INTEGRATED RETAIL SOLUTIONS:
INCREASING PROFIT MARGINS THROUGH IMPROVED OPERATIONS
Combining POS and Back-Office Systems to Achieve New Visibility and Control
EXECUTIVE SUMMARY
Retailers worldwide today compete in a period marked by rising commodity prices and sluggish
consumer demand due to higher than average unemployment in many countries. Despite these
forces, there are signs of economic recovery. As the recovery accelerates, retailers will be challenged to seize the opportunity to capitalize on increasing consumer spending while profit margins
are tighter than ever.
To meet these challenges, retailers are moving to integrated technology solutions that enable multichannel commerce from traditional brick and mortar stores and the Internet while, at the same time,
optimizing internal operations. These solutions merge conventional Point of Sale (POS) functionality with e-commerce capabilities and back office ERP-style features. Combined, this integrated
solution will deliver a holistic view into retail businesses that enables you to optimize operations and
increase profit margins.
Solutions of this type have historically been beyond the budget of most companies – but recent
advancements in open source software has made them affordable for small and medium retail
organizations. As a result, a growing number of retail companies are using integrated technology
to improve the performance of operations across finance, sales, procurement, warehouses and
master data management.
This paper explains how an integrated open source retail solution can deliver more effective visibility into your business. It reviews the top 10 capabilities you should require in such a solution as
well as sample implementation timelines and cost estimates so you can assess how this solution
can enable the growth of your business.
RETAIL AND POS TODAY
Before exploring the relationship between the POS application and how it interacts
with more advanced back office Enterprise Resource Planning (ERP) systems, let’s
first quickly review how POS commonly functions today. Most modern POS systems
have replaced manual cash registers, and now leverage touch-screen technology for
easier use by clerks and store managers.
POS systems perform a variety of transaction types for retailers including sales,
exchanges, returns, and promotional discounts. They also help retailers process
multiple payment types (cash, credit card, check) in multiple currencies. Advanced
java-based software such as Openbravo POS is hardware-independent, to give you
the flexibility to choose whatever device, terminal or tablet that meets the needs of
your business.
POS systems have traditionally been concerned with the following operations:
%
Efficiently processing customers at cash registers – Ensuring multiple
customer- facing operations (returns, exchanges, gift cards, promotions) are
manageable by clerks with minimal training.
%
Accurately manage in-store revenue – Including cash intakes and refunds
by clerk, credit cards, debit cards, checks, sometimes across multiple
currencies.
%
Accurately manage in-store inventory – Including both on-floor and restock
reserves. This inventory data is used to automate inventory counts and
stock replenishments.
While very small retailers, such as those with a single store and only a few registers,
may be able to manage their business manually with spreadsheets (or even in their
heads!), a larger retail organization today will need to have these functions automated
via POS in some manner.
Now more than ever, retailers and franchises are confronted with a growing volume
of customer transaction data that needs to be aggregated and examined to assess
business performance. Forward looking organizations are realizing greater profitability
by achieving more control and visibility into day-to-day operations such as inventory
control, purchasing, receiving and transferring of products and store sales information
for reporting purposes. They accomplish this by adding back-office capabilities that
would commonly be categorized as Enterprise Resource Planning (ERP). If you’re
unfamiliar with ERP, take a quick glance at the sidebar ‘ERP: A Brief Introduction for
Retailers’.
ERP: A Brief Introduction
for Retailers
Enterprise resource planning (ERP)
integrates internal and external
data across an entire company including sales, inventory, accounting, manufacturing, service, etc.
An ERP solution will automatically
integrate and present this information in flexible views that meet
the needs of every employee from
senior executives to store managers to individual retail clerks. The
objective of an ERP is to present
a unified, streamlined view of company information to appropriate
stakeholders so they can make
better business decisions that
improve organizational success.
Openbravo is unique among ERP
vendors because of the company’s
Agile ERP approach. To learn more
about Agile ERP from Openbravo,
please read our white paper: ‘Increasing Business Performance
with Agile ERP’.
LOOKING BEYOND POS FOR GREATER RETAIL SUCCESS
Whether your retail operation is a single store or a complex multi-site, multi-country, multi-channel
business, the new capabilities that exist today between integrated POS and ERP have the power
to help you dramatically improve the success of your company. While some commercial offerings
attempt to do this, they are suitable only for retailers in the Fortune 5000 due to their cost, complexity, and implementation timelines. For background on this, see Table 1: Comparing commercial vs.
open source integrated POS+ERP.
