Retail Software Uncertainty Slows POS Sales

 
 
By Evan Schuman  |  Posted 2006-03-15 Email Print this article Print
 
 
 
 
 
 
 

Moves by SAP and Oracle prompt retail IT execs to hold back from purchases; Linux POS market share almost doubles.

The recent report of a 5 percent increase in North American Point of Sale purchases last year was much lower than had been expected, and is a sign of delayed retail IT purchases during a year of substantial retail software consolidation, according to IHL Consulting Group, the retail research house that issued the report the week of March 13. The 5 percent increase reported for 2005 follows 2004s comparable 15 percent increase and 2003s 8 percent increase. The IHL Consulting Group had been projecting that last year would also have strong double-digit growth, which it predicted wouldnt slow until 2008, but that didnt happen, IHL President Greg Buzek said.
Click here to read about how wireless POS systems can cut retailers costs.
Last years 5 percent growth is much closer to the historical annual POS sales increases—last seen in the late 90s—of about 4 percent, Buzek said. There were several reasons for the slowdown, but the most likely one involves retail IT execs slashing or even freezing IT spending last year as the retail software market was being rewritten with key retail software acquisitions involving SAP, Oracle, Epicor and Retalix, he said. "About 40 percent of the [retail IT execs] that said that they were going to buy [in 2005] delayed those decisions. Retailers continue to be in very competitive situations," Buzek said.
"Much of this involves the level of acquisitions that we saw last year on the software side. There was a lot of uncertainty and I think that played out. In a world that is being increasingly challenged by Wal-Mart, those are decisions that are continually being delayed." That said, Buzek pointed out that 5 percent POS growth is not terrible. "What youve got here is strong, healthy growth, but its just not as robust as we thought it was ramping up to be," he said. "The POS market last year went from a 70 miles-per-hour zone to a 55 miles-per-hour zone." Another interesting trend from the IHL report is the continued strength of Linux for retail POS, which almost doubled its market share last year, moving from 5 percent to 9 percent. To read about Microsofts new POS offering that challenges Linux options, please click here. Buzek said he had expected even greater growth for Linux, but the same market pullbacks that slowed overall POS sales also impacted Linux. The Linux growth "was a little slower than I was expecting. Some of the big Linux retailers—PepBoys, CircuitCity—they didnt roll out as fast or deploy them as fast as we expected," Buzek said. Those particular rollout speeds were mostly impacted by the retailers internal approaches, he said. "With Publix, their POS rollout will be done over three to five years while the Home Depot rolled out their entire chain in six months." Neither Publix nor Home Depot are major Linux users, he said. Also noteworthy is the substantial number of older-generation, slower CPUs still being used. "Retailers tend to not buy the souped-up version of anything," Buzek said. "The number of 286 and 386 processors that are still running grocery stores and department stores is still substantial." Ziff Davis Media eSeminars invite: IBM is looking for a few good partners in the SMB space. Tune in March 21 at 12:30 p.m. ET, live on eSeminarsLive.com. Sponsored by IBM. IHL, based in Franklin, Tenn., estimates that 286- and 386-based machines represent about 2 percent of all retail POS units in use today, with 486s representing an additional 16 percent. Intel Celeron and Advanced Micro Devices Sempron represents about 23 percent of the POS market. To read about Canadian Tires $40 million POS project, click here. IHLs report points to several reasons for last years 5 percent increase in POS sales, including the expected replacement of aging equipment and the lowering POS prices prompting faster replacements. Although older POS units tend to function for a long time, lowering prices today are sharply changing the total cost of ownership equation. "You could have a 10-year-old POS today and its going to be costing you as much in maintenance costs as it would cost you to just buy a new one," Buzek said. Touch-screen capabilities are also a big draw because of faster rollout and reduced training costs. Those touch-screens will typically display just the functions needed for the relevant part of the transaction, in effect making it much more obvious what needs to be clicked. "It gets them up to proficiency much more quickly," he said. Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com. Check out eWEEK.coms for the latest news, views and analysis on technologys impact on retail.
 
 
 
 
Evan Schuman is the editor of CIOInsight.com's Retail industry center. He has covered retail technology issues since 1988 for Ziff-Davis, CMP Media, IDG, Penton, Lebhar-Friedman, VNU, BusinessWeek, Business 2.0 and United Press International, among others. He can be reached by e-mail at Evan.Schuman@ziffdavisenterprise.com.
 
 
 
 
 
 
 

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