IBM Faces the SMB Retail Challenge

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There was a time when retail establishments were judged solely upon how they compared with retailers of similar size and product mix. Not so any longer. Today's shoppers compare their shopping experience in a small-to-medium-sized retail establishment to that of every establishment they have ever frequented, from the largest "big box" store to the magical environment of Disneyland. Today's customers are unforgiving and will shop only at establishments that provide them with a pleasant shopping experience. IBM recognized that to provide the optimum shopping experience, retailers of all sizes need to turn to high-quality yet affordable solutions.

IBM has always been there for the large retailer that could afford to pay a premium for top-of-the-line "retail-hardened" hardware and outstanding onsite support services. The size of this high-end market has always justified onsite representation from IBM's direct sales force. However, smaller retailers have begun to demand the same functionality and quality that IBM has traditionally offered only to its largest retail customers. The need for these solutions becomes apparent when the retailer grows from one to two or more stores.

IBM realized that it could no longer force retailers to use non-standard operating systems such as Retail DOS (RDOS). Today, IBM must support all standard operating systems (such as Windows, Linux, and UNIX) and must also compete with low-cost hardware vendors such as Dell, Microsoft, and others, which offer point-of-sale (POS) devices to the small and medium-sized retailers.

IBM has stepped up to this challenge in a variety of ways. The company has abandoned its non-standard RDOS operating system and replaced the hardware with POS devices capable of executing on any of the common operating systems. IBM built all-new POS devices that conform to the OLE Point Of Sale (OPOS) and Java Point Of Sale (JPOS) industry standard interfaces, thus allowing software developers to build POS solutions that can interface interchangeably with both IBM and non-IBM components.

The challenge still remained for IBM to find cost-effective ways to reach the small-and-medium-size retailers. This large group of retailers began to discover that customers were demanding the same shopping experience in their stores that they were experiencing in larger stores. Customers expect to be processed at the POS with the speed and accuracy of barcode scanning. They want to participate in customer loyalty programs. They require their purchases to be processed quickly against either their debit or credit cards, with the peace of mind that their personal identification numbers (PINs) are being entered into a secure PIN pad device (preferably with electronic signature capturing).

Integrating this process into POS devices and software applications can save retailers many thousands of dollars per year in credit- and debit-card processing fees. New technologies such as electronic check capturing, combined with the ability to print the face of the customer's check as well as frank the back of the check, have started to become priorities to small retailers. They realize that capturing a digital image of the customer's check represents the first step toward a paperless environment. Some small retailers are now using flat-panel monitors to display video advertising rather than using traditional pole displays. And many small retailers have found that during peak periods they need radio frequency devices to speed up the front lines by performing a "line busting" function. For the first time, small and medium-size retailers are watching technology and expecting solutions that will keep them competitive.

IBM already had these technologies and needed to find a way to provide them to these retailers. The challenge for IBM was first to address the price point of the IBM hardware so that it would be competitive with hardware sourced from the low-cost vendors. To accomplish this, IBM had to break away from its traditional model of allowing the attachment of virtually any combination of products through a complicated configuration process. IBM also had to be sure to identify the appropriate feature codes, representing not only the specific devices, but all prerequisites such as additional power supplies, cover plates, cables, etc. To accomplish this, IBM introduced competitively priced POS registers that are virtually non-upgradeable. These devices come in a limited number of "bundles" that match the configurations of the most commonly requested devices. This ensures that the devices are properly configured without the need to involve the expertise of an IBM sales representative. The limited number of standard configuration options serves not only to simplify the ordering process, but also to reduce the cost of the equipment to the customer.

To handle distribution of the hardware to the small and medium-sized retailers that need only a small number of POS devices, IBM set up several companies to act as distributors for the IBM hardware. In this way, IBM continues to ship its hardware in large quantities, while making it available in appropriate quantities to the smaller customers. To be able to sell its hardware in these small quantities, IBM had to find a mechanism to let prospects know that IBM hardware is now affordable and available to small and medium-sized retailers. To this end, IBM established an online Business Partner Application Showcase that features solutions from Business Partners that incorporate the IBM offerings.

In order for IBM to endorse solutions built by their Business Partners, a method was needed to separate problems within a software application (which affect the POS devices) from actual hardware issues. To accomplish this, IBM established a "Store Proven" program that led to today's "Ready for Retail" designation for those applications that pass an extensive IBM certification process. In this way, IBM can ensure that all of the features of the hardware will work properly when the customer installs the Business Partner application in conjunction with IBM hardware.

To control the distribution of IBM hardware to small and medium-sized retail establishments, IBM established a contractual requirement with the resellers stipulating that only certified software resellers can provide IBM hardware and only when it is used in conjunction with the certified software. This policy serves to increase customer satisfaction with IBM hardware.

The "Ready for Retail" designation provides the customers with the peace of mind that they are acquiring a solution that will provide the capabilities they seek. The Business Partner Application Showcase, in conjunction with the sales and marketing efforts of the Business Partners themselves, has served to open up the small to medium-sized retail establishment channel to IBM. In total, this represents a significant new market to IBM and, equally important, has opened the door to quality POS hardware and software solutions for the smaller retailers. IBM has truly stepped up and met the challenge of providing IBM solutions to small and medium-sized retailers.

Robert Fish is the President of Responsive Data Systems Corporation, authors of Competitive Edge POS software for the IBM iSeries/400. Competitive Edge is an IBM-certified "Ready for Retail" application that allows retailers to run their operations on a single platform by seamlessly integrating POS with whatever back office software is chosen. Responsive Data Systems' POS solutions are running in retail establishments with as few as one store and as many as 165 stores throughout the United States and Canada. Learn more about Responsive Data Systems' many POS solutions at www.rdscorp.com.

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