At the same time, the number of POS systems sold increased by about 12 percent, said Lee Holman, one of the reports authors and vice president of product development at IHL.
When software, services and various POS-related peripherals are factored in, that amounts to a roughly $6.5 billion market for 2004, with an expectation of an "even bigger" market for 2005, IHL said.
Greg Buzek, the reports other author and president of IHL, said the POS growth extended across many retail segments. Last year "was an outstanding year of unit growth for vendors, particularly in specialty stores, table service restaurants and super centers," he said.
"Looking ahead, our research indicates that every segment of the retail industry will increase its POS purchases in 2005 over 2004, as retailers upgrade to more reliable and easier-to-use systems."
Around 2001 and 2002, many of the POS price reductions were based on improving supply-chain efficiencies, with vendors reducing their costs and passing along a small portion of those savings to customers, Holman said.
But IHL attributed many of the recent price reductions to responses from POS industry veterans—especially IBM and NCR Corp.—to POS newcomers, especially Dell Inc. and Hewlett-Packard Co., which introduced lower-priced systems.
"The very fact that HP and Dell have entered the market has driven the cost down," Holman said in an eWEEK.com interview. "Simply by including Dell or HP in the mix, that forces the other vendors to drive their prices down. Prior to Dell and HP entering, there was no reason for vendors to have a hardball price, and there was no reason to have to cut their prices significantly."
Another industry change is the debundling of POS and supporting peripherals and systems. Historically, when retailers would upgrade, replace or add new POS units, "he would buy all his stuff—including scanners, printers, monitors and so on—from the same vendor," Holman said.
"As retailers have become more savvy with their technology," he said, they have started keeping their peripherals and not replacing them just because they are buying new POS units.
That means that they can get months and sometimes additional years of service out of those peripherals, which reduces their total POS-related expenditures. That has also made it more difficult for vendors to pad POS prices.