With Microsoft Corp. no longer supporting its Windows XP operating system, companies marketing tablet-based point-of-sale gear and software are hoping to garner more business from small and mid-sized businesses looking to replace POS systems that use the outmoded OS.
As expected, computing giant Microsoft ceased support for the 12-year-old XP on Tuesday, but merchants accounting for millions of points of sale are still running PCs equipped with the OS to handle functions from card transactions to loyalty programs to inventory management.
With Microsoft no longer supporting the software, users will no longer receive online updates, including so-called patches that fix security holes that could allow hackers to penetrate users’ systems. That makes XP more insecure, experts say, and also means users are no longer compliant with the Payment Card Industry data-security standard (PCI).
While exact numbers on how many merchants are using XP are hard to come by, the OS remains quite popular, especially with small and mid-size businesses. Some 73% of small merchants are running XP in some form, including for POS transactions or on servers, according to a recent survey by ControlScan Inc., an Alpharetta, Ga.-based security-services company. Ninety-two percent are aware that Microsoft ended support this week, but budget constraints and other considerations have kept many of them from switching out equipment, the survey says.
The new vulnerability of this existing gear also comes as merchants ranging from giant Target Corp. to smaller retailers are reporting data breaches that have exposed data on tens of millions of payment cards.
As more of these merchants begin looking to replace or shore up XP-based systems, a growing legion of tablet POS vendors hope to benefit. Many offer products based on the Apple Inc. iPad, which runs on Apple’s iOS operating system.
“We want people to switch,” says Jason Richelson, founder of New York City-based ShopKeep Inc. and himself a former merchant. “It’s a big deal. More than likely they’ll get a virus on their machine and won’t be able to rebuild the machine or re-install the software.” Six-year-old ShopKeep offers a cloud-based system that relies on the iPad and lets merchants run transactions, keep track of employee hours, manage inventory, and perform other business functions. ShopKeep accepts card transactions and also supports payment alternatives like PayPal and LevelUp.
“It’s going to take time, but yes, absolutely” the end of XP support will be a “catalyst” for tablet-based POS systems, Richelson tells Digital Transactions News.
In a recently released six-page white paper co-produced with ControlScan, Richelson advises merchants using XP that their choices are to upgrade to Windows 7 or 8, continue to use XP but switch to POS terminals for card transactions, or adopt a tablet linked to a cloud-based system. Tablets typically come from most vendors with card readers, receipt printers, and cash drawers.
The paper tells merchants they can easily tell whether their PCs are running XP by clicking on “Run” under the “Start” command in the task bar. They can then type “Winver” in the search box and click on “Enter” to bring up the version of Windows the machine is running.
ShopKeep just released version 2.0 of its system, featuring faster transaction times that Richelson says will make it easier for the product to penetrate new markets like full-service bars and restaurants. Most of the company’s current clients are small retailers and quick-service restaurants. The company will also release later this quarter a new product that will work with handheld devices like the iPod touch, Richeleson says, allowing retail personnel to serve customers anywhere in the store.
ShopKeep works with some 10,000 stores and is processing transactions amounting to $1.5 billion on an annual basis, Richelson says. The merchant count is up from 6,500 10 months ago.
Jason Richelson and his co-founder launched ShopKeep, a cloud-based point of sale company, from the back of their wine and grocery store back in 2008.
For the previous four years, Richelson had been using a traditional Windows-based point of sale system and was fed up with all the tech problems, including one particularly brutal experience where the servers crashed while he was on vacation, forcing his store to temporarily close.
He built ShopKeep to solve all the problems he faced with his old system. The company now offers small business owners a complete software and hardware product that gives them a wealth of data analytics as well as a way to track employees and scan credit cards with an iPad dongle, similar to what the mobile payments startup Square offers. Because all the software is cloud-based, users are safe from the potential havoc wrought by a single crashed server.
The company targets brick-and-mortar businesses of varying sizes whose owners are sick of using old, clunky systems that offer little to no customer service. ShopKeep not only lets users ring up sales, but track and manage their inventory, log customer information, and look for trends in sales data.
“ShopKeep helps you run a better business,” Richelson told Business Insider. “A lot of our customers try Square first. But, for them, it’s about collecting credit cards and doing payments. For us, it’s about what’s the next feature we can add to help our customers make more money.”
