How to Choose a Retail Management System
How to Choose a Retail
Management System
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you’ve probably outgrown your current systems. If your growth path is
projected to continue, you need to consider new systems right away
Welcome! For more than 25 years Sage Software has been helping
companies across the globe choose and implement lasting software
solutions. Of the hundreds of thousands of companies who use Sage
Software solutions, each one had to decide which system to buy and when
to buy it.
Our experience has taught us that people need more than just product
information; they also need other kinds of input to make sound accounting
and retail management software decisions. And that’s what this booklet
is all about. We’ve distilled what we’ve learned from our many successful
Yes. Stop. Growth or other significant business changes mean that
to ensure that your current system does not become obsolete.
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No. Go to question 4.
4. Does your retail management software integrate seamlessly with your accounting software?
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Yes. Go to question 5.
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No. Go to question 7.
customers and have structured it to deliver useful information to:
5. Is your retail management software more than three years old?
nPeople
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Yes. Go to question 6.
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No. Stop. If your integrated system was chosen carefully within the last
who are managing retail operations manually and need to
automate.
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who are using entry-level software and want to move up.
nPeople
who have old systems and are ready for new technology.
nPeople
who are using a standalone retail management system and are
looking for an integrated system.
So why would a software company write a booklet that doesn’t promote
its own products? Because we’ve discovered that the more people know
three years, it should be working just fine. Before proceeding with a
new purchase decision, discuss your situation with the consultant who
helped you implement your current systems.
6. Is there a satisfactory upgrade available from your current software supplier?
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upgrading your system right away.
about accounting and retail management software, the more likely they
are to choose products from Sage Software and our partners. An informed
Yes. Stop. Contact your software vendor to find out more about
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No. Stop. You need to find a new supplier with a more serious
customer often ends up being our customer, so we have a vested interest
commitment to ongoing product development. Now is a good time
in sharing information with you.
to take a look at the products available in today’s market.
Should Your Company Buy
Retail Management Software?
This simple test will tell you just how ready your company
7. Is your accounting software more than three years old?
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Yes. Go to question 8.
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No. Stop. Without complete integration of your retail management and
is to adopt a new retail management system.
financial systems, you won’t get the full benefits of computerization.
1.Do you have one or more brick and mortar
retail outlets?
Be sure to consider only those packages that can demonstrate full
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Yes. Go to question 2.
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No. Stop. Most traditional retail companies have one or more brick and
mortar outlets for selling their products to consumers. If you answered
“no” to this question, you probably are looking for e-commerce software.
integration.
8. Is your retail management software an in-house
package invented or developed by your internal
programming/IT staff?
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were so many excellent software packages to choose from. Upgrading
Check with your local consultant for more information on available
your system now will eliminate the ongoing cost to maintain customized
e-commerce solutions, including those from Sage Software.
software. As custom systems age, maintenance gets more complicated
2. Does your company currently have some kind of retail management software in place?
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Yes. Go to question 3.
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No. Stop. You face a serious competitive threat from other companies
that are reaping the benefits of retail management systems. Read the
rest of this guide and get started on an implementation plan today.
3. Has your company experienced huge growth or
significantly altered its lines of business in the last three years?
How to Choose a Retail Management System
Yes. Stop. Your system was probably developed years ago, before there
and often more expensive. But be prepared for a little extra effort,
because your IT group may oppose a packaged solution that wasn’t
developed internally.
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No. Stop. Your old accounting system and non-integrated retail
management package are begging to be retired. The benefits of
harnessing new technology can pay big dividends. The earlier you get
started on an upgrade and conversion plan, the sooner you’ll
see results.
Can You Afford to Buy?
The benefits of implementing an integrated retail management system are
well-known and well-documented. But it still may be difficult to persuade the
Questions to Ask Resellers
About a New System
management of your company to part with hard-earned profits for the new system
you’re proposing. Consider preparing a return on investment (ROI) analysis to help
Pick the best three systems and ask each reseller
your company decide how much to pay for the new system. Start by categorizing
to provide the following information:
your costs.
Software costs
These include software purchase or lease, maintenance fees, and add-on products
or packages required to adapt the new system (both retail management system
and the back-end ERP) to your needs. These costs range from about $6,500 to
$50,000 for purchase, depending upon the number of point-of-sale (POS) registers,
with annual maintenance costs starting at approximately 15 to 20 percent of the
purchase price.
Hardware costs
These include PC-based POS systems, servers, components, networks, and
printers. Costs can be difficult to project until you make your software selection.
You probably already have most of the hardware you’ll need, but you may need
1. Estimated license costs for your
implementation.
2. Estimated build-out costs to adapt the system
to your requirements.
3. Estimated costs for communication between
the central office and stores, as well as costs
for POS hardware and their equipment.
