What Is a Retail Management System?
Retail management includes controlling all of the business processes and activity that helps customers acquire the desired products (merchandise), services, and experiences from the physical or digital retail stores they value. For more detailed information on retail management, careers, training, and retail strategy read our article on How To Survive and Thrive in Retail Management. Retail management system software (RMS) is the combination of technology a retailer uses to empower the customer experience and operate daily retail management processes, including software, hardware, telecommunications, databases, applications, and the point-of-sale (POS) platform.
RMS applications handle checkout activity, flow of inventory, customer relationship management (CRM), e-commerce activity, and more. There are also categories of related software systems that branch off from the retail management software systems classification of enterprise technology. These may include:
- Inventory Management Software
- Accounting Software
- CRM Software
- Merchandise Sales Data and Analytics Software
- E-commerce (Omnichannel) Software
- Business Intelligence Software
- Warehouse Management and Logistics Software
- Employee management
Retail Management and Technology For Your Store
Some RMS solutions provide standalone functionality for tracking sales, inventory, or employee management. Standalone retail management systems manage a single business function. If you already have a large investment in existing enterprise software, then consider integrating individual RMS applications for a specific retail business process. Most RMS solutions are bundled into a suite of software with various RMS applications. This retail management POS will process payments, manage product inventory, manage digital receipts, and more.
The type of RMS you need for your store depends on how many stores you’ll be integrating, your budget, the size of your operation, and the IT capabilities of your infrastructure. If you manage multiple retail stores or are adding online retail capabilities to your operations, you may require advanced enterprise software integrated with various RMS applications. Some retail management POS systems manage the entire retail operation of multiple stores, ecommerce, and even warehouse and logistics management. For example, Microsoft’s RMS solution offers a unified CRM and enterprise resource planning (ERP) suite of applications available for end-to-end retail management technology.
What Is Microsoft’s RMS?
Microsoft Dynamics 365 for Retail (formerly Microsoft Dynamics RMS and QuickSell 2000) is part of the Dynamics suite of cloud-based “intelligent applications” for business processes including:
- Sales
- Customer Service
- Field Service
- Talent Management
- Finance and Operations
- Project Service Automation
- Marketing
- Customer Insights
According to Microsoft, Dynamics for Retail is an “end-to-end retail solution” for retail channels including brick-and-mortar stores, online stores, and call centers. Small independent retailers or large multi-chain retail operations can set up individual business processes for each retail location. This RMS provides a POS platform, CRM platform, unified commerce dashboard for in-store and online retail processes, store experience functions for the customer (buy online, pickup in-store) and employees (scheduling and management dashboards), merchandise sales management data, and operational insight for inventory and financial management.
RMS Integration Is Critical
Dynamics 365 for Retail allows you to integrate more than 80 software applications to customize and enhance your in-store operations or omnichannel commerce. These add-on applications from Microsoft partners are available in the Appsource store and include restaurant operations apps, supply chain apps, store replenishment apps, payment processing apps, and more.
Microsoft’s acquisition of LinkedIn proved critical to the Microsoft Dynamics product suite. The company combined LinkedIn Sales Navigator and Dynamics 365 for Sales as a single solution. The “Microsoft Relationship Sales solution” includes Sales Navigator and the Enterprise edition of Dynamics 365 for Sales starting at $135 per user/month. This offering is an example of the importance of software integration for RMS and an opportunity for retailers to leverage technology to advance their retail management strategy. Microsoft combined applications to form a retail growth management system that provides retailers advanced CRM capabilities for finding, managing, and supporting customers, buyers, vendors, manufacturers, and suppliers.
Microsoft Dynamics for Retail Editions and Pricing
Microsoft Dynamics 365 offers an Enterprise and Business edition. The Business edition of Dynamics 365 combines accounting, sales, warehouse, manufacturing, and project management. Prices for full user access starts at $40 per user/month; additional team members can access basic processes and tasks at $5 per user/month. The Enterprise edition provides full use of all Microsoft Dynamics 365 applications, and is designed for retailers who require a full retail store chain management suite of applications to manage multiple stores. Prices start at $210 per user/month plus $8 per additional user/month. There are also standalone plans within the Enterprise edition with options ranging from $40 to $170 per user/month to start with only the RMS applications you need for your retail store and operations. This edition offers an Operations Devices bundle providing shared, licensed hardware devices for your store starting at $75 per device/month.