Richelson says that his company — which has currently has over 10,000 customers around the U.S. and has raised $12.2 million from investors like Tribeca Venture Partners and Canaan — helps small businesses in a more full-circle way than Square, the startup that Jack Dorsey founded that has more than $340 million in funding and multi-millions of users.
Going up against giants like Square and Groupon (which offers a point of sale app called Breadcrumb) with established names and big followings won’t be easy, but Richelson, who says that ShopKeep’s number of customers has tripled every year since launch, is in it for the long haul.
Smart marketers know that offline marketing techniques like in-store promotions, events, and free samples are powerful techniques for delighting customers and driving sales. The challenge? There’s limited data to prove it.
Meanwhile, the Internet has spoiled us. Thanks to tools like Google Analytics and KISSMetrics, we have more data than we can handle – we can track everything from lifetime value to user acquisition costs, and acquisition models.
We laugh at brick-and-mortar and call it “old school,” making absurd claims that online mega-conglomerates are making our favorite stores obsolete. The days of the shopping mall are dead, right?
Not so much. Brick and mortar isn’t going anywhere. Consumers will always be window shopping on their lunch breaks, grocery shopping after work, and trying on clothes at the mall.
The fact is that online and offline marketing aren’t separate channels. They’re interconnected parts of the same customer acquisition engine. Our Web browsing habits follow us to the store, and when we’re at the store, those preferences follow us home.
As research firm Millward Brown predicts, “the notion of marketing activity being online or offline or mobile will cease to be a meaningful debate in 2014.” Thanks to smartphones and tablets, there is absolutely zero reason for brick-and-mortar marketers to throw darts in the dark.
Mobile gives offline marketers the ability to quantify anything. Here are three ways that mobile can bridge data blind spots for brick and mortar storefronts.
1. What’s in your customers’ heads
Customers are a small business owner’s lifeblood. That’s why Oren Dobronsky, owner at Oren’s Hummus Shop in Palo Alto, would always ask his patrons for feedback.
He would rarely hear anything beyond the usual ‘awesome’ or ‘good’ – that is, until he checked his Yelp reviews and Facebook account, when a negative post would surface out of nowhere. That’s when Dobronsky teamed up with Adi Bittan to build OwnerListens, a messaging platform that helps business and consumers communicate in real time.
“The problem with current feedback methods is that they are slow, slunky, and ineffective,” explains Bittan. “No one wants to sit on a phone call or end up on an e-mail spam list.”
When it comes to customer satisfaction and retention, however, a split second can make all the difference. Business owners need to connect with their patrons at exactly the right time.
On the Internet, we rely on algorithms to make these moments possible. As Bittan explains, offline should not be any different.
“Customers are used to getting what they need at the touch of a button,” explains Bittan. “They leave a message on a friend’s page and get a comment in five minutes.”
Consumers can use the OwnerListens app to send a message to any business without having to deal with the time sink of looking for an email address or phone number. Businesses who sign up for OwnerListens will also receive a dedicated ‘smart’ SMS number that customers can easily text message.
2. Cross-platform connections
Real-time feedback, however, is only the first step. Storefronts that use OwnerListens will develop a log of all customer communication. The next step? Analyze the information you’ve collected, and incorporate your findings into your future business strategy.
“Over time, customer feedback data will help us better understand consumer patterns and expectations at the individual and geographic level,” says Bittan. “These insights about the quality of customer service can help us predict future business success.”
Just as online marketers optimize natural touch points through landing pages, social media, and 1:1 email exchanges, businesses need to make sure that they’re prioritizing the metrics that influence the business. This information can help connect customer behavior across online and offline marketing channels.
“The easiest example to think of is Facebook,” says Bittan. “If users have to login through Facebook to use your app and later go home and use Facebook, there is now a connection between their offline and online behavior.”
Business owners who aren’t collecting data are facing a major opportunity cost. Even when the data is readily available, businesses seldom think to capture it. This process requires upfront planning. Once the right systems are in place, however, business owners can focus on collecting the exact information that they need.
“As more consumers walk around with cell phones and especially smartphones, collecting data will continue to become cheaper and easier,” says Bittan. “A good way to think about it is that the mobile phone is to the physical world as is the browser cookie to the virtual world.”