4. Timeframe and cost for implementation.
5. Annual support and maintenance costs.
to upgrade servers, storage devices, or POS peripherals to accommodate a new
6. Training methodology and training costs.
system. For each 10 POS registers, plan on spending $6,000 to $12,000 to upgrade
7. A plan for integrating your back-office systems.
existing equipment, and $15,000 to $30,000 to start from scratch.
Consulting costs
You’ll want an experienced consultant to help you select and plan your system
implementation. Fees vary on the size of your retail business, location of your
business, and depend substantially on your desire to “do it yourself” or to off-load
excess work to an expert. Plan on 50-100 hours or more, with rates ranging from
$90 to $180 per hour.
Overtime costs
During implementation, you and your staff will have more work than usual. You
may have to hire temporary employees to handle some administrative tasks or ask
for overtime from your employees. Plan for 10 to 20 extra hours per week per 10
employees served by the new system.
Training costs
You’ll need training to get people up and running on the new system. Good training
is a logical investment in the success of the project since it can save many hours
of expensive backtracking. Training costs are lower than ever thanks to Internet
“virtual” classrooms that reduce travel time and fit education into busy schedules.
Plan for training to take between 10 to 20 hours per employee for the back-office
system, and less than an hour per employee at the POS register.
How to Choose a Retail Management System
Return on Investment Calculations
The new summarized income statement of the same retail company, after
Return on investment (ROI) results will vary by the size of the company,
nature of the retail business, and various other factors such as geographical
location of the outlets, experience of your staff members, and more.
Yours may be a small specialty retail outlet or a multi-store, multi-register
department store, but for ROI calculation purposes let’s assume a small
specialty and miscellaneous retail company with an annual turnover of $7
million. And suppose you are looking for an integrated retail management
system with 5 POS registers and 5 back-end accounting users.
As per the above cost guidelines, let’s say the software cost is about $18K.
Other projected costs associated with a successful implementation of an
integrated retail management system would be as follows:
Expense Category
Percentage Contribution
Amount
Software license
19%
$18K
Infrastructure and personnel
40%
$38K
Support and upgrade
Training
Configuration
Customization and implementation
Total
20%
12%
5%
4%
100%
$19K
$11K
$5K
$4K
$95K
The total is about $95K in the first year. As per a survey conducted by
using the retail management software for a year, might look like this:
Sales
COGS
Operating Expenses
Net Operating Income
100%
60.60%
32.80%
6.60%
$7.280 million
$4.411 million
$2.387 million
$480K
Total savings and revenue gain from the retail management system is
about $333K. An integrated retail management system in a small specialty
operation can pay for itself in the first year. These calculations may not
directly apply to your business, but you get the idea of the expected
returns.
10 Essential Features to Look for
in a Retail Management System
1. Complete back-office integration with Order Entry, Inventory Control,
and Accounts Receivable modules.
2. Scalability to accommodate future business growth in terms of number
of POS registers, inventory items, and/or retail outlets.
3. Option of centralized, real-time inventory updates for accuracy,
efficiency, and responsiveness.
the National Retail Federation (NRF), retail management software alone
4. Simple, easy-to-use, and customizable interface.
should be 2% of the annual sales for the first year and 1% thereafter. For a
5. Delivering an end-to-end retailing experience, including Web store
$7 million company the 2% quota amounts to $140K, which is more than
(e-commerce), Customer Relationship Management (CRM), and
the actual possible expense. Moreover, $95K also includes the back-end
Warehouse Management System (WMS) integration.
accounting and inventory control system.
6. Advanced reporting capabilities.
Continuing with the above calculations, the cost for a retail management
7. Advanced merchandising management, including pricing, packaging,
system in the subsequent years would be about $30K per year. The total
cost of ownership for the first three years is about $125K. How does this
compare with the returns?
Based on the retail industry performance statistics for a small specialty
retail operation, taken from www.bizstats.com, the summarized income
statement of a typical $7 million-revenue retail company will be
as follows:
Sales
COGS
100%
60.60%
$7 million
$4.242 million
Operating Expenses
37.30%
$2.611 million
Net Operating Income
2.10%
$147K
Once the retail management system is installed, we can assume a revenue
increase of about 4% due to better pricing control and timely promotions,
a 5% reduction in employee costs due to reduced overtime and re-training
costs (streamlined data entry), a 2% reduction in costs due to reduced
thefts and frauds (tighter inventory management), a 2% reduction in
expense due to fewer employee errors (automated, error-free data entry),
and a 10% reduction in inventories due to reallocation of slow-moving items
to fast-moving items.
How to Choose a Retail Management System
promotions, purchasing, etc.
8. Secure access to authorized users to use and maintain the system.
9. Easy handling of new solutions and technologies across locations
as well as within.
