2008 Aberdeen Group. Telephone: 617 723 7890

February, 2008

Retail Point of Service Performance: IBM Edges Out NCR and Fujitsu

Analyst Insight

Aberdeens Insights provide the analyst perspective of the research as drawn from an aggregated view of the research surveys, interviews, and data analysis

Recent data from the January 2008 Aberdeen benchmark report The Imminent Retail Store Transition: Customer-Centric POS shows that IBM users indicate higher adoption of key capabilities that enable customer efficiencies at the point of interaction. However, despite the fact that IBM users are currently ahead on some key POS capabilities does not mean that they score on overall POS performance. Our results show that the gap is narrowing between retailers that are using competing hardware and ecosystem solutions from IBM, NCR, and Fujitsu. This Aberdeen Insight details the comparative performance of retailers that are current users of these three major POS hardware companies and draws further comparison with Best-in-Class retailers.

IBM Users Ahead on Retail POS Capabilities Our results show that retailers using IBM POS systems are showing higher adoption of two out of the three core customer-centric capabilities that shape effective POS process management from a customer service standpoint in retail when compared to NCR and Fujitsu (Figure 1).

Figure 1: Different Levels of POS Capabilities by Vendor and Best-in-Class

Best-in-Class Criteria

The criteria for calculating Best-in-Class performance are: Process measures POS

checkout time

Financial measures average transaction size

Quality measures percentage of customers that meet customer satisfaction goals 14%

63%

41%

6%

52%

28%

19%

56%

36%

32%

63%

42%

0% 25% 50% 75% 100%

Ability to access websites, catalog, and fulfillweb generated orders at POS

Ability to process accurate productpromotions through POS (price integrity and

coupon usage)

Measuring and reporting customersatisfaction at POS

IBM NCRFujitsu Best-in-Class

Source: Aberdeen Group, February 2008

Aberdeen identified the three core POS process management capabilities in Figure 1 above based on results from the POS survey of 180 companies in January 2008. These capabilities enable retailers to:

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Retail Point of Service Performance: IBM Edges Out NCR and Fujitsu Page 2

2008 Aberdeen Group. Telephone: 617 723 7890

Demographics

Respondent base: 180 global companies

Three major retail industry segments: supermarket and grocery (15%), specialty (20%), general merchandise and apparel (18%)

Revenue size: small (38%), mid-size (38%), and large (24%)

Report, measure and benchmark customer satisfaction at POS as a key performance management goal for stores

Process easier and convenient POS transaction processing by the timely and accurate acceptance of promotions at POS

Provide stores with multi-channel content, CRM and order management tools to service cross-channel customers: access to internal and external websites for accessing product information, product selection, web as well as catalogue order management from a purchase, return and exchange standpoint

IBM Users Score on All but One Capability Firstly, an assessment of each of the capabilities that are mentioned in Figure 1 reveals that IBM users execute programs that place greater store accountability on customer POS experience than the users of NCR and Fujitsu. Close to half (41%) IBM users surveyed have indicated that they are measuring, reporting, and setting store POS performance benchmarks using customer satisfaction (CSAT) at POS through customer satisfaction surveys.

Retailers execute this process printing surveys on a customer receipt in a random manner on a monthly basis. The customer is required to call into a toll free number to respond to the survey. The retailer then compiles the aggregate score of the survey per store and assigns the CSAT score for the specific store. The number of IBM users who execute CSAT surveys is almost equal to the Best-in-Class usage of CSAT surveys at POS as a store point of interaction performance tool.

Secondly, IBM users also indicate that they possess the ability to process accurate customer promotions at the POS. This capability leads to fewer customer delays and greater customer satisfaction at POS. "In the next two years our

franchisee of stores will continue to improve the multi-channel service functions, payment and loyalty functions at the POS. We have two major POS ecosystem providers who have installed registers in our franchise. An IBM system rates higher on performance as it has more customer friendly features, and our teams have spent less time and effort on the maintenance and support of IBM POS".

~ Director of Store Systems, Large US-based Specialty and

Apparel Retailer (User of IBM and NCR POS hardware and

other POS ecosystem solutions)

Accurate POS promotions requires that retailers possess the right mix of promotion event execution and pricing tools, presence of adequate IT staff for executing the promotion/pricing updates process on a daily basis, and an optimized network to send frequent and seamless software updates to the store server from the headquarter that consists of daily or weekly price changes.

Our data indicates that an equal number of IBM users possess the ability to process accurate product promotions when compared with Best-in-Class companies. While this capability is also well adopted by over half of the NCR and Fujitsu users, these companies need to improve further when compared to IBM and Best-in-Class companies.

Finally, on the capability to enable multi-channel customer management at POS, IBM is outperformed by both Fujitsu and Best-in-Class retailers as shown in figure 1. Both IBM and NCR POS users need to further improve the ability to access websites, catalogue and web generated order at the POS to address the needs of the cross-channel customer. Prior Aberdeen data has already shown that 70% of retailers consider multi-channel

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Retail Point of Service Performance: IBM Edges Out NCR and Fujitsu Page 3

2008 Aberdeen Group. Telephone: 617 723 7890

customers as more profitable. Therefore, POS integration with multi-channel processes is a crucial capability for improved POS experience of customers.

POS Performance Management: Vendors in Dead Heat It is important for retailers to establish POS performance management metrics or key performance indicators (KPIs) as POS interaction has a direct impact on customer retention, success of loyalty programs and store revenue (Figure 2).

Figure 2: POS Key Performance Indicators (KPIs) by Vendor "Our POS system provides access to internal and external websites, and multi-channel service functions such as web order management. We have both legacy and next generation POS system from the same provider as we are transitioning to next generation POS in a phased-manner. We are very pleased with the performance of our POS system from a service, support, and lifecycle management standpoint."

~ Director of Store Systems, Large US-based Consumer

Electronics Retailer (User of Fujitsu POS hardware and

other ecosystem solutions)

37%

68%

38%

60%

36%

58%

84%

48%

80%

33%

28%25%

0% 25% 50% 75% 100%

% of users that have 80% ormore customers meet CSAT

goals

1-3 Minute average checkouttime

Increase in average transactionsize

IBM Users NCR Users

Fujitsu Users Best-in-Class

Source: Aberdeen Group, February 2008

The standard KPIs that retailers have used in the past for managing POS efficiencies is POS uptime. However, Best-in-Class companies are going a step further. By focusing on customer-related metrics such as the ones mentioned in the figure above, Best-in-Class are deriving customer benefits from POS systems installed in the stores. The Best-in-Class establish the most effective KPIs to monitor POS performance from a customer satisfaction, throughput, and sale per transaction standpoint.

In figure 2 above, our data indicates that IBM users show better performance on two of the three KPIs that are impacting POS performance in stores. IBM users are marginally ahead of its competitors: Fujitsu, NCR, and Wincor, in increasing average transaction size and attaining 1-3 minute average transaction time. However, NCR users have marginally higher satisfied customers than IBM. For instance, 38% of NCR users have 80% or more customers currently meeting the corporate customer satisfaction goal which is marginally better than 37% of IBM users with 80% of more satisfied customers in their stores. Overall, the gap between IBM, NCR and Fujitsu is narrowing when it comes to their users establishing a performance management culture around POS systems.

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Key Takeaways IBM, NCR, and Fujitsu are all some of the largest manufacturers, POS ecosystem providers, and innovators in the POS hardware space. These companies have played a critical role in a majority of acquisitions and improvements of POS systems by retailers on a global