Over the past 6 years my companies have made close to €10 million in sales through retail and online channels. In this post I will go over the systems that we have used to make this happen and talk about how I believe companies at different stages of growth should structure their internal tech systems.
What is Required and Why?
Retail businesses are complex machines with lots of moving parts which need to be managed accurately to ensure a smooth service to the customer. As a retailer, aside from requiring the classic business functions of finance, HR, CRM we also require specialised inventory management systems and Point of Sale (POS) softwares (and hardwares) to run our businesses.
Here is a breakdown of our current tech stack at La Nostra Ciutat and my thoughts about each area of the system:
We are currently using Shopify POS in our retail stores and Shopify Advanced as our online platform. In March 2023 we switched our operations to Shopify having previously used VendHQ in stores (and before that, in the very beginning a stand-alone system from CaixaBank, this one tought us a lot!). We chose Shopify POS for the primary reason of connectivity. The truth is, most POS systems are the same, they have 90% of the same functionality, layout and aesthetic. What really sets one apart from the other is how inter-operable they are with other systems, and none are more inter-operable than Shopify. Everything connects with it. That means we are able to change our mind about other systems we are using and simply connect them in to the POS system in the future.
The key from the POS system is that it does the basics really well (sell, keep data & ease of use), has strong inventory controls (and preferably forecasting features, or at least connectivity to systems that can do this), as well as being able to export your sales data automatically to a financial system for reconciliation against bank accounts.
Our POS is still the master system for product information, however how long this will last for us I am not sure.
We left VendHQ (which I consider to be a better stand alone POS system for retailers in terms of functionality) purely becuase of its lack of connectivity with other systems.
Our current financial system is Holded, a Spain based small business ERP system. The system is fine, it is certainly not the worst i’ve ever used and not the best either, but the price point is quite reasonable and it ticks many of the boxes needed for a financial management system.
What are those boxes? Well, expense management, automatic bank connections (imports your bank history directly to the system for reconciliation), sales and invoicing, integrations with Shopify, wholesaling features, HR & payroll functions, country adapted taxes.
These are all critical functions, but haivng a system adapted correctly for your countries’ taxes, bank integration and POS integration are the three areas which are going to make the biggest difference. We have previously used SageOne (which is fine for tracking expenses and sending B2B invoices, but not a lot else) and Quickbooks, the latter being my prefered option over all, but it’s lack of adaptation to Spanish accounting rules and taxes made the system diffcult to use in many cases (although the design and Ai on their bank reconcilliation is miles ahead of Holded & Sage). In the end we switched to Holded primaily for the tax functionality, even though the build of the software is not as good as the Quickbooks interface. If I were in the USA I would recommend quickbooks 100%.
Web & eCommerce
The key here is to not duplicate your work and keep inventory levels synced. We have always run Shopify as our online platform, despite haivng previous experience on WordPress and WooCommerce. For us it was worth paying the extra €20 a month to have the hosting managed and not need to worry about things like SSL other technical aspects. We experienced a lot of headaches when using VendHQ as our POS and Shopify online through the direction and the information that you could sync between the two platforms. For example, we could only move over one product photo from Vend to Shopify, so would always have to duplicate the uploads between systems. Moreover, there were issues such as a product link getting broken and making a duplicate in one system and other such mishaps.
Eventually we made the change to Shopify to simplify the workflow and it has been a good decision. Less systems to manage = less headaches!
There are other more flexible platforms out there than Shopify, but you will require more technical knowledge and more cost to manage that knowledge. Systems like Magento & PrestaShop will require full time programmers to build and maintain. Shopify seems to us like the best of both worlds.
Inventory is the biggest challenge of retail without a doubt. Get your inventory wrong and you are either locking up cash or losing sales, both ways bad. For us inventory has always ben a key focus, but we have not invested in the systems to make that happen. Excel has always been our friend, and for many years we were using complex excel sheets to do forecasting and inventory purchasing. This is only really possible if you come from a highly financial backgorund and have deep experience with Excel (thank you to my investment banking past!).
For regular people a system is going to be much more functional. Therefore as we reached a size where we could start out hire people to deal with our inventory maangement, we have switched for the moment onto Shopify’s Stocky system. This is a system that is hard to recommend, but also one that is hard to turn down. It is included free with the Shopify POS sytem and gives you instant syncing with your inventory levels and sales. Many inventory systems will tell you that reail time views of stock and reorder points are groundbreaking things, but they are not. That is a basic feature. Stocky gives us automatic reordering using sales/item/day forecasts. The feature is ok. Not the best, but honestly better than expensive systems like Unleashed are able to offer (which is mindblowing to me). The Stock app itsself was obviously built as a Shopify app and has really not been improved since Shopify bought it about 5 years ago. This shows, and in the future we will change. However it is also not a bad system if you understand what you are doing.
