• Chart: Retail Portfolio Expands

A new Microsoft point-of-sale application will take on Intuit's retail offerings for single-store retailers. Microsoft Point of Sale (Microsoft POS) 1.0, a stripped-down version of the company's existing Retail Management Systems product, will act as a PC-based cash register replacement. The product will compete with the similar QuickBooks Point of Sale, but it will also integrate with Intuit's QuickBooks accounting software. However, the company has not said that Microsoft POS will integrate with the forthcoming Small Business Accounting package, which is designed to compete with QuickBooks. Furthermore, Microsoft POS will not integrate with other Microsoft accounting products, such as Great Plains.

Where Microsoft POS Fits

Microsoft POS is a PC application designed to replace the traditional cash register and "dumb" point-of-sale devices (such as electronic cash registers or character-based terminals) that retail stores use to record and track sales transactions.

Microsoft entered the point-of-sale application market with the May 2002 acquisition of Sales Management Systems. The acquisition netted Microsoft a point-of-sale and inventory management application that it rebranded as Microsoft Retail Management System (RMS); its most recent update, RMS 1.2, came in July 2003. Microsoft deferred plans to update RMS in 2004, and instead spun off Microsoft POS from the RMS code base. An RMS update is planned for the third quarter of 2005.

(For highlights of the main differences between Microsoft POS and RMS, see the chart "Retail Portfolio Expands".)

Basic Transaction Processing, Inventory Lead Features

Microsoft POS provides a base set of transaction processing, inventory management, and reporting features for retailers with a single store. The main features of the product are the following:

Transaction processing. Microsoft POS provides bar-code scanning and touch-screen capabilities that allow cashiers to process sales. The product can also process credit and debit card transactions so that retailers are not required to have separate credit-card processing devices.

Inventory management. The product provides basic inventory-tracking capabilities. For example, store personnel can view inventory status, such as the quantity of items sold, available in the store, or on order. In addition, Microsoft POS can be configured to generate purchase orders when inventory falls below predefined levels.

Customer management. Because it records and tracks customer history, Microsoft POS can help businesses target customers for special promotions or sales. For example, the product can suggest, at purchase time, cross-sell or up-sell opportunities based on customer buying history and preferences. In addition, store owners can apply discounts for preferred customers, such as frequent shoppers.

QuickBooks integration. Microsoft POS integrates with Intuit's QuickBooks, the dominant small business accounting package. For example, business owners can post Microsoft POS sales batches and purchase orders to QuickBooks on a predetermined schedule. However, Microsoft has not said that the product will offer similar integration with the forthcoming Small Business Accounting (SBA), which ships in Sept. 2005 and is positioned as a competitor to QuickBooks.

Reporting. About 30 canned reports, such as inventory, product pricing, and employee hours, ship with Microsoft POS.

The product's user interface is modeled on Microsoft's popular Outlook 2003 client. In addition, Microsoft POS provides some level of integration with Office: for example, it can import product details and customer and supplier records from Excel, and export reports to Excel. Other obvious points of integration could be delivered in subsequent versions: the first version of Microsoft POS cannot synchronize customer contact information with Outlook or Business Contact Manager, for instance.

Part of a Larger Plan

Attracting small retailers to a Microsoft point-of-sale solution is one component of a larger Microsoft plan to gain ground in the business applications market for small companies, a market that is dominated today by Intuit. Point-of-sale applications represent a major financial opportunity within this market—Microsoft estimates that single-store retailers account for about 4 million checkout lanes in the United States alone. In addition, retailers who adopt Microsoft POS become prospects for other Microsoft products, such as Great Plains accounting, Microsoft Customer Relationship Management, or Small Business Server.

In general, Microsoft's strategy appears to be to challenge Intuit move-for-move, conceding not even the smallest customers. For example, Microsoft will soon release SBA, an accounting package for companies with fewer than 25 employees, which will compete directly with QuickBooks. The company has also repositioned the entry-level product in its Great Plains line (Small Business Financials) to compete with QuickBooks Premier and Enterprise Editions. Microsoft POS is Microsoft's latest volley.

Availability, Pricing, and Resources

Microsoft POS will be generally available in June 2005. Microsoft has suggested a retail price of US$800 for a single lane, which is in line with Intuit's low-end POS product; the product will only be available through MBS resellers. The product will run on Windows XP Professional SP2 (or later) or Windows Server 2003, and it is packaged with the Microsoft Desktop Engine (MSDE).

More information about Microsoft POS is at www.microsoft.com/pos.

Microsoft's overall strategy in the retail market is outlined in "Building a Presence in Retail" on page 30 of the Apr. 2004 Update.

The forthcoming SBA is described in "Small Business Accounting Fills Product Gap" on page 25 of the Dec. 2004 Update.

The acquisition of Sales Management Systems was covered in "Retail Point-of-Sale Software Company Acquired" on page 8 of the July 2002 Update.