Uber Showing How POS Companies Will Be Displaced Unless They Get Their Sh*t Together

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If you didn’t catch it, last week Uber announced a software product for restaurants that should be an indictment on the point of sale (POS) industry.

Did you see it?

Let’s back up before we dive into the details.

Uber has raised nearly $12B over the past 6 years. Its valuation is somewhere north of $70B. It’s still losing billions annually, maybe $3B. To leverage its scale it’s added other delivery services, like UberEats.

UberEats is on pace to earn $100M in net revenue in 2017 but is also expecting to lose $100M. This is a non-core business for Uber, and it certainly doesn’t hold any particular expertise in running a restaurant. In delivery, sure; but as for the daily operations, not so much.

But that didn’t stop Uber from seeing an opportunity.

Using what data it collects, Uber has made a software tool to help improve the operations of the restaurant. Directly from Uber’s site:

Now, restaurants will have access to insights about their service quality, customer satisfaction, and sales alongside access to the tools to make specific adjustments to improve their business.

Uber claims to make the information actionable, which is an admirable goal. We know that most tools in the brick and mortar world are not actionable and require an unjustifiably large amount of time to make useful