 30-40%. This reduces CAPEX spend related to purchasing replacement hardware, as well as the operational cost of replacing POS terminals and reconnecting peripherals. It also ends the decade-long approach of hardware refresh cycles, which has historically necessitated the replacement of expensive equipment. Indeed, in an era of heightened awareness around sustainability, getting out of the regular rip and replace cycle also results in less e-waste going into landfills.
There are also an ever-increasing number of applications that retailers need to run locally or in a hybrid configuration to remain competitive and keep their customers happy. The large, distributed nature of connected sites often makes this challenging to achieve centrally, while locations can often be connected with low quality internet connections and staffed by team members who lack the necessary skills to assist remote IT workers. However, a vPOS approach, in conjunction with a hybrid cloud capability, can take advantage of the standardization that often exists between different stores to provide most of the benefits of virtualization at the retail edge, and allow much greater flexibility in upgrading and patching workloads, and rolling out entirely new workloads, than is otherwise possible with a non-virtualized, physical setup.
Virtualization means consolidating workloads and running them in the cloud or on edge deployed servers. This has the added advantage of orchestration for automated, repetitive processes while analytics and alerts make trouble-shooting proactive and rapid. It also hugely improves the ability and speed to roll out security and feature updates – critical in an era of GDPR (In Europe), CCPA (in America) and consumer consciousness around fraud.
Indeed, when it comes to the consumer, vPOS also plays into wider consumer trends. Shopping patterns fluctuate throughout the year with some retailers struggling during peak periods to provide customers with the experience they would prefer due to long lines. To provide customers with unique experiences such as pop-up shops or other events that require extending the store outside of its traditional location requires retailers to equip employees with adequate resources to handle customer transactions and this can only be achieved with vPOS.
Focus on operations
Retailers need to focus on their operations, not supporting, securing, and maintaining on-site IT infrastructure. Adoption of vPOS is something that has lagged behind virtualization in other settings, and a successful deployment needs a different, retail-specific approach. Retailer IT teams have historically associated virtualization solutions with their datacenter. To successfully deploy vPOS, IT teams have to solve complex peripheral connectivity issues and many other orchestration related issues. However, as outlined above, vPOS has significant benefits both in terms of cost reduction, resilience of store operations and greater agility in upgrading and rolling out the new workloads key to efficient store operations and a great in-store customer experience.
To find out more about how we can help on our virtualization journey, or to hear how we have helped our retail customers facing similar challenges to you, please get in touch at [email protected].
