Distribution channels are many companies’ solution to expediently moving product. Not everyone is fortunate enough to have mountains of investor cash for a 100% direct sales operation on day one. The tradeoff is a slower growth trajectory and revenue share in place of the overhead for direct sales employees. Pre-venture capital this was the only way to do it.
Many POS companies were started pre-venture. That, or they didn’t have a model that satiated venture: rapidly growing markets with tens of billions in potential opportunity. Brick and mortar, as you should know if you follow our posts, is the least capital efficient market to apply your craft.
The implicit arrangement in manufacturer-dealer agreements is that the product manufacturer focuses on making a good product, and the reseller does what’s needed to sell it. It’s very much a symbiotic relationship: the manufacturer relies on resellers for customer feedback and ideas for product enhancements, and the resellers rely on the manufacturer to continue delivering a product worthy of their portfolio.
But we’ve seen this model breaking down repeatedly in POS over the past few years.
Most legacy POS companies are fat, happy or indifferent. All this in the face of the largest change to hit the industry since the cash register went digital. Legacy POS companies are poster children for the innovator’s dilemma. That’s why their resellers have started doing things that would make any sane analyst worried about the viability of legacy POS as a whole.
Look at POS Partners. They’ve sold Future POS, a legacy POS product, but until recently* Future has not made investments to offer customers the flexibility of data portability on their software. So POS Partners, as a Future reseller with a duty to stay relevant to customers, built their own backend and APIs.
Similarly CBS undertook the same efforts on top of POSitouch. POSitouch, a legacy POS, lacked an above store reporting suite that met CBS’ needs. CBS went ahead and built a solution in the absence of movement from POSitouch. When their customers started asking for cloud and POSitouch couldn’t deliver, CBS even started work on their own cloud POS.
And it’s happened in retail too. RITE, New West, and Systems Solutions are all resellers of Microsoft RMS software. However, RMS did not offer the needed features to keep its resellers actively producing new accounts. So the resellers took it upon themselves to make the software more relevant for the market.
Juxtapose this with mobile devices. When I go to an AT&T store to buy an iPhone, do I expect AT&T to have written their own modifications to Apple’s iOS software so it can support third party applications? When I go to Best Buy to purchase a Chromebook, do I want a tech in khaki pants and a blue polo to put his touches on Google’s Android software?
That’s entirely farcical. One is that Apple and Google are not so shortsighted, but two is that most distribution channels are NOT inherently software companies. Finagling the software can, and should be, a very dangerous proposition.
But POS resellers have been put between a rock and a hard place. They’ve invested years – sometimes decades – into a POS software product. Before 2010 that relationship served them well. Now that the POS market is being disrupted resellers are losing support from what was their closest ally: the POS manufacturer.
Even though resellers are providing market feedback to the mothership, the mothership ain’t listening. Those at the helm are not taking hits to their paycheck to reinvest in their product. In fact they’re doing the opposite: completely ignoring the customer and hoping the problem goes away. I’m going to go out on a limb and say that’s not a great customer support strategy…
For all the wrong legacy POS companies are doing, there’s little alternative for resellers. Sure, cloud POS companies are building “future-proof” and market-relevant software, but they haven’t shown a way for dealers to make money carrying their product: 20% of $49/month is barely enough to feed a dog. Unless the reseller has thousands of installs or has figured out a consulting business, moving to cloud isn’t solving a reseller’s woes either.
Between building legacy POS features to satisfy today’s clients and staring down the inevitable low-cost cloud replacement, it’s a tough time to be a POS dealer.
*2017 Update: Future is now investing in a replication platform of its own to pull data above store and enable API communication. Our hope is that Future finds a way to roll this out to all accounts by default, opening up new value for its customers and dealers alike.