Retail and POS Software Industry Performance & Trends

Industry Performance Summary

The Retail and POS Software industry is expected to grow in line with the economy during the next 3 years to 2017, and is undergoing a period of consolidation, as larger industry players look to increase market share through acquisition. Advancements in technology have contributed to drastic changes in the industry and these have helped to stimulate sales and innovation in an industry that is largely mature and stable. Revenue for the Point of Sale Software industry is expected to continue growing, albeit at a slower annualized rate of 1.9% to $1.5 billion in the five years to 2019.

Technology Impact

The wider adoption of both mobile and cloud computing systems have forced industry operators to create Retail and POS software that incorporates traditional, web-based, and mobile platforms. Cloud systems have also forced Retail and POS software developers to take data and system security into account as SaaS (software as a service) systems become increasingly adopted. SaaS solutions have increased as a proportion of industry revenue during the past five years as cloud computing has continued to gain traction in the business world.

Other new technology developments in Retail include POS software for mobile devices that are enabled with near field communications (NFC). NFC-enabled devices allow consumers to store credit card and loyalty information on their mobile phones.

Mobile POS devices allow for storewide promotion opportunities, with various sections of retail stores holding demonstrations and promotions, marketing and selling to customers instantly and sending email receipts. Consumers are responding positively to these changes through increased sales. When fashion and beauty retailer Nordstrom revealed its mobile POS devices (i.e. a modified iPod Touch with a merchandise scanner and credit card slider) throughout their full-line stores, retail sales increased 15.3%.

Consolidation Expected to Continue

Demand for POS software is expected to increase as corporate profit rises. Rising corporate profit will ultimately cause businesses to make the computer and software purchases they delayed during the recession. Companies’ confidence in their financial ability to invest in computers and software is anticipated to cause private investment in computers and software to increase at an average rate of 6.0% annually in the five years to 2019. A portion of increasing software expenditure will stem from retailers, wholesalers and hospitality companies purchasing POS software, bolstering the industry during the next five years.

In spite of this growth, the Point of Sale Software industry is expected to continue undergoing consolidation during the next five years as large multinational conglomerates acquire smaller companies to increase market share and gain access to patents and niche markets, such as the growing POS software market for healthcare.  Furthermore, the prices of products designed for niche markets are expected to fall as the markets mature and more options become available.  In the five years to 2019, the number of companies operating in the industry is expected to decline 2.0% per year on average as a result of this increased consolidation. In spite of this, industry consolidation will ultimately contribute to a marginal increase in profit margins, as the largest companies cut down on their operating costs.

Lower middle-market firms should heed these industry markers.  Competitors will become larger and more dominant as they continue to acquire, revenues may be harder to grow as increased competitive offerings become available, and the overall slow growth of the market as a whole will make it very challenging for Retail and POS software companies to continue to achieve solid top-line growth.

Industry Life Cycle 

The Retail and Point of Sale Software industry is in the mature phase of its life cycle, with industry value added (IVA), a measure of its contribution to the overall economy, expected to grow slower than GDP during the 5 years to 2019. During that time, IVA is expected to grow at an annualized rate of 1.9%, compared with forecast annual GDP growth of 2.7% during the same period

In the five years leading up to 2014, it is estimated that the number of industry enterprises decreased at an annualized rate of 2.1%. This decline is attributed to the ongoing consolidation seen in this market as large operators have acquired smaller firms and niche providers to increase their market share.

M&A Impact  

M&A deal value and volume are at their highest levels across all markets since the recession, and the appetite for acquisition and consolidation in the POS and Retail software market, coupled with increased confidence in the economy, is driving greater numbers of transactions in this sector and creating a window of opportunity for potential sellers.

Source: IBISWorld

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