Table 1: Comparing commercial vs. open source integrated POS+ERP
METRIC
INDUSTRY AVG*Average
OPENBRAVO AGILE ERP P
Take Longer Than Expected
57%
25%
Implementation Duration
18.4 months
3-4 months
Total Implementation Cost
$6,200,000
$100,000
Total Implementation Cost (% of revenue)
6.9%
~1%
Total Implementation Cost Exceeds Budget
54%
20%
A growing trend in retail, particularly with larger organizations, is enabling individual stores to take
greater autonomy when making product and promotional decisions related to their city, region,
or country. Instilling this independence within your retail organization (safely enabled by the ERP
capabilities) allows managers to work more aggressively against their own P&L and business objectives. For retail organizations that operate under a franchise model, this capability is even more
desirable because an ERP reduces the time it takes for a new franchise to open for business.
Additionally, the ERP is viewed by franchisees as a value-add during the franchise sales process
because of the proven stability it brings to each franchise operation. Because Openbravo ERP is
100% web-based, franchisers are able to rapidly bring new franchisees on-board, without the usual
back office hardware or on-site implementation and support costs.
Expanding retail technology capabilities from POS only to include ERP capabilities allows you have
the best of both worlds - store-level empowerment plus consistent company-wide policies and
rules. Here are some examples of the benefits this type of integrated solution provides for retail
operations:
%
Finance – Manage financial performance of stores and franchises on their individual P&L.
For franchises, an integrated retail solution allows you to have your own Profit and Loss
(P&L) and visibility into individual franchisees. For fully owned chains, an integrated retail
solution enables you to analyze stores as individual entities with their own P&L so you can
identify strong and poor performing contributors to your business.
%
Sales – Exercise as much or as little control as you want on pricing policies with an
integrated retail solution. For example, if you want to set price lists that are enforced across
your entire chain or a specific region, you can define a master price list that those stores will
need to adhere to. If instead you prefer to allow individual stores to have some discretion
to adjust prices, you can also enable this with an integrated retail solution.
%
Supply Chain Management – View and analyze product performance in terms of sales (or
lack of sales) across every store in your entire operation with an integrated retail solution.
You can also see product performance at global, country, regional, and city levels so you
can plan warehouse replenishment more efficiently. This solution also helps eliminate
‘contract leaks’ – where one store pays more for a specific product because they were not
aware of an existing discount negotiated by another part of the retail organization.
%
Master Data Management – Build a centralized, standardized repository for all your
business data. Because an integrated retail solution includes a centralized, unified system
for retail data management, it enables new products to be added to your current inventory
mix more efficiently. With direct access to ‘master product entries’ that are pushed down
to the integrated POS system, retailers can add new products faster and more accurately.
MANAGING MULTI-COUNTRY RETAIL OPERATIONS
Managing an international retail operation is tremendously complex because every country has
different regulatory environments and tax protocols that influence how your products should be categorized, priced, and taxed. Because of these differences, it’s easy to think building country specific
systems that enable country specific autonomy is the right way to deal with these challenges. In the
long run, this strategy becomes very problematic because country specific systems create incompatibilities that ultimately will fragment your data – and therefore reduce your efficiency.
Data fragmentation also creates problems for customer loyalty programs because your shop
personnel are unable to offer a consistent customer experience. For example, if you manage a
luxury goods retail operation, you want to ensure that if your customer buys an expensive pair of
shoes in Milan and elects to return them in Dubai that your store can honor your customer’s return
request.
It’s important to realize that as your retail operation expands to other countries, without an integrated
retail solution, you will be forced to make painful tradeoffs between autonomy and integration. With
an integrated back office solution, you can operate in multiple countries with a unified set of data
that provides a consistent view of your customers. It will also deliver multi-currency support, a
single view of products, and will allow for country or region specific pricing and promotion policies.
A critical solution requirement for any retail organization that has (or plans to have) physical operations in multiple countries is the ability to add support for new tax structures and currencies. Many
legacy business systems are limited out of the box, and require expensive customizations to add
support for additional currencies and tax regulations. Because Openbravo is a web-based, modular
product, with a wealth of pre-existing modules that offer a fast and cost-effective way to expand
your retail solution. For more details on the growing number of international localization modules
available from Openbravo, please visit: http://forge.openbravo.com/categories/openbravoerp/localizationmodules.