Essential RMS Hardware
Microsoft Dynamics 365 for Retail “assists customers in the modern store” with mobile Windows devices for RMS. Tablets, phones, and laptops are critical for the enhanced in-store customer experience that target customer segments, such as Millennials and Gen Z shoppers, have come to expect. Mobile and web-based POS hardware allow retailers to provide customer value and enhanced in-store experiences that mimic the online retail experience. Retail sales associates empowered with mobile devices and inventory software perform real-time merchandise searches, check and execute online orders, and process mobile payments anywhere in the store. In addition to modern RMS hardware, Microsoft Dynamics RMS supports these essential hardware devices:
- POS register screen
- Card reader
- Cash drawer
- Line display
- Pin pad
- Receipt printer
- Barcode scanner
- Signature capture
Dynamics for 365 offers a “peripheral simulator” for retailers to test the compatibility of hardware devices by virtual simulation of the POS client. In addition, a “Modern POS (MPOS)” and “Cloud POS” offer multiple interfaces and deployment options depending on the retailer’s business processes. The MPOS is compatible with PCs, tablets, and phones that retail associates can operate anywhere in the store. The Cloud POS is browser-based and is available in any standard web browser.
History of Retail Management System Technology
To understand the value of a RMS today, it helps to understand how technology played a role in the history of retail. Stefan Niemeier’s book, Reshaping Retail: Why Technology is Transforming the Industry and How to Win in the New Consumer Driven World, explains the new retail era in the context of three historical eras of transformation: mercantile, modern, and digital.
- Mercantile Era: This era is defined by using technology in the form of tools, transportation, skilled craftsmanship, and bartering starting in the 13th century. The introduction of banking made money the preferred standard of exchange and created capital funding. Retailers in this era primarily served the elite class with manufactured crafts of their own creation that were transported to commerce areas in London and Paris in the 18th century by mules, wagon trains, and eventually ships.
- Modern Era: The industrial revolution in the mid-18th century started the consumer-oriented society we recognize today. Globalization trends and technological advances in mechanical computing, automation, navigation, and the telegraph replaced craftsmanship with mass production capabilities. Factories and human capital further consolidated power to retailers with the rise of the middle-class, and railroads quickened distribution of fresh goods and information. Department stores — “the world’s greatest price wrecker,” according to the media — like Le Bon Marché created the credit policies, sales analysis processes, modern hiring methods, and promotional strategies still used today.
- Digital Era: Retail becomes “the enabler.” E-commerce rises and shows potential, only to fall victim to the dot-com bubble and a recession (2008) before finally gaining traction. The Internet transforms demand aggregation, and retailers expand product lines and locations with streamlined business operations. Walmart dominates with RMS innovations in pricing, inventory control, and warehouse and transportation operations. Amazon disrupts the progress of online speciality retailers with narrow product lines. The rise of mobile technology makes decades of progress in computing power, data storage, and operating systems feel antiquated.
The information available today makes more than 700 years of technological innovation in retail seem trivial. The authors of Reshaping Retail point out that modern retail is impossible without RMS technology. Data transfer and storage, telecommunications, and integrated software made the coordination of massive amounts of physical products and information possible. Retailers originally stole economic power from manufacturers and wholesalers by managing supply and demand with superior economy of scale. The dominance continues today, as advanced computing power, software, databases, and telecommunications extend retail’s control on the flow of goods and services. The amount of information retailers have on customer demand, inventory logistics, financial capital, and social analytics is empowering a new era of customer value.
The Value of RMS Technology
Technology enforces the ability to add customer value - the holy grail of profitability for retailers. Traditionally, retailers add value by:
- Providing an assortment of products and services
- Breaking bulk
- Holding inventory
- Providing services
*Source: Retailing Management, (7th edition) by Michael Levy and Barton Weitz
According to Reshaping Retail, retail technology underpins the ability of retailers to create value, scale their business, and operate quickly. Leveraging RMS technology promotes greater customer value and sales by empowering retail management functions (for example, analyzing purchase data to gain a better understanding of the goods and services in demand). The telecommunications, POS platforms, and databases used have a relatively fixed cost for retailers compared to other industries. This technology is valuable for retail management growth strategies that involve adding more physical locations or e-commerce operations. A sound retail management strategy for an omnichannel retailer depends on RMS technology. The benefits of RMS often cited by vendors are:
- Actionable customer data
- Increased efficiency at the point of sale
- Enhanced inventory and merchandise management
- Superior financial transparency
- Improved security
In Reshaping Retail, the authors present four ways that modern retailers add value with technology:
- Preselection: Two types of preselection activity create customer value: “editorial direction” and “editorial choice.” Retailers use the knowledge of their target customer(s) to stock certain goods at a certain price and make creative choices between competitive alternatives. For example, “It is one thing to decide to offer fresh cheese, and another to decide which varieties to sell.” Preselection offers value to customers, as well as the suppliers, agencies, and third-party retail consultants who purchase the transactional data generated by RMS technology from retailers.