10.From a company that has a long-standing, credible reputation
in the industry.
11 Common Mistakes People Make When
Choosing a Retail Management System
Mistake 7: Understanding the ramp-up and debug phases
of a project
Mistake 1: Not doing enough homework
shortly after they make the purchase. The best system will not perform
Many companies assume a well-designed system will operate at peak levels
Analyzing and then selecting a retail management system takes time and
as expected until properly trained personnel have developed complete
effort. Information is critical to selecting the most appropriate system for
competency with the system. Allow users to gain confidence through a
your organization. You’re already a step ahead of most people because
gradual process of operational ramp-up, including incremental training and
you’re reading this booklet.
system usage. Wait to introduce them to new and more complex system
Mistake 2: Misunderstanding the benefits of automation
functions until they have mastered the basics.
Automating retail operations and related functions can save your
Mistake 8: The cheapest solution is the best
organizations considerable time and money and contribute to high customer
Selecting a retail management solution based upon price is equivalent to
satisfaction. However, if you don’t also improve your current processes and
selecting the cheapest surgeon. In the long run, the cost of a poor solution
ways of interfacing with accounting software, bar coding system, credit/
is substantially more expensive than doing it right the first time. Measure
debit card processing systems, and the POS equipment, automating your
price in terms of a firm’s knowledge, experience, professionalism, and depth
store won’t deliver the full return on investment you require.
of resources.
Mistake 3: Assuming that all software is the same
Mistake 9: My friend or family told me to buy it
Many people assume that, since the product they purchase comes from
Although family and friends want to help, they rarely have the knowledge
a leading software manufacturer, it is going to work and they cannot go
and experience to select an end-to-end business solution. Understanding
wrong. Vast differences exist between one solution and another. You need a
computers or an aspect of automation does not make someone an expert.
clear and precise understanding of your own company’s requirements and
Beware of recommendations unless you’re dealing with an expert.
goals, and then every solution should be analyzed in terms of how well it
addresses each of your goals.
Mistake 4: Ignoring hard-to-quantify benefits
It is difficult to calculate possible future gains such as increased
productivity, improved customer service, better inventory control, faster
register check-outs, centralized information for faster decision-making,
and other factors after a new system has been successfully implemented.
Remember, these types of benefits can dramatically improve your bottom
line and should not be overlooked.
Mistake 5: Passing the buck
All solution providers need time with key members of your organization to
Mistake 10: Forget to get references
Once you are comfortable with the retail management solution provider, you
should contact at least three of their existing clients to talk about how they
feel about the solution provider and the retail management system.
Mistake 11: Buy POS hardware first
You can save lot of time and money if you select the retail management
software first. The retail management software will have hardware and
operating system requirements. In addition, each program will only function
with certain types of printers, bar code scanners, cash drawers, and card
readers. You can avoid frustration and save money if you choose the
software first.
gather information and requirements about your business. Top management
and other key personnel within the organization must be involved in the
selection and the implementation process. For the project to be a success,
management needs to stay involved.
Mistake 6: We can do it ourselves
An experienced retail management solution provider has automated many
retail businesses. Their level of knowledge and expertise in business
automation is generally well beyond the staff of a typical business. Very few
businesses can select and implement a solution without outside assistance.
How to Choose a Retail Management System 5
How to Prepare for Product
Demonstrations
The software demonstration is an excellent time for
your team to understand the features and capabilities
of a particular solution. Take full advantage of this
opportunity by following these guidelines:
Electronic Business
While many companies are examining their Internet sales strategies, many are
overlooking the roles that accounting, distribution, and retail play in this market
revolution. Ideally, your accounting and retail management software should
be ready for electronic business even if your company isn’t. Here’s what to
look for:
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control systems.
Inform software resellers about your specific
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interests in advance. A software demo is a reseller’s
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E-mail integration so you can begin sending invoices, notifications, and
confirmations electronically.
opportunity to profile their products and services.
By informing them ahead of time about your specific
A complete solution that seamlessly integrates distribution, retail store,
and Web store activities to the back-office accounting and inventory
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The ability to publish any accounting or production reports in HTML (the
needs, you direct the demonstrator’s attention to your
standard Internet format) for publication on the Internet, or more important,
interests, not theirs.
for internal distribution on your corporate intranet. Many companies no longer
Make sure your core team is able to attend the
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demos. Make it a priority to keep your core team
up to date about their appointments. Since each
team member has a different area of expertise, it’s
distribute paper reports to managers.
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trading partners. Don’t waste time on duplicate data entry of electronic leads
demonstrations in order to get the most out of each
room through the entire demo; shared concerns can
be flagged more effectively if everyone is present to
hear questions raised by others on the team.