3. On-the-fly profit maximization
Jason Richelson, founder and CEO at ShopKeep POS, is a small business owner turned tech entrepreneur who realized that data was the solution to better serving his customers.
“I built my wine business on emailing customers when we had new wine in stock that I thought they might like based on what they brought previously,” says Richelson.
The idea of 1) reaching the right customers, 2) with the right message, 3) at the right time is foundational to marketing online. Thanks to cloud-based technologies, marketing automation, and sophisticated real-time bidding (RTB) algorithms, marketers can send personalized messages to consumers at just the right moment.
Why should brick and mortar be any different?
“ShopKeep’s customers collect all their store data via their iPad register, which automatically populates in a BackOffice in the cloud,” says Richelson. “The POS is the data collection hub for a retail business, tracking everything from sales and products to customers and staff.”
Richelson elaborates that the cloud has infinite power in bridging data gaps for brick and mortar.
“The cloud eliminates data storage issues and makes analysis as easy as clicking a button,” he says. “That data is then available from anywhere using mobile devices.”
Brick and mortar storefront owners have access to their customers’ data in one central place.
“ShopKeep customers use that live data to make changes to staffing levels or sales strategies in real time,” says Richelson. “For example, store owners might notice a particular product selling well, and decide to run a promotion or position that product prominently in the store. Or they may notice Wednesday afternoons becoming increasingly, busy and decide to add more staff.”
Work backwards from your goals
If business owners aren’t careful, they’ll find themselves buried in a big data dump. The key to getting started with predictive analytics, real time feedback, and on-the-fly profit maximization is structure.
What matters most to your business and bottom line? What customer engagement metrics are most relevant to your business’s sales and revenue objectives?
Start with your goals, and reverse engineer the process. It doesn’t matter whether you’re marketing online and offline – you still need to wield your left and right-brained skillets. With the proper outlook and strategy, the technology and solutions will fall into place.
Wine may improve with age, but point of sale technology does not.
Years ago, when ShopKeep POS founder Jason Richelson operated the Green Grape wine store in Fort Greene, Brooklyn, he struggled so often with archaic point of sale systems that it motivated him to develop his own alternative.
Richelson had several problems with the store’s point of sale system. Because information was stored on the server, he had to be in the store to check reports. He also couldn’t get much support from the terminal manufacturers if problems arose.
“The final nail in the coffin was when I was on vacation and the server crashed in the store because there were viruses on the Windows machine,” Richelson says.
So in 2008, while still working at the wine shop with his partner, Richelson launched ShopKeep as a cloud-based system. When Apple unveiled its iPad in 2010, the tablet became “a catalyst for making innovative point of sale systems much more affordable for merchants especially small merchants,” Richelson says.
Before tablet-based systems, point of sale equipment was usually a Windows PC touch-screen which costs about $3,000, he says. IPads cost around $500, so ShopKeep quickly adopted the tablet as the basis for its own point of sale system.
The company of about 100 people started in co-working spaces in downtown Manhattan, and has since moved to its own office in Soho. ShopKeep recently opened an office in Belfast, Ireland and plans to target European merchants soon, Richelson says.
ShopKeep’s founder already had some experience in payments from co-founding Internet Cash in 1999. The company developed a system for consumers to buy online anonymously. Consumers would use a prepaid card with an Internet Cash-hosted payment page, rather than using their own credit cards.
ShopKeep charges merchants $50 a month per register. Merchants pay transaction fees directly to their processor. ShopKeep works with processors such as First Data, Heartland Payment Systems and Mercury Payment Systems. It also works with SCVNGR’s LevelUp, a mobile payment and loyalty system; and PayPal, which can process both PayPal and credit card payments.
PayPal has been a strong promoter of ShopKeep, mentioning the point of sale provider in much of its marketing and promotional material. ShopKeep also helped test PayPal’s mobile wallet in 2012 at a film festival in New York.
“PayPal is one of the partners that has helped us grow the business,” says Richelson. “It’s an innovative service and lots of our customers use it.”
Since its launch, ShopKeep has amassed more than 10,000 small independent retailer and quick-service restaurant customers. The company had seen a lot of adoption in Brooklyn, its home town. It has steadily updated its technology with features such as a customizable interface and QuickBooks integration.
All of ShopKeep’s customers come inbound, meaning they call the company looking for point of sale systems. The company also offers its Surround 360 software through independent sales organizations, though it is phasing this offering out to introduce a new program in the second quarter.