INTEGRATING ONLINE COMMERCE WITH BRICK AND MORTAR STORES
The types of products you sell and how you sell them will largely determine when an online sales
channel is necessary for the continued growth of your business. Ultimately, every successful retail
operation will need to build some type of online presence. The challenge of online commerce from
a business management perspective is how to coordinate data from both online and brick-andmortar channels. This is accomplished by utilizing an online commerce platform that integrates with
your back-office ERP. For example, Openbravo´s ERP has an integration module for Magento – the
leading open source online commerce application. For more information on this, see the sidebar
‘Openbravo and Magento – The Winning Open Source Retail Combination’.
A growing concern for retailers that have multi-channel sales from both online
commerce and physical stores is how to deliver a consistent customer experience.
Specifically, how do you enable your employees to deliver your customers professional, personalized interactions off-line and on-line (including support for multiple
device types like computers, cell phones and tablets)? All of these factors point to
the need for an integrated retail system where information flows both ways between
POS terminals and your online commerce site(s) to a single ERP system in the
back office.
BENEFITS OF OPEN SOURCE SOFTWARE FOR RETAILERS
A tremendous amount has been written about the differences between open source
and commercial business software. A summary would show that open source continues to gain ground against commercial software, particularly with small and medium sized businesses that need to preserve resources and business agility at
the same time. For example, Openbravo Community Edition has been downloaded
over 2,000,000 times and Openbravo POS over 250,000 times as of mid-2011.
Following is a summary of the benefits choosing an open source retail solution will
deliver to your business:
%
Cost Effective - Proprietary POS and ERP technology is notoriously
expensive. It also tends to have long and costly implementation timetable.
Moreover, these commercial offerings also carry ‘maintenance’ fees that
are commonly an annual fee between 18-20% of your license price. By
contrast, open source software has no maintenance fees and is free to try.
%
Reduced Risk – Because open source software is free to try before you
buy, retailers can download and experiment with open source POS, ERP
and online commerce applications to test or experiment with. This allows
you to ensure the applications you select meet the specific requirements of
your business, so you can acquire and deploy them with great confidence.
%
Security – Because open source code is readily available, many security
experts believe open source is more secure than commercial code. This is
because end users can evaluate and contribute security fixes to the code,
and the fact that the code must be resilient in the face of hackers who can
download it for free. A large, vibrant open source developer community
like Openbravo’s enjoys a clear security advantage over comparably smaller
proprietary teams who rely on “security by obscurity”.
%
Flexibility – Any open source software user has the ability to examine source
code and make any alterations to the code they choose. This enables techsavvy customers to eliminate any problems they may encounter, and add
any functionality they require.
%
Standards Based – Interoperability with other software systems facilitates
your ability to integrate with a range of complementary products to meet
business requirements. Open source software uses open standards that
provide a clear definition of how information and data are to be exchanged
between different systems or components operating together.
Openbravo and Magento –
The Winning Open Source
Retail Combination
To facilitate the creation of an integrated retail solution, Openbravo
created an integration module for
Magento, a leading online commerce platform. This allows joint
users of both products to have
a single, consolidated view into
the performance of multi-channel
sales.
Magento is a powerful online commerce platform that merchants
can use to build and run online
stores. Robust, flexible and highly
customizable, Magento solutions
offer businesses the ability to meet
complex needs and create customized online commerce experiences.
Magento Enterprise solutions offer
code-level and database access,
robust web services APIs, as well
as a library of 4,000 extensions
retailers can use to extend and
customize your online store(s).
INTEGRATED RETAIL SOLUTIONS IN THE REAL WORLD
If you’re a small, medium or large retailer, once you understand the value an ERP can deliver to
your business, it’s important to educate yourself about the specific benefits and features you’ll want
from your ERP. Whether you select an open source or commercial ERP, there are some capabilities you’ll need to ensure your success. For a list of key requirements, please see Table 2: ‘Top 10
Capabilities Checklist for Integrated Retail Solutions’.
Table 2: Top 10 Capabilities Checklist for Integrated Retail Solutions
POS
ERP
Customer and Inventory Management
Beyond the basics of managing cash intake and
common transactions such as refunds by clerk,
credit cards, debit cards, checks, and multiple currency support, your POS should also provide visibility and reporting on your inventory status that is
actionable by your ERP.
Intuitive Usability
For technology to be adopted, it must to be easy to
use. Legacy ERP often fails due to poor usability.
Familiar application attributes like multi-tab views,
spreadsheet-like interfaces and contextual help can
greatly facilitate adoption of your ERP.
