Is Your POS System a Help or Hinderance to Profitability?

Managing a profitable garden center is anything but simple. Successful IGCs master figuring out what you can manage and control and what you cannot. There are factors and conditions that most would agree cannot be controlled — the weather, the economy, customer fads and trends. However, there are other things that can be organized, tracked, measured, optimized and improved to help your profitability.

The more you can organize, track and measure something, the simpler it is to optimize and improve it. Your POS system is the cornerstone of your store’s ability to organize, track and measure three key areas of data: customer data, inventory data and transaction data. The right system gives you the tools to streamline the customers’ purchasing experience, optimize your inventory, analyze your customer purchasing patterns for effective marketing and assortment, and exceed customer expectations at every opportunity. If your current POS system isn’t accomplishing this, then you may have the wrong system, or you may not be utilizing the capabilities of your system to the fullest extent possible.

How do you know if your system is “incapable” or “underutilized”? Ask yourself these seven questions:

1. Can my system give me inventory analytics on a moment’s notice so that I can instantly know my sell-through, cost, margin, GMROI and turns?
2. Can I pull a report today of my top or bottom selling items in any category or subcategory?
3. Do I have tools that I can use for “line busting” during the busiest times of the year?
4. Does my system allow me to target market to my customers based on their purchase history?
5. Can my system easily tell a customer what items they purchased from me last year, or what they currently have on a pending order?
6. Can my system schedule delivery at the time of sale, and effectively facilitate picking, loading and delivery of a customer order?
7. Can my system quickly ascertain any products that are not meeting my minimum or target margins?

As you review these questions, consider if your system has these capabilities but you just aren’t using them, or if it cannot perform these functions. If your system cannot support these functions, you may need to consider a new system. If a system upgrade enabled half of the capabilities listed above, think how that might translate to increased sales and/or profits. Generally, investing in a fully featured POS system is a substantial investment. But consider the potential return on that investment.

Julie Titterington tackled an interesting question, what businesses should be spending on their POS systems, in a blog post titled “POS 101: Budgeting for Success:”

Traditional wisdom indicates that people tend to do well if they spend 1-2% of their overall annual revenue on POS software and equipment. But you don’t have to let “traditional wisdom” push you around. Your business is just that: your business. … But you wouldn’t be breaking a holy edict passed down from on high if you decided that it was best for your business to use 0.5% of your revenue on point-of-sale technology, or even 3-4%. In fact, some experts now believe that reserving 3-4% of your revenue for POS expenses is more realistic.

If you follow the lower end of Julie’s advice, 1 percent, and assume an anticipated useful life of 5 years, with annual revenues of $1 million, the POS budget over the useful life would be $50,000. I would expect that budget to break down to about 60 percent in upfront costs and 40 percent in ongoing costs such as software maintenance, enhancements, hardware costs and support services. What does this exercise tell us? That you should expect to budget about $30,000 in upfront costs for each $1 million in annual revenues your store earns.

Calculating your ROI can be done using the same logic in reverse. With a 5-year spend of $50,000 per $1 million in revenues, you need to realize 1 percent in additional revenues or cost savings to break even on your POS investment. If your POS system is helping you market to customers, track your inventory, streamline your supply chain and reduce losses, it is not difficult to imagine returns far beyond $10,000. Imagine the new revenue that an email marketing campaign could generate if it were driven by real customer purchasing habits. The bottom line is that purchasing and implementing a new POS system is a big decision. It can be stressful and challenging — even overwhelming. But when you consider the opportunities for improving your bottom line, the decision becomes a no-brainer.

Read the original article here.