ShopKeep has seen steady growth, tripling its number of storefronts every year for the past three years, Richelson says.
“I truly believe in five years you’re not going to see any more PCs behind the counter instead you’ll see tablets in a lot of retail stores, mostly iPads,” says Richelson. This will be influenced also by Microsoft ending support for Windows XP in April, forcing merchants to seek a replacement to stay secure, he says.
Richelson’s prediction is confirmed by research from Mobey Forum, which states that mobile point of sale terminals will reach 46% market penetration by 2017.
The Green Grape still operates in Brooklyn, but Richelson sold his half to his partner two years ago to focus on ShopKeep. The store’s profits helped fund Richelson’s work for the first few years before ShopKeep got venture capitalist investment, he says. Green Grape still uses ShopKeep’s technology today.
“I have big aspirations to be the first software as a service company that comes out of New York with a billion dollar valuation,” says Richelson.
Pikanik Bakery’s multi-allergy mission
Bakers Journal
The next generation is growing up with a new baseline set of expectations about what the minimum standards of technology should be. Modern retailers have never known the excruciating anticipation of waiting for some incredibly basic report to load over a 56K bit connection. They are strangers to the hours of mind-numbing tedium spent surrounded by papers trying to get your books in order. There are a whole host of miserable experiences that the next generation of merchants will just never have to deal with. They too are entering the world of retail with a whole new set of expectations as to what the minimum standards should be.
That being said, here are five retail miseries that are now a thing of the past.
1. Man vs. Mother Nature
My disastrous old Windows POS system ran off a server kept in the basement. Prudence (and the insurance company) dictated that data from this server would backup at the end of each business day in case of fire or flood. This involved connecting a massive external hard-drive into the back of the computer and waiting whilst the data seemingly inched across the cable. It also involved carrying the hard-drive back home every day because, let’s face it, a backup is no use if it burns down in the same fire as the actual server.
How It Got Better: The cloud. With cloud-based servers data backup is automatic. Data is constantly synced and stored in the cloud, so Mother Nature can do her worst to the server, and crucial business data is always secure.
2. Man vs. Virus
Threat detected! Malware found! Critical vulnerabilities discovered! In the Land Before the iPad (LBtiP) the computer virus was a very real part of every retailer’s life. Thousands of dollars and hundreds of hours have been spent dealing with malfunctioning and infected PCs. And then, months were spent afterwards being a tyrant banning staff from using the computers to do anything other than ring up sales. Not exactly conducive to a fun working environment.
How It Got Better: The Mac and now the iPad have both proven themselves to be infinitely more robust in the face of hack attacks. So, now sales can be rung up in peace – and staff can play Angry Birds when things are quiet too.
3. Man vs. Data
The prohibitive expense of hardware meant most small businesses used only one machine for all the functions in the store. The same machine doubled as a POS unit and as a business computer to respond to email and run reports. In practice this meant running reports could only happen at the end of the business day. What’s more, even if there was an additional computer, someone still had to be physically located within the store and connected to the server to get access to the data. As a result, business decisions were often made on the fly and without consistent reference to real-time data.
How It Got Better: Cloud-based reporting has made it possible to access data anywhere. Something that was a complete headache previously is now as simple as opening an app and checking out real-time data on staffing, inventory, sales and more.
4. Man vs. Power
The power is out, you can’t take sales. The Internet is down, you can’t take sales. It’s a Tuesday, you can’t take sales. Considering the expense of the old Windows POS machines, they were often unreliable. After spending thousands of dollars on the machine itself, panic set in every time the power went out. And if the Internet went down for any reason, forget about taking any payments at all, hours were spent just trying to get someone on the phone.
How It Got Better: Mobile POS solutions rely on tablets that come with powerful, built-in batteries. Also, the top modern POS solutions allow for acceptance of payments even when Internet connectivity is down. The best part? The hardware to make this happen now costs about $500 instead of $5,000.
5. Man vs. Upgrade
I always thought that the great, cosmic joke of the old-fashioned POS system was that six months after you shelled out half of your life savings for some truck-sized Windows POS system, they would release hardware that was half the size and twice as fast – along with new software that contained lots of great new features. But it was too late to install that one, or you could but you’d have to pay for it all over again, including someone to install it. Then again to fix the viruses when it went wrong.