- Demand Aggregation: The traditional retail model accomplished demand aggregation by anticipation. The cost of carrying merchandise in anticipation of customer demand has consequences. Regardless of the number of retail locations, the ability to gather enough customers at a “point of sale” - and therefore lower prices - is valuable. Advances in RMS technology for sales support, pricing, and inventory management provides small independent stores with the power that large retail chains leverage to scale demand successfully — relying on data instead of speculation.
- Sales Advice: The retail store is the most effective and convenient location for customers to receive valuable sales advice. Manufacturers may have more knowledge than retailers, but retailers know how and what to sell to customers. RMS technology empowers retail sales associates with real-time research capabilities on wireless mobile devices. These Internet-connected devices provide a platform for in-store training on new products.
- Physical Movement of Stock: Retailers of all sizes have the technological capacity to coordinate the flow of inventory with RMS technology. This adds value to customers, who can buy an item online and pick it up in the store with real-time alerts on availability. Alerts are a value-added service to suppliers as well, who traditionally controlled the flow of inventory through networks of warehouses and transportation companies and shared the responsibility of delivering on time with each party involved.
Retail Management System Technology Trends and Developments
Today, retail management systems empower crucial value-added services for small independents to large retail chains. Regardless of where you stand on the retail hierarchy, the retailers that survive and thrive understand the importance of RMS technology and follow the digital trends and new developments in retail technology to add value to the overall customer experience. This section looks at the trends and new developments you should understand when choosing RMS technology for your store.
Free and Open Source Software for Retail Management
The pros and cons of open source software are a hot topic in software development circles. For advocates of open source, the control you have of the system and the customization capabilities for POS systems and RMS platforms is worth the extra resources (developers) and time that implementation requires. One of the downsides is the upfront cost of the hardware devices you’ll need that commercial RMS providers often lease to customers. Be careful not to confuse free software with open source software. There is open source POS software that is free, but some free retail management software is closed source (or hosted).
Depending on the size or your retail operation, your business requirements, the location of your business, and your IT capabilities, the free software may end up more costly in the long run. Gil Yehuda is the Sr. Director of Open Source at Oath and a published author. In an answer to a question posed on Quora, Yehuda explains, “The license for open source projects allow you to use the code in any manner you see fit. Many open source licenses have conditions of use that apply — usually in cases where you distribute the code to a third party [...] Regardless of the license, various laws may restrict what you can do with software — and those are not based on the license, but the jurisdiction you are in.”
If you decide that the pros outweigh the cons for free and open source retail management software, here are some popular solutions available:
- Floreant POS: Started in 2008 with a partnership between its founders and Denny’s, Floreant is a restaurant POS with a large user base and good reputation. The site advertises a simple 90-second installation and supports essential restaurant hardware such as mobile tablets, kitchen printers, and POS displays.
- Odoo: Odoo is a well-established community of open source retail applications for small independent stores to large retail chains. The company offers productivity, sales, operations apps, and a free, self-service plan for retailers with less than 50 users. Paid commercial plans are also available for advanced enterprise functions and number of users. With 300 employees, more than two million users, and an active open source development community contributing to hundreds of enterprise level applications, Odoo attracts customers like Toyota as well as small startups.
- imonggo: If your retail operation is a single user/single location operation, imonggo offers a free solution for up to 1,000 products and 1,000 transactions per month. It is a web-based platform compatible with iPad and Android tablets, PC- or Mac-based devices, and a host of essential retail hardware. The free version offers customer support, but does not support offline operations. For $30 per month, you can upgrade to unlimited transactions, offline functions, unlimited users, and accept credit cards.