When we first opened LNC out HR system was basically not having a system. In Spain the paper work involved with running a company is so complex that you are virtually forced to hire a legal and financial advisor from day one, so that is what we did and let them take care of the records. From there we passed on to using Excel to keep a list of our employees contracts and details, sending out the payslips via email each month. Now we are using Holded which has a built in (if not very simple) HR section which lets us manage the staff, their contracts and documents as well as payroll all in one. I would suggest using Bamboo HR or probably Deputy if you want to spend a little bit of money on HR systems (Deputy has one huge plus for retail which is auto-scheduling of staff into a rota, huge for retail). These systems will better enable you to manage the employee journeys in your company and offer things like on-boarding and training materials all for a relatively reasonable price.
From day one we have worked with Caixabank in Spain and used their external payment terminals. These have offered us the best rates (from 0.6% per transaction) but do come with the draw-back that the payment amounts need to be typed in by hand for every transaction. This does lead to some errors, but for the amount of money we are saving on payment processing it has been our preffered system (we are talking saving thousands a year).
Integated payment systems are available with either a higher price or technical capabilities. Gradually in Europe the American providers of these services (Stripe, Shopify, Square etc) are lowering their prices to be more competitive with regional banks (dropping from 4%+ previously to around 1%ish now). As the gap closes it will become a no-brainer to have integrated paymetns, but until this happens we will continue to use external. If you wish to save yourself the hasstle of reconciliing the payments (which I would fully understand) then pay the extra processing fee and use integrated systems.
This is a tricky area in retail, primarily because all the specialist hardware is unnecessarily expensive. Feel free to pay over €10k for a label printer if you feel like, but that is not for us. We currently use the follwing hardware in our stores: iPad as a cash machine, Mac Mini for work, Star TSP143 reciept printer, Start Cash Draws, Zebra 220d label printers (plus a special driver so that they work with Macs), SocketScanner barcode scanners and other cheaper auxillary devices.
I do not believe this is an optimal setup, but we have always wanted to have a fast operating system at the checkout and hence have used tablets. They give us extra computing power too and the ability to do extra activities with the cash register. In time I suspect we will shift to a more traditional set up, but for quick execution and a reasonably cheap price (under €2.5k for whole set up, whcih you can easily spend on a dedicated cash register alone) it has been a good option for us.
Size of Company Matters
But the size and scale of your operation is likely to make different softwares more necessary than others. Let’s run over what I believe are the important services that a retail business should have depending on its size:
1 Person Retailers & Pop-Ups
If you are an individual who runs a store then you will likely have a smaller operation, be looking to keep your costs down and not be too bothered about user accounts and controls. In this case, my recommended stack would be:
Hardware: Laptop, Cheap Scanner, Star TSP Printer & Cash Draw
Stores with External Staff, 1-3 Locations
Hardware: Desktop, Tablet, SocketScanners, Star TSP Printer & Cash Draw
Larger stores with 2-5 Locations
Hardware: Desktop, Tablet or Touch Screen Register, SocketScanners, Star TSP Printer & Cash Draw
Multi-Store, Multi-City, Stand Alone Warehouse & Beyond
POS: ERP Dependent or Custom
ERP: Public ERP from SAP, Netsuite, Dynamics
Payments: Integrated Payments via Banks
Hardware: Touch Streen Computers, Integrated Payment Terminals, Recommended Hardware from ERP Providers
ERP: Private ERP from SAP, Netsuite, Dynamics
Everything Else: Hire a CTO.
What Does The Future Look Like For LNC
Our current system sicking points centre around the mis-matched systems that we are running. Large companies use ERP systems (Enterprise Resource Planning systems) which are effectively everything I have described in this post in a single system. Given that they are a single system, they come with a much higher pricepoint generally when compared to the distinct stand alone systems, but also come with much more capabilities too.
There are two key types of EPR system, public and private. Public systems are pre-configured systems that are built for the ‘standard’ company. That means that you will get a set range of capabiliies from the outset and can get up and running relatively quickly. Private ERP systems are the domain of large companies ($1bn+). These are cusom built systems which are tailor-made to fit their business practices. I’ll let you know what they look like when we get there!
One key thing to note with ERP systems is that they are not sold like a regular software app where you can just sign-up. These are gated gardens which require ‘implementation’ before they can be used. This is essentially a pre-configuration phase where a platform expert goes through the needs of your company, activates and customises the right modules for you and migrates data across from your existing systems. This work can often cost from €10k up to €50k, and is hence a large obstacle on the path to making a switch.
However if you are able to partner with some of the larger ERP providers that you can meet through events, they will often help fast growing retailers to avoid most of these fees in order to get you onto their platforms.
As LNC has grown we have begun to feel more of the pains of scale, thousands of SKUs, multiple locations, many bank accounts and providers. ERP systems are designed to solve these issues and it is where the future of our technology lies.
If you have any questions about your retail tech stack, feel free to let me know and I will try to answer your doubts!