How It Got Better: The advent of the iPad has provided a touchscreen system that is getting better and better without raising the price point. What’s more, these updates get pushed out to the iPad from the App Store without ever having to do anything. The major POS providers now operate on a no-contract, monthly subscription model that means they are incentivized to constantly upgrade their service to remain competitive and retain their customers.
In short, there has never been a better time to be a retailer looking for technology.
Cash—and even checks—may have come back into vogue since the Target security mess, but the example being set by small businesses like San Francisco sandwich shop Split Bread shows that some owners are positioning their registers straight ahead—straight to cashless.
From the low cashier stands placed in the middle of the restaurant to the metal-plated QR codes affixed to each table, the design of the rotisserie sandwich shop was wholly inspired by the owners’ desire for a no-cash customer payment system.
“As we were designing the space, we realized that we were designing it around a cash till,” said David Silverglide, co-founder of the 20-employee operation. “We stepped back and said, ‘Why are we doing this when 70 percent to 80 percent of customer transactions at our other seven [restaurants] are made with credit cards?'”
The harm, following the recent data heists at Target and Neiman Marcus—where millions of consumers’ personal information was stolen—is now readily apparent. However, experts say that costs for merchants who process credit cards will skyrocket, and that may be a greater pain than cashless solutions mitigate.
It may be too little too late, but the world’s largest credit card companies have set a deadline of next year to switch from traditional magnetic swipe cards to EMV—computer chips embedded into credit cards, which can offer an extra layer of security depending on the way they’re used—for point-of-sales transactions. It’s a timeline that existed before the Target data breach but has taken on some urgency since: Target this week presented an expedited timeline for its own $100 million investment in EMV during a Senate hearing.
(Read more: The dysfunctional state of America’s credit cards)
For thousands of small businesses, that means paying hundreds to thousands of dollars to swap out old terminals for hardware and software that can handle the new credit cards. Given the way these cards are processed—consumers must pause to enter a pin after their card is read—it also means a slowdown in transaction time, which for quick-serve service businesses equals more money lost.
“For the small merchants, it’s not really fair—they’re asked to pay the cost to upgrade, but they’re not really at a huge risk, because of the [relatively small] amount of card information that they have,” said Jeff Shanahan, president of payment technology firm CardConnect. “They have to buy into the fact that this is for the greater good of the industry.”
Freeing itself from cash can help solve this retail cost/benefit imbalance. Investing in a cloud-based point-of-sales system allows Split Bread to more easily adapt to changes in the marketplace, like capturing sales from the increasing number of American consumers embracing tap-and-pay smartphone apps or complying with new security standards set by the credit card industry.
“We can scale as all these new technologies emerge,” said Silverglide. “Cash was the limiting factor.”
Building a better credit card trap
Split Bread is well ahead of many of the nation’s small businesses, just over half of which still only accept cash or checks. But as more small merchants make the investment to switch to cashless payments systems, Split Bread’s payment model—a blend of wireless and traditional payment processing—offers a more cost-effective way to navigate the waters of a historically complicated and expensive market.
Accepting credit cards has never been cheap or easy for small businesses. Besides the initial cash outlay of a few hundred dollars for hardware, merchants must pay a fee of 2 percent to 3 percent per card swipe, plus a laundry list of monthly and annual costs that banks, credit card companies and merchant service providers tack on.
“They send us the most complicated, hard-to-understand statement ever,” said Ben Van Leeuwen of Van Leeuwen Artisan Ice Cream, a 60-employee Brooklyn firm with six ice cream trucks and three retail locations. The company, founded in 2008, started accepting credit cards a year and a half ago. “I can’t really spend the hours and months trying to figure out what it means,” he said. According to the National Retail Federation, merchants pay about $30 billion each year for debit and credit card purchases, most of which goes to the banks issuing the cards.
Merchants who have invested in cloud-based point-of-sales systems that support swiping credit cards via smartphones or iPads are finding their way around some of the more exorbitant upgrade costs. “New hardware will be needed; that’s an undeniable truth about EMV,” said John Berkley, vice president of product at Mercury Payment Systems, a payment solutions company based in Durango, Colo. “If you have a piece of hardware that only accepts magstripes, the smaller it is to replace, the better,” he said. “When it’s a software system with a peripheral attached to it that can easily be swapped out, that’s an easier way to make [the upgrade] happen.”
