The Keys To Grocery POS Success

"I wouldn't bet my mortgage on selling into the grocery vertical." Yikes. This came from a highly regarded industry analyst during a recent conversation we had on whether VARs can make money selling to the grocery POS vertical. Come on! We all know that VARs have been making great money selling POS solutions to this market for decades. That said, this vertical is one of the hardest in which to sell POS solutions. Because grocery stores face meager profit margins (2% is common), spending money on technology often isn't high on an owner's priority list.

Chicago Cash Register (CCR) is just one example of a VAR finding success in the grocery vertical. Rodolfo Sturla, CCR's CEO, credits a large part of his company's success to being able to properly identify and address the common "red flag" issues a grocery store may face. According to Sturla, identifying these red flags can help any VAR become successful at selling POS solutions to this vertical.

Four Red Flags: Make Selling Grocery POS Easier
So, what are these common issues facing grocery stores? First, and most obvious, is the pain of failing technology. This type of pain is the easiest to identify and address, due to the great effect failing technology can have on the bottom line of a business. In fact, according to a 2007 study by the IHL Consulting Group, there are over 100,000 POS units  in U.S. grocery stores reaching end of life within the next two years. The typical grocery POS solution sold by CCR includes bar code scanner/scales, handheld bar code scanners, mobile computers for scanning inventory on shelves and in the stock room, cash drawers, receipt printers, pole displays, and PC-based POS terminals running Auto-Star Star-Plus software.

Secondly, VARs should be looking to see if a customer's POS solution meets the current requirements of doing business. For instance, recent years have seen regulations forcing product weights to be included on shelf labeling. Also, on the payment processing side, security standards now require that private card holder information not appear on receipts. In these cases, Sturla says that CCR benefits from selling support programs that cover such updates to customers. "For each customer, our support program annually yields approximately 8% to 15% of the original cost of the POS system," he says.

For another VAR's perspective on this market, check out the May 2007 article on grocery POS.

A third, and perhaps obvious, issue grocery store owners face is dealing with growth. Grocery stores often look for new POS technology when expanding by adding lanes or when undergoing renovations. Sturla says that these types of opportunities account for 30% of his business.

Finally, perhaps the most common and difficult red flag to address is a lack of technology that can improve business processes. "Small owner-operated stores, especially, are in need of process improvements that can equate to significant savings for the stores," says Sturla. "For example, VARs should check to see whether or not a grocery store has inventory software tied to the POS system." A store can have 30,000 items on shelves and in a stock room and face the challenge of making unnecessary purchases. Also, how the store manages price changes from its distributors can greatly affect the store's profits. VARs can sell hardware (i.e. bar code scanners or handheld computers) and POS software with inventory functionality that give owners an accurate accounting of all items in stock.

According to Sturla, there's also a need for POS software functionality that allows store owners to track pricing trends. Food distributors often offer weekly and seasonal promotions that require stores to meet certain sales goals. Some POS software allows the owners to accurately forecast what sales goals are possible by tracking sales from previous years. "We have one customer who used regular cash registers for 15 years," shares Sturla. "We installed a new POS system and taught the customer how to use some of the inventory management features. In one year, he paid for the cost of the new system."

One Sales Strategy Won't Work For The Grocery POS Vertical
Regardless of what pain points exist or how many business processes can benefit from new hardware and software, Sturla explains that, often, the toughest challenge is getting the owner to acknowledge the need. The difficulty of this endeavor differs depending on the size of the store or chain. Sturla breaks the opportunities into two groups. What he refers to as the low end of tier-two includes small chains of no more than five stores or a thriving independent store that has been in business for many years. Typically, there are no fewer than four lanes per store. The upper end of tier-two includes local and regional chains of 30 to 60 stores. "Generally speaking, the people you interact with in a tier-two store/chain will rely on ROI calculations to help make purchasing decisions," says Sturla. For that reason, CCR has a spreadsheet its salespeople use to calculate statistics such as increased margins and inventory reduction.

CCR also targets a tier consisting of single stores. What he refers to as lower tier-three independents are grocery stores with one or two lanes. Typically, the owner of the store also works the register. Sturla's upper tier-three consists of a single store with three or four lanes. The owner is on-site, but there are clerks working the registers. "Most owners of tier-three grocery stores are business-savvy, but often don't care to even look at ROI numbers." He goes on to say that in tier-three, winning a sale often comes down to how well you're liked by the owner. In these instances, good old-fashioned relationship building is the necessary skill.

CCR's salespeople find most success getting in front of these store owners through time-tested cold calling. Sturla says this is the most effective way to get in front of the grocery store owners. "Other marketing methods, such as direct mail, cannot ensure that the owner will get the message," he says. "A low response rate is typical with mailers to this vertical." CCR has, however, found marketing success by attending food wholesaler trade shows. Typically, the events are two days long and cost the VAR anywhere from $500 to $2,000 to have a booth displaying the VAR's grocery POS solutions. On average, the VAR attends three shows a year. The result? "Leads generated from attending trade shows account for 10% of our grocery POS revenue," reveals Sturla.

What does all this mean for CCR? Well, the VAR currently has 40% of its yearly revenue coming from grocery store POS sales. Since 2004, the VAR has increased its sales revenue from the grocery vertical by 80% and expects another 10% increase this year. So, making money from this vertical is possible, provided you know what to look for. And now, you do.