Our small, friendly shopkeeper is finding it harder and harder to compete with bigger chains which have the tools to tempt customers into their stores and offer better prices. But one Cypriot-Swedish partnership thinks it has hit on a system to save small retailers from extinction.

Many worry the days of the small, friendly shopkeeper are numbered. Larger, often out-of-town retailers are luring customers away with better prices, thanks to bulk buying from distributors. They have also devised technical methods like reward cards to track consumer spending and use their knowledge of our habits to target us with products.

"Nowadays the bigger guys like Carrefour and McDonald’s have the tools to offer the end-user a much more interesting shopping experience", says Chris Lazarides, managing director of Cypriot software and hardware developer Cpl Computer Innovations. "They give you a loyalty card. You accumulate points and you can redeem them. You can go into a drawer with the possibility of huge gifts like a car."

Andreas Prodromos who owns a shop in the town of Egkomi, Nicosia in Cyprus agrees. "I have been running my shop for more than 10 years and I have had a good success servicing the neighbourhood with general supermarket items, fruits and vegetables. The bigger supermarkets are growing around me like mushrooms, I have a very hard time competing."

Larger stores also have more staff so they can monitor stock levels better, filling up the shelves before products run out. "Whereas the big guys have people dedicated only to doing stock levels, the small guys don’t have that luxury," says Lazarides. "They are lucky enough to get the goods delivered."

Many small family businesses in Europe face a stark choice, says Lazarides. They must either sell their businesses or introduce stock control and invoicing systems to compete with big business. "It’s not easy to upgrade," says Lazarides. "They don’t have the know-how and they don’t have the money." With years of experience designing systems for retailers, Cpl spotted a gap in the market for equipment to make the life of smaller retailers easier, at a more affordable price than current retail management systems.

Cpl decided to develop such a system with EUREKA support and the project began in January 2006. EUREKA put the company in touch with Swedish software developer Klaraelvdalens Datakonsult which brought technical expertise to the project. EUREKA helped the pair secure 0.16 million euro to finance the research and development.

Two years on, the partners have completed the software and hardware for the system and are on the verge of offering it as an equipment upgrade to existing customers who they already supply with retail systems. If all goes well, they will be selling the system in the second half of this year to new customers too.

Their system offers retailers a cash till and advertising screens linked to a main data system through a secure Internet connection. Cpl and Klaraelvdalens will make their money not by selling the equipment but by charging a subscription to be part of a network of retailers and distributors.

The partners say POSMA offers benefits for small shops and retail outlets, and those which supply them with products. Small shopkeepers can control their stock more easily. When they receive orders, says Lazarides, they will not need to scan in bar codes. They simply press accept on an electronic invoice to confirm what they have received.

Chips on products will also allow shopkeepers to tell where a product is on the shelf and small retailers can also run their own loyalty and smartcards through the system.

Suppliers will be able to automatically replenish stocks in any of the individual shops within the retailer network, based on sales data in real time. The retailers will not have to waste time keying in data manually and can benefit from better prices from distributors by buying within a consortium.

One of the most revolutionary aspects of the system will be its ability to monitor real-time product consumption and then use advertising screens which can display offers when a customer is at a particular point in the shop, making a decision about a product. "As a distributor, I can sit at my desk and see I sold eight shampoos in one area, six in another. It looks like one special offer I did is doing well and if that doesn’t work I can dynamically change that," says Lazarides.

"At this stage that kind of information is not even known to the big suppliers. With this system they have the information in real time. The systems in place in retail now do not really – with some exceptions – monitor real-time shelf consumption where the supplier is given permission to do it."

Much of the software and hardware which the partners are using is not completely new, but it is innovative to find this kind of logistics technology integrated into one system. The equipment has a built-in disaster recovery system so if a terminal is damaged or stolen, a shop’s information can be retrieved from the central system once the owner of the terminal is verified.

The equipment is also extremely robust, made to quasi military specifications. "Most of the components can run at conditions of minus 10 degrees and at up to 60 degrees," says Lazarides.

Sceptics may find it hard to imagine such cutting-edge technology sitting on the counters in today’s dusty corner shops in European towns and cities, or to see an elderly family business person using such an Internet-connected network. But Lazarides says his equipment is as easy as using an average shop till.

"Our biggest issue is data entry, huge amounts of manual processing every major season. With a service like POSMA, I can concentrate on servicing my clients," says Ivi Kaiafa who runs a children’s clothes shop.

The system will throw small retailers a lifeline, making them competitive – and he insists they will not lose their charm by becoming more commercial. "The smile is good," he says, but he thinks friendly local shops sometimes treat their customers inconsistently.

"Sometimes you go into your friendly shop to buy shoes and if the owner is not there the assistant might not give you the 20 percent discount which the owner usually gives you," he says. "This system will allow shops to verify the discounts customers get so it won’t just depend on the friendly owner."