Article | May 20, 2021

Back To Basics: Prioritizing TCO In Retail Technology Purchases

Back To Basics

Even before the COVID-19 pandemic, the retail industry was transforming itself to adopt new technologies and accommodate evolving consumer preferences. Now, as retailers look beyond the pandemic, they need to invest in new technologies and services to stay competitive in the digital future. For point of sale (POS) solution providers, this opens profit-generating opportunities to sell technology solutions and deliver long-term services.

As solution providers, you also get a renewed opportunity to tighten customer bonds and strengthen your trusted advisor role. This means focusing on value instead of price. Customers often pressure solution providers for basement pricing, but caving to that pressure can easily lead to ill-advised technology purchases.

Instead, you should stress total cost of ownership (TCO). Explain to retailers how investing more up front for quality and reliability usually is bound to save them money in the long run. In prioritizing TCO, you add value for your customers, which helps you gain their trust and loyalty.

Vendor Partnerships

The pandemic drove overall retail sales down by 5.7% in 2020, according to Statista. It also contributed significantly to 12,200 U.S. shop closures[PP1] . But retail is bouncing back with a projected sales increase of 7.2% in 2021 and 6.6% in 2022. To capitalize on this growth, retailers need to make technology investments that offer not only future-proofing but also pandemic-proofing, should the virus return or a new one emerges.

To make the right decisions, retailers need help from solution providers when buying new POS hardware or software, cash drawers, cash management systems, or POS/web integration systems and services. You can steer customers toward robust systems that best suit their needs and help them avoid the pitfalls of focusing on low-cost solutions.

To do this effectively, providers need good vendor partners. Whatever the solution, usually there are multiple vendor choices, but not all solutions are created equal. Always seek out vendors whose products and support deliver the best TCO. Here are some TCO-related factors to consider in partnering with vendors:

Quality and reliability – High-quality materials are more reliable and durable, especially in environments where rough handling is common. Be it a cash drawer in a high-traffic checkout or a handheld used for stocking shelves, it’s better to pay more up front for durable equipment than to purchase devices that need frequent maintenance or replacement.

Easy management – Even if a solution costs less up front, costs can escalate if it is difficult to deploy, integrate, and maintain. Always check on a solution’s track record before making a purchase decision.

Product development – Learn as much as possible about a vendor’s commitment to product development, especially when planning to standardize on the vendor’s platforms. A vendor that keeps up with evolving technology, adding useful features along the way, is preferable to one with stagnant technology.

Account representatives – Time is money for solution providers. So, choose vendors with knowledgeable, responsive account reps that get back to you quickly with product information and answers to questions.

Technical support – No matter how good a product is, sooner or later you or the customer may have technical questions about it. When that happens, a robust, responsive technical support team is key to quickly resolving issues.

Partner support – Choose vendors that understand your needs by providing business and marketing support. A vendor’s lead generation, marketing materials, and sales incentives can help you win new customers and expand the business with existing ones.

Financial footing – No matter how good a vendor’s technology is, if the company is in financial straits, it could go out of business and leave you with unsupported products. When forging vendor partnerships, check financial statements, references, and third-party ratings to ensure the vendor is on solid financial footing.

Understand the Cost Structure

When partnering with vendors, be sure to understand their solutions’ cost structures. This involves calculating up-front expenses such as installation costs and network upgrades, as well as other costs such as software licensing fees or software as a service (SaaS) subscriptions. Also, be sure to look at warranties and what they cover. Check a product’s track record of breakage by contacting companies that use the technology.

When calculating cost structure, some costs are less obvious in the pre-sales phase but just as important. Those include staffing and learning curve. Will an implementation require a customer to hire more staff to run the solution once it’s in place? And how many hours of training per person does the solution require? Understanding these costs up front is critical to getting the full TCO picture.

Avoid Pitfalls

Sometimes, TCO is poorly understood because of a failure to factor in costs such as maintenance or training, which leads to unexpected outcomes, going over budget, or both. And that in turn leads to unhappy customers – something solution providers always want to avoid.

So, be sure to first assess customer needs, taking into account whether a solution is replacing old technology or is a net new investment. For instance, multiple variables come into play when a retailer is investing in a POS system. Does it include tablets for mobility? Will it integrate with online shopping to provide an omni-channel experience? Knowing the answers helps figure out which POS application to deploy. You also need take into account expected store traffic to determine whether to have one or more cash drawers and whether the environment calls for heavy-duty drawers. Also, consider whether consumer tablets or ruggedized handhelds for tasks such as inventory tracking and managing curbside pickup are a better fit.

These are all decisions that can affect TCO negatively if equipment has to be replaced sooner than originally projected. In addition to performing assessments to avoid pitfalls, you should also consider offering proofs of concept (POC), product demos, and – if possible – pilot programs. After all, seeing is believing when it comes to technology purchases.

Establish Trust

Once you complete all the TCO calculations, there is one question left for customers: Do they trust the numbers? That will depend on a combination of relationship and the quality of information you deliver. The quality of information largely depends on what information you obtain from your vendor, which goes back to the importance of forging relationships with reliable vendors.

Customer trust is built over time, so existing customers will consider how accurate your TCO promises have been in the past. New customers will have less information to go on, but you can provide them references from customers who can vouch for you. If you have a solid history of standing by your commitments and working with vendors that support your needs and those of customers, your customers will be happy to provide references.

This is what being a trusted advisor is all about – fulfilling your commitments and being reliable and trustworthy. As retailers look to thrive in a post-pandemic world, they will need help in making technology investments that enable them to compete and succeed. Prioritizing TCO will go a long way to cementing your relationship with customers and help you succeed along with them.


 [PP1]https://fortune.com/2021/01/07/record-store-closings-bankruptcy-2020/