February 21, 2005

China's Exploding POS

Did you know that Sixty percent of the [construction] cranes in the world are in China right now. Forty percent of the world's concrete is in China right now, too..

China POS Sales Soaring
February 18, 2005

By Evan Schuman
As Chinese consumers suddenly start to embrace the retail store, orders for point of sale systems are soaring, according to a new study from IHL Consulting Group.
IHL is projecting that China's accelerating 20 percent annual growth rate last year will catapult it this year beyond the POS sales of Germany, which is Europe's largest POS market.

Like all statistics, these POS sales numbers look very different depending on context. Historically, China's POS sales have been very low despite a huge population. Just like a startup company, when a retail industry such as China's does start buying POS units, the initial purchases will likely be massive. After all, a developed retail infrastructure such as Germany's needs only replace aging POS units, not replace every single POS in every establishment. But China's need is much more extensive.


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To read about Microsoft's push into the POS space, click here.

Also, many of the POS purchases that China is making are very low-end units, raising the question of whether it's a fair statement to compare the units with Germany's without factoring in price, said report co-author and IHL President Greg Buzek.

"It should be noted that more than 75 percent of the installed base of POS devices in China are actually PC-on-Cash-Drawer [PCOCD] devices," the report said. "This is much higher than any other country in the world and shows that, although the POS growth opportunities are huge, the traditional POS vendors will need to adapt their strategies to take full advantage in the region."

Although Chinese retailers are more willing than ever to embrace Western retail technology approaches, the IT environment is radically different.

"Fully 92 percent of the POS population used 486 or higher processors at the end of 2004, mainly due to the relatively young age of the modern retail landscape in China," the IHL report said. "There are still 36,000 older POS devices installed. The older technology's hold on the POS market is exacerbated by the food and specialty retailers using DOS terminals and showing little initiative to change."

IBM's China PC deal is giving Big Blue a big help in that country. To read more, click here.

Even though the typical U.S. retailer is technologically behind some of the more sophisticated Japanese and European retailers, China's current retail technology "is probably about 70 to 80 years behind" the United States, Buzek said in an eWEEK.com interview.

In China, POS systemsand low-end POS systems at thatare only in the larger retail chains. Small chains and single-store retailers rarely use POS, Buzek said.

"One interesting aspect of POS systems in China is the relative lack of scanners, even in new installations," the report said. "Simply, there are not that many products in Chinese retail locations that have barcodes. The retailers therefore rely upon time-honored price tags."

Cash systems dominate, with credit-card units rare, Buzek said.

Next Page: Is China's economy growing too quickly?

Buzek paints China as an economy that is growing too quickly, potentially out of control. "Sixty percent of the [construction] cranes in the world are in China right now. Forty percent of the world's concrete is in China right now, too," he said.

rest of story

Posted by Craig at February 21, 2005 04:25 PM