(Read more: Time to put chips in U.S. cards: MasterCard)
The costs to switch to EMV will likely be lower for users of Intuit’s GoPayment and Square, wireless payment technologies featuring card readers and software that integrate with smartphones and tablets. Both companies already support chip card requirements in Canada (Square) and the U.K. (Intuit).
Fraud magnets
But even as these new technologies, like chip cards and wireless payment, promise a higher level of security with continually evolving encryption measures—for example, like many of its competitors, the GoPayment card reader encrypts credit card numbers and then decrypts them on Intuit’s servers so no personal data is ever captured in the software hosted on a merchant’s phone—fraudsters will likely find a way to hack into them.
“In other countries where they have required chip-and-pin in brick-and-mortar shops, the fraud risks have moved online,” said Jason Richelson, founder of ShopKeep POS, a purveyor of cloud-based point-of-sale software.
Or as Bob Sullivan, fraud expert and contributor to Credit.com, put it: “Here’s the thing about crime: It’s all a matter of odds. There’s no way to prevent it.”
Small merchants face a double-edged sword when it comes to fraud protection: They are less at risk than a major national chain like Target, but they also have a known tendency to spend less than their bigger counterparts to protect digital information, making them more susceptible to attacks.
The first defense against risks associated with wireless—things like malware targeted at mobile devices and the lack of time-tested fraud controls configured specifically for mobile—is education. “Most merchants don’t spend the time or effort to get educated, and that’s to their detriment,” said Steve Casco, founder and CEO of Cardnotpresent.com, an online publication that covers issues in the e-commerce and mobile payments industries. “We’re trying to bring our readers into the 20th century, let alone the 21st.”
The majority of small firms rely on their vendors for infrastructure security updates, and partnering with a well-known tech company can help ease client worries about security weaknesses with new technologies. “That’s one of the reasons why we wanted to go with a company like PayPal,” said Justin Joseph, a partner and CFO of EJ Blooms, a start-up floral design firm in Manhattan that only accepts plastic via PayPal Here to serve clients, including Viacom and the New York Historical Society. “Most people will have heard of it and know they can trust [the system].”
When Silverglide first deliberated on the decision to go straight to cashless, he asked himself, “What’s the harm of getting rid of cash already and see what it does for our operation?”
It did quite a bit. Despite the occasional customer grumbling about not being able to use cash, Split Bread has seen well over double-digit sales growth month over month since opening a year and a half ago. Silverglide attributes some of that growth to fostering an electronic payments–only business, which allows for quicker customer throughput—if they don’t want to stand in line and swipe their credit card to pay, customers can seat themselves at a table, scan the QR code with their smartphone and order without having to interact with staff—and less time and labor wasted with counting, watching over and depositing cash.
Cloud-based point of sale platform for retailers ShopKeep POS has teamed-up with popular accessory maker Griffin to launch the ShopKeep Mobile, a handheld point of sale device that makes it super-easy to accept credit card payments.
“This is a complete handheld POS that is connected to the cloud. It’s everything you need to run your store – in your pocket,” said Jason Richelson, Founder & CEO, ShopKeep POS. “It also removes one of the worst parts of the retail experience for shoppers, which is waiting in line; and creates a more personal customer interaction by removing the counter as a barrier.”
The thing about this accessory is that it’s designed for the iPod touch rather than iPhone, making sure retailers can use it without big upfront expenses. It rocks an encrypted credit card swiper as well as laser barcode scanner to “ring-up sales right from the showroom floor.”
The two companies are targeting an array of different stores for ShopKeep Mobile, ranging from clothing boutiques to specialty retailers, which can maximize revenue per square footage by removing their counter and providing customers with a better shopping experience.
As part of the deal, ShopKeep Mobile users get full suite of reports, inventory management and QuickBooks integration via the BackOffice, customer database, ability to send receipts via email, discounts by $ or %, rapid item search, ability to turn tax on or off, printer and offline mode support.
We kinda like how this sounds. The idea to end the shopping process right on the floor (rather than waiting in line to pay for goods) does promise an improved experience that ultimately leads to increase sales.
The ShopKeep Mobile is in production beta, and if you want to know more – you can register your interest from here.