Plan your questions. Have the core team come up
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with questions for each product demonstrator. You
may also want to plan the sequence in which the
questions will be asked, to ensure that everyone stays
on topic during each demonstration.
Establish a system for scoring each issue addressed
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by the demonstrator. Keeping tally for individual
issues makes the entire scoring process efficient. It
prevents situations in which someone from your team
forgets how a particular demonstrator addressed an
issue. The scores will also come in handy when it’s
time to decide which of the short-listed solutions is
best suited for your organization.
Ask the reseller to follow up on issues not fully
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addressed. The reseller may need to consult with
colleagues or the software manufacturer before
providing answers to more in-depth questions.
Be sure someone on your team follows up on any
unanswered questions after the demo.
How to Choose a Retail Management System
An interface to capture leads from the Internet and automatically convert them
to customer records as well as process Electronic Data Interchange (EDI) with
important for everyone on the team to be at the
demo. Encourage team members to remain in the
The ability to execute payment electronically for payroll or accounts payable.
You’ll see lower error rates, more control, and lower transaction costs.
and transactions.
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Customer self-service capabilities to give customers access to their order
status through your Web site.
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The ability to show one face to your customers. No matter how your
customers touch your organization, they are presented with consistent pricing,
product availability information, payment terms, and more.
Retail Management Software Checklist
Excellent
Adequate
Excellent
Deficient
General Features
Shipping system manifests by store
Training mode (practice with store data)
RF-driven picking, packing, and shipping
Multilingual support
All or nothing allocation
Network failsafe
Postal/zip code order routing
View all printable reports on-screen
Batch pick, backroom re-pack, efficient handling
Multicurrency support
Security
Real-time visibility
Password protection
Customizable interface
No-sale cash drawer opening
Integrated with back-office accounting system
Price/tax override at POS
POS Features
Add/modify items/customers at POS
Integrated credit/debit card processing
Inventory maintenance control
Support for multiple tenders (cash, check, etc.)
Back-office access control
Flexible item search function
Data encryption
Display item availability/stock level
Multi-store
Scan barcodes at POS
Item availability information across store chain
Issue discounts/promotional price at POS
Polled updates back and forth with the central office
Gift card/certificate issuing and tracking
Store-and-forward option during failed communication
Customer loyalty tracking and reporting
Centralized merchandise administration and updates
Lay-away/suspended sales/quotes handling
Group inventory by store/location
User-definable keyboard shortcuts
Receive items to multiple stores against a central PO
Inventory Control and Purchasing Features
Reporting
Store and view item information including barcode
Centralized reporting
Track items by serial/lot number
Sales reporting by store/category/vendor/item etc.
Support multiple units of measure
Inventory control reporting
View item sales/purchase history
Purchasing reporting
Electronic transmission of purchase orders
Customer/vendor management reporting
Auto/manual generation of POs
Financial and cash flow reporting
Cost and Pricing
POS Hardware Support Features
Customer-based pricing
PC-based POS peripherals and POS unit support
Pricing based on cost/margin/discount/quantity
Cash drawer/weigh scale/barcode scanner
Multiple costing methods
Receipt printer/touch screen monitor/pole display
Date-sensitive sale pricing
Signature capture pad/change dispenser/MSR
Promotional pricing
Portable data terminal for inventory cycle count
E-commerce Integration
MICR check verification
Credit limit/active-inactive status/pricing level check
Rental/Payroll/CRM/End-to-End Integration Features
Consolidated customer history and tracking
Rental tracking and invoicing
Consolidated item history and tracking
Employee timecards
Product availability updates to storefront
Direct deposits
Multi-channel retailing
Unlimited earnings/deductions
Warehouse Management System Integration
View billing/shipping/birthday/driver license information
Fulfillment of orders booked at POS/CRM/ERP/
e-commerce
Mailing list creation and follow-up
Adequate
Deficient
How to Choose a Retail Management System
About Sage Software
Sage Software offers leading business management software and
services that support the needs, challenges, and dreams of more
than 2.4 million small and midsized customers in North America. Its
parent company, The Sage Group plc (London: SGE.L), supports 4.5
million customers worldwide. For more than 25 years, Sage Software
has delivered easy-to-use, scalable, and customizable software for
accounting, customer relationship management, human resources, retail
management, time tracking, and the specialized needs of accounting
practices in the construction, distribution, manufacturing, nonprofit,
retail, and real estate industries.
Sage Accpac International, Inc.
6700 Koll Center Parkway
Third Floor
Pleasanton, CA 94566
925-461-2625
800-873-7282
www.sagesoftware.com
©2006 Sage Accpac International, Inc. All rights reserved. Sage Software, Sage Software logos, and
all Sage Accpac International product and service names are registered trademarks or trademarks of
Sage Accpac International, Inc., or its affiliated entities. All other trademarks are the property of their
respective owners.
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