Roughly ten years ago the average American owned their new cars for 4.5 years. Now they own those same vehicles for 6.5 years. Economists have attributed this trend to a few things: more generous financing terms, erosion of middle class purchasing power, and more reliable vehicles.
Vehicles are major household purchases – the average new one ran just a little over $35,000 last year. But somehow consumers are turning through these major purchases at a faster rate than merchants are replacing one of their major items: the Point of Sale (POS). When you consider the implications of such torpidity it only further serves to explain brick and mortar’s problems.
The POS is the hub of the merchant nervous system, collecting all sorts of useful data. Many merchants view POS like they view payments: a necessary evil. But unlike payments, the POS has a promise to revolutionize the way merchants run their business. We expect POS systems in the near future to:
- Help merchants find new locations
- Help merchants select hours of operation
- Help merchants automatically run, measure, and adjust marketing
- Help merchants automatically order inventory, taking into account item demand and supplier pricing
- Help merchants automatically build labor schedules, compliant with rules and regulations
- Help merchants optimize their labor, increasing revenue and decreasing costs simultaneously
- Help merchants discover products to add and remove from their stores, and also suggest the best pricing
- Help merchants syndicate their offerings across multiple platforms to reach more customers
- Help merchants with delivery of their items
Yet merchants are known to keep their POS systems forever, assuming the merchant stays solvent and the reseller doesn’t totally screw up support (which happens way too often). When we asked our industry friends they determined the average length of POS ownership broke out as follows, using the payments categorization system for merchant sizes:
Level 1: 15 years
Level 2: 10 years
Level 3: 6 years
Level 4: 3 years, but this is mostly because small merchants churn in such high numbers they drop the averages lower. They are also lured by “free POS” and strongly consider switching even if they’ve had a system for a year or two.
People thought hardware is probably the first reason merchants swap software providers. “We think the average ownership time is coming down as hardware becomes cheaper and software is easier to flip on. Usually the hardware would crash and the merchant would blame the software and start shopping elsewhere,” shared one respondent.
If you’re wondering who would own a POS system this long, remember that merchants are low-margin businesses. A few multi-store merchants told us they accounted the useful life of a POS between five and seven years. But that flies in the face of logic: with all the benefits of internet-connected POS systems, why aren’t larger merchants – who stand to benefit the most – upgrading their POS systems faster?
Software moves at an ever-increasing pace these days. The restaurant industry just caught on to mobile ordering (even though olo has been pushing it uphill for 13 years!) and voice ordering will reach higher levels of penetration even faster. Choosing older, legacy POS system means it will be harder for merchants to benefit from the universe of updated software and all the value it brings without expensive taxes on integration. Once updated, however, the newer SaaS models of POS promise ongoing software updates that keep the merchant relevant for many more years.
Automobiles have changed a lot over the last decade. There’s more liberal inclusion of airbags. Frames have crumple zones. Vehicles have internet access, lane assist, and some are even rolling off the lot with autonomous driving features. POS, on the other hand, has changed even more over the last few years. While cars are becoming more and more about software POS is just about the software!
Nobody who owns a 1982 El Camino is trying to put internet in their car. Nor are they expecting to survive a crash with another vehicle above 25 mph. At a certain point you need to update to stay relevant (or alive). We wish merchants reading this take the same advice for their POS. Newer cloud POS systems are not cost centers: they are revenue generators. Cloud POS products will prove this to you over the next few years.
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