Integration with External Devices
Ensure your POS system is flexible enough to
support various external devices including bar
code scanners, scales, customer displays, credit
card readers and cash drawers. This provides you
with the flexibility to change the retail hardware
you use in response to business needs.
Modularity
The ability to add pre-built capabilities onto your
core ERP application provides a means to costeffectively add new functionality when you need it.
It also ensures a small functional footprint for the
core application itself, for faster deployment times.
Payment Gateway Integration
To effectively integrate online commerce data with
brick and mortar operations, your POS system
should offer integration with popular online commerce platforms.
100% Web-based
Return on Investment (ROI) is often difficult to
calculate when it comes to evaluating enterprise
software. To deliver rapid ROI, your ERP should
be 100% web-based to avoid costly and timeconsuming software updates. A web-based solution also dramatically accelerates your speed of
deployment.
ERP Integration
To build an integrated retail solution, your POS will
need the ability to integrate with an ERP or other
back-office applications. Look for POS systems
that have pre-built integrations that will reduce your
overall costs and time to deploy.
Customizability
Generally speaking, businesses should seek to
extend, not customize ERP. However, it’s important to have the ability to customize your solution
if needed. Two factors will contribute to ease of
customizability: Modularity, and if your solution is
open source - because you can edit open source
software with zero license fees.
Programmable Interfaces
Different retail employees will require benefit
from user-interfaces that are customized to their
specific roles. Ensure your POS has programmable interfaces to facilitate these optimizations.
Interoperability
To ensure your ERP can work with your existing
systems and grow with your business, ensure it
can interoperate with other software systems. Generally speaking, open source software uses open
standards that greatly facilitate interoperability.
COST AND DEPLOYMENT TIME FOR INTEGRATED RETAIL SOLUTIONS
As you look for the right integrated retail solution, it’s critical that you match your needs and the
complexity of the solution you want to your budget and available time for implementation. Legacy
ERP has a reputation for cost overruns and difficult implementations. As an example, to help you
forecast the cost and deployment time required for Openbravo, please see Table 3: ‘Sample Openbravo Retail Cost and Deployment Scenarios’.
Table 3: Sample Openbravo Retail Cost and Deployment Scenarios
SMALL RETAILER
MEDIUM RETAILER
LARGE RETAILER
# Of Stores
5
50
500
# Of Countries with Stores
1
3
20
Software Subscription
8,750 / year
90,000 / year
500,000 / year
Implementation Cost
20,000 – 150,000
400,000
2,000,000
Maintenance Cost
Included
Included
Included
Support Cost
Included
Included
Included
CONCLUSION
Retailers operate in one of the most competitive business environments and today face both challenging times and unprecedented opportunities. Now more than ever, technology can deliver powerful competitive advantages that allow retail operations to become more agile and more efficient.
By looking beyond stand-alone POS systems to integrated retail solutions, retailers are becoming
smarter and more sophisticated about understanding their business. Doing so allows them to make
smarter decisions and gain greater insight into the success (or failure) of individual products, stores
and employees in your company.
While the prospect of migrating back office systems from spreadsheets or basic accounting packages to ERP style functionality used to be intimidating, the success of open source software to
make ERP affordable and accessible to small and medium retailers has changed that reality. Old
barriers to using the best technology have been removed, ushering in new opportunities for you to
gain new efficiencies that directly impact profit margins. At the same time, integrated retail solutions
allow you to improve overall customer satisfaction, setting the stage for more repeat business and
increasing same-store revenue.
You can realize these benefits by using an integrated solution for supply chain optimization, centralized product pricing and promotions, and ensuring brand consistency across multiple channels and
multiple stores – even across multiple countries.
If you’d like to learn more about how an integrated retail solution can impact the performance of
your business, Openbravo and our network of certified partners are here to help you. Simply fill out
our contact us form at http://www.openbravo.com/form/customer/
ABOUT OPENBRAVO
Downloaded over 2,000,000 times, Openbravo is the world’s leading web-based Open Source ERP
solution. Downloaded over 250,000 times, Openbravo POS is also the world’s most popular Open
Source POS. The agile ERP company, Openbravo sells its Professional Edition exclusively through
a global network of channel partners whose expertise provides rapid, cost-effective implementation services. Openbravo partners also provide deployment expertise for the rapidly growing selection
of over 320 Openbravo modules that add localization and rich functionality to the core product.
Openbravo has offices in the U.S., Spain, and India.