Not too long ago, many theorized that the Internet would eclipse brick-and-mortar stores. Yet while the Internet has certainly had a tremendous impact on retail, fifteen years after the dot.com craze the brick-and-mortar stores are still in place. In fact, the Internet has proved to be a great extension to brick-and-mortar stores. Most large retailers have embraced the Internet with multichannel sales strategies, including e-commerce, online advertising and online product information, specifications and comparisons.

Meanwhile, brick-and-mortar retailing has continued to evolve with customer-centric promotions at the point of sale (POS) , digital signage, loyalty- and registry-based kiosks, self-checkout and “save-the-sale” inventory look-up at the POS. Despite the huge growth of Internet retailing, today’s brick-and-mortar stores process 95 percent of retail sales transactions, and almost all of those transactions are conducted through a traditional POS terminal.POS is poised to undergo profound transformation in the next several years. This shift is driven by the integration of mobile devices, in-store sensors that track consumers, developers that create new customer and merchant experiences, and the resulting rapid changes in consumer behavior.

The deeper integration between POS and back-office systems makes the future of POS and the future of retail inextricably intertwined. Together, they will ultimately offer merchants unique in-store opportunities to engage customers in deeply personalized ways to counter the ‘siren song of showrooming.

Companies that provide POS solutions that integrate with in-store retail systems and customer experiences will increasingly have an edge. These companies — such as Square, a mobile credit card processor that provides visual-based payment authentication; Shopkick, which enables shoppers to earn rewards just by walking into a store; and Points Inside for driving in-store consumer engagement — will not only drive engagement, but will be the focus of venture capital-backed investments.

Symbiotic hardware and software innovation is accelerating

In 2010, dongles such as credit card readers that attach to mobile phones enabled anyone to process mobile payments using downloadable apps. Within the course of 18 months, mobile phones and tablets began to replace traditional stand-alone POS registers. These transformations are quickly driving hardware and software innovations, with features such as Bluetooth-connected handheld barcode scanners and other peripherals, discreet in-store sensors that identify and track consumers, checkout devices and the proliferation of in-store tablets to promote consumer engagement.

Further, the evolution and integration of back-end and front-end software — such as tablet-based POS systems that can keep track of customer information and manage inventory, combined with the power of Big Data and cost savings of cloud computing — will streamline everything from customer relationship management (CRM) to financials and supply chain management (SCM), all of which will evolve considerably.

A new set of drivers are emerging in the evolution of POS

One such driver is the proliferation of smartphones and their advanced capabilities. Not only do smartphones empower shoppers with price comparisons, product reviews and social media influence, but it also provides an opportunity for merchants to leverage mobile engagement. Another driver is startups, which are disrupting the POS space by building new POS experiences and expanding POS capabilities to new heights.

POS evolution enables new and uniquely personalized customer experience

The combination of mobile devices, in-store sensors and Big Data will personalize the customer experience in a variety of ways (for instance, based on individual preferences and shopping history). It will also increase consumer interaction via loyalty rewards programs, self-checkout and on-demand payment locations, and revolutionary authentication methods such as visual identification, voice recognition and biometrics.

For businesses, all of this translates to a paradigm shift, where early adopters and data-focused organizations will have a clear advantage during and after the POS evolution, according to the report. Strategically, businesses should focus less on return on investment and more on rapidly adapting to POS changes.

It is also projected that small- to medium-size businesses (SMB) have a competitive opportunity window, as smaller organizations typically have an easier POS migration and integration process than their larger counterparts. Further, with bundled services, mass market devices and continuous innovation, providers are emerging with new business models, making mobile and intelligent POS systems more affordable to SMBs than ever before.