Cloud-based Vs. On-Premise Retail Management System Software
If you are purchasing or upgrading retail management software today, you will inevitably decide between cloud-based or on-premise systems. The decision is a question of deployment, or how your retail stores access the RMS software. Cloud-based RMS software is hosted on the vendor’s servers off site and accessed through your web browsers or applications. Conversely, on-premise RMS software is installed on your own servers and hardware. The popularity of cloud-based enterprise software continues to rise as the costs decrease and vendors push more and more cloud solutions. Also, there are companies like Microsoft finding the middle ground and offering a “hybrid cloud” deployment so you can decide if you will store critical data on-premise and only select applications operate outside servers (the “cloud”).
In general, cloud-based RMS solutions are subscriptions (monthly or annual operating expenditures based on the provider) that typically incur additional fees for number of users, training, customer support, and updates. Companies tend to consider on-premise a more of a capital expenditure for retailers due to a one-time licensing fee based on the amount of users or the size of the business. The debate is out on overall cost, but in general cloud-based RMS solutions are more affordable up front due to the lack of additional investment and support for infrastructure and quicker implementation on average.
Finally, one of the most critical choices for retailers to consider is the type of customer data they will store and the overall risk exposure of your IT operations. Cloud-based solutions store data on the vendor’s infrastructure. Reputable cloud solutions have strict standards for data security and more resources to combat a breach, but you should consider all options for data security based on your operations and the type of data you will store.
Mobile Payment
Mobility is key for new generations of Millennial and Gen Z shoppers. In fact, Forrester predicts the mobile payment market will grow more than 20 percent through 2021. According to a report by Salesforce and Sapient Razorfish, mobile is “the compass for shoppers” and the “key engagement vehicle” for retailers. More than 50 percent of shoppers surveyed used their mobile device in-store, and 40 percent of all buyer traffic is on mobile platforms. More than a quarter of the global respondents used mobile payments, and in the UK, the majority of commerce is small payment transactions on mobile devices. Age and gender mattered to the results, as 67 percent of shoppers aged 18-24 used social media to search for products and services. The majority of social activity online is on mobile platforms, and mobile payments provide the unique bridge to boost conversion sales with the Gen Z demographic.
The Perpetual Shopping Cart
The role of a retail store is evolving with the digital revolution and changing the way shoppers interact with a retailer. The report by Salesforce and Sapient Razorfish found that 50 percent of digital commerce sales still involve the physical store. However, a seamless shopping experience between digital and physical environments is key: shoppers want to shop and buy online (using mobile), pick up the items at local stores, save in-store purchases online and track orders, and have the ability to return products directly to a physical store. The balance of digital retail and the demand for physical stores to support the shopper’s journey is good news for traditional retailers. Following an omnichannel strategy that accounts for online attribution of sales and inventory is critical. To do so, you must select the appropriate RMS solutions to empower the merger of physical and digital customer experiences without sacrificing profitability.
Wireless POS
Customer service issues, poor profit margins, and lack of storage space are all consequences of poor inventory management. Utilizing a wireless, mobile POS system improves inventory management, increases customer value, and provides strategic planning capabilities. Checking physical inventory in stores is a costly, time-consuming, and frustrating retail activity, but it is crucial to have an accurate inventory count and maintain organized retail operations. Using a mobile POS system reduces human error and provides a level of precision for managing inventory in real-time that is crucial for omnichannel operations.
Retail Artificial Intelligence
For today’s online retailers, artificial intelligence (AI) has become a digital reality. AI can power the personalized product recommendations on your website, the targeted promotional emails, and your social media ads. Of the shoppers surveyed by Salesforce and Sapient, 70 percent reported that they are more likely to visit a retail store again after receiving personalized offers. AI technology integrated with RMS solutions power the digital marketing campaigns of savvy retailers. Connecting a customer to the digital and physical retail experience (by attracting them online and executing in-store) is a strategy that top performing omnichannel retailers use, as well as single store independents fighting for market share in a local area. AI technology can infuse social-local-mobile (SoLoMo) marketing into your retail strategy and merge with RMS solutions to offer:
- Targeted audience marketing based on loyalty programs
- Tailored emails with content relevant to purchase history
- Time-sensitive offers based on seasonal trends or over-stock inventory
Internet of Things and Retail
The Internet of Things (IoT) refers to connected objects with sensors that communicate with each other over a network. IoT retail technology isn’t new (for example, RFID tracking devices for inventory control are already in widespread use), but the range of technology and devices is expanding quickly with digital innovation and the democratization of network technology. New uses for IoT technology has the potential to permanently alter the customer experience and physical shopper’s journey in retail stores. Three Square Market offers micro-markets and breakroom vending services. The company recently announced a partnership with a company in Wisconsin to implant a rice-sized RFID chip in 50 employees that allows them to purchase food at the micro-markets. If that sounds a bit too revolutionary, consider the success of Amazon’s Alexa device. Customers search online, order groceries, and set reminders by simply speaking to Alexa. The impact of IoT devices like Alexa is moving beyond human interaction as well - for example, refrigerators from Samsung and other manufacturers now utilize sensor technology and a connected network to remind their owners when they are low on milk.
Specialty Retail Management Software
If you’re a specialty retailer, the market for RMS solutions includes software specific to the unique needs of your business. Restaurants and bars require specialty solutions that control the flow of food and beverage orders, and offer floor plan POS layouts and employee management reports and functions. Resale stores such as consignment boutiques require sophisticated inventory management functions and accounting features designed for customer-owned inventory and transactions involving store credit. Specialty RMS solutions are available for the following industries:
- Supermarkets
- Pharmacies
- Automotive
- Florists
Retail Management System Software Comparison
In order to choose the right RMS solution for your store, you’ll need to identify features that are most important to your specific business. The following comparison chart highlights the features and capabilities available in some of the most popular retail management system software providers in the market.
FAQs For Selecting the Right Retail Management Systems Software for Your Store
The search for retail management software can be daunting. This section features the frequently asked questions you should consider when deciding on RMS technology for your store.
Why Am I in The Market for RMS Solutions?
Regardless of your motivation for considering a new RMS solution, it’s crucial to start with the why. Are you interested in advanced CRM functions for marketing integration? Is your current inventory control too reliant on manual labor, costly, or inaccurate? Do you just have to have iPad POS devices on a swivel base to leverage the modern design aesthetic?
What Are Your Plans for Growth?
The type of RMS solution and software integration that works well for a small independent retailer is inadequate for a chain retailer operating stores in several locations. How you choose to scale your operations and leverage technology to help you get there is a critical question to answer up front.
Do I Need a Specialty RMS Solution?
While it may seem like a simple decision to consider a specialty RMS solution based on your retail category, the key to answering this question is integration. How does the solution integrate with your unique customer experience strategy or marketing plans? Does the specialty solution provide a CRM function that allows you to integrate email automation technology using contact information you store? If the specialty solution includes limited hardware for lease that isn’t compatible with existing mobile devices, perhaps it’s not a good option.
Can You Demo The Technology?
Ask for a test drive of the POS platform you’re considering and have your employees provide honest feedback. Make sure you prepare workflow scenarios that fit your retail management and operations to really put it through its paces. If you’re considering a RMS solution with advanced business intelligence features, will the vendor provide a demonstration based on your unique data? How about dashboard customization training? Once the software is installed and in use for a period of time, does the solution provider offer follow up training or customer support plans to account for unforeseen developments and at what cost?
Will The RMS Solution Integrate With Existing Software?
You need to account for your existing back office system for accounting software, staff scheduling, or inventory control to avoid merging disparate POS technology or paying for costly technical support. Cost of ownership is a critical factor in determining which RMS solution to implement, and in ensuring that the critical software you rely on is adaptable to existing infrastructure.
Will the RMS Vendor Connect You With an Existing Customer?
It can’t hurt to ask about the solution provider’s policy on customer testimonials. Of course, you should do some research online and look for the digital word-of-mouth reputation. But a direct reference to another retailer who uses the POS system you’re considering goes a long way in helping to select the right product and the right partner. What are the challenges the customer faced with integration? How is their retail business structured? What changes would they make if they had to select an RMS solution today? Retail is a people business, and fellow retailers understand what it means to be a smart customer looking for superior value.
What Is the Solution Provider’s Policy On Updates and Customer Support?
When comparing RMS solutions, ask questions about the customer support policy and read the fine print. Is the support team in-house or a third-party agent? What are the hours of operation for tech support and the policy for onsite assistance? Some POS vendors require paid software updates or strict contracts for leasing hardware depending on how they deploy the technology (cloud-based SaaS, on-premise system, or hybrid solution). Keeping your RMS technology secure and up-to-date with essential functionality should not cost profitability. Inquire up front about how frequently the company updates their products, what features and applications are free to maintain, and how they run their customer support operation. Finally, if they do not uphold the terms and conditions of your licensing and service agreement, what are your options for terminating the contract? Seek the necessary legal advice before finalizing any agreement.
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