Natural Foods Merchandiser logo

Small Retailers Overcome the Fear of Scanning

April 24, 2008

5 Min Read
Small Retailers Overcome the Fear of Scanning

Although a dizzying array of fancy point-of-sale systems are now available, many small natural foods retailers still cling to their old registers and tape.

Taking the plunge and moving into a world of scanners and databases can be daunting. Plus, health food retailers are a pretty skeptical lot when it comes to new technology.

?I?m still waiting to see what the ideal system is,? said Joe Wallen, owner of For Goodness Sake in Naples, Fla. Wallen would like to buy a POS system by this summer and has looked at offerings from ECR Software of Boone, N.C., and other vendors. But he remains dubious about many of the sales pitches he hears. One of his three stores already has an older scanning system and it ?seems to require more labor,? Wallen said.

Small retailers with one or two checkout lanes and less than 2,000 square feet of store space are hard-pressed to lay out $20,000 to $30,000 for a high-end POS system. Old-fashioned registers work just fine, many of them say.

Except they really don?t. Even basic point-of-sale systems offer quicker checkout, better sales tracking and inventory management, fewer pricing mistakes and, perhaps most importantly, a broad spectrum of financial data and reports that help merchants run their stores more efficiently. A growing number of health food retailers want to jump aboard. Betsy Perkins, manager of Amazing Grains in Grand Forks, N.D., particularly wants better accuracy and data collection. ?We?re a co-op. It would help us keep track of merchandise sales and calculate rebates.? Perkins is looking at the books and could buy a POS system by the end of the year.

Several companies offer POS systems tailored to naturals stores? unique needs and vendors. Lewisville, Texas-based OrderDog Inc. launched its iPOS point-of-sale system in March at Natural Products Expo West. Living Naturally of Venice, Fla., integrates its ScanGenius databases into new or existing POS solutions.

Chris Cohen, assistant manager of the Fort Collins Food Co-op in Fort Collins, Colo., has been looking at different POS vendors, but finds most are selling flashier and more expensive systems than she wants. Currently, the co-op is considering a trimmed-down system from a small Winona, Minn.-based company called CoPOS, which specializes in POS packages for natural foods co-ops.

According to CoPOS President Ken Geiger, the revenue tipping point for a POS system has historically been about $2 million in sales per year. But he?s successfully selling to retailers with only $180,000 in annual sales.

The key is cost. Geiger sells a one-lane system for about $7,000 and a two-lane configuration for $12,000. ?We?re struggling to meet the demand; we?ve had a very good response,? Geiger said. The CoPOS system tracks purchases by co-op members, handles special orders and accepts sales paid by gift certificate, Geiger said. Geiger?s system also has an automatic inventory option, but most of his customers don?t use it. ?We find, generally speaking, that [automatic] inventories in small stores are redundant,? he said. That?s because these merchants already know when they need more pickles or pasta. Gayle Cupit, general manager of MOM?s Co-op in Cambridge, Minn., bought Geiger?s system and said it?s working well so far. ?I wanted more accurate financial information about products we were selling,? she said.

Cupit looked at several larger POS vendors, but the price was considerably higher at $16,000 to $20,000. And the platforms weren?t designed specifically for co-ops. ?They would have required too much changing,? Cupit said.

Big POS vendors are well aware of the small grocery store market. Many currently offer trimmed-down versions of their large platforms. ?Guys at that end of the market need something easy to install and operate,? said Mike Lyden, solutions sales specialist for NCR Corp. of Dayton, Ohio, which offers a two-lane POS configuration called ScanMaster for $5,000 to $7,500.

ECR Software also focuses on small health food merchandisers, but sales manager Geoff Robinson said it can be a tough sell: ?A lot of natural products store owners tend to be technophobes. They?re scared to death, so you better give them a simple system.?

ECR?s POS system for small retailers runs between $12,000 and $15,000 and includes all hardware and software, scale/scanner, credit card reader and printer. Robinson said most of his customers lease a system for $300 to $400 per month. ?After five years, you own it,? he added.

Enter the complex question of return on investment. Most health food merchandisers know a POS system can save money, but they?re not exactly sure how—or how to figure it out. South Windsor, Conn., systems consultant Dick Calio said the general rule holds that a POS system can add between 3 percent and 4 percent to the bottom line.

Eliminating pricing mistakes is a primary money saver, Calio said. But even more important is knowing how to use to your advantage the data generated by a POS platform. ?The goal is for a retailer to look at only critical data and to drill down when a problem is indicated,? he said.

Three key indicators are most important to track, Calio said.

Cash control. ?This is the quickest return you will get from your POS,? said Calio. ?In addition to better cash control and cash drawer reconciliation, the following controls will in be place: pricing accuracy, voids and no-sales by clerk, and an audit trail on all discounts by clerk.?

Gross margin management. ?The erosion of gross margin is the silent killer of profit,? Calio said. ?You need to run a report daily that shows your target gross margin percent by department, and the actual gross margin percent attained from sales.?

Inventory turn. According to Calio, excess inventory results in profit erosion. The primary problems are higher carry costs and lower gross margin, since older inventory has to be marked down or put on sale.

Cupit isn?t inclined to do all the math to calculate MOM?s Co-ops return on investment. ?I know I have better member and financial information. It?s already paid for itself,? she said.

Randy Barrett is president of Business Writers Group in Falls Church, Va.

Natural Foods Merchandiser volume XXV/number 6/p. 62, 64

Subscribe and receive the latest updates on trends, data, events and more.
Join 57,000+ members of the natural products community.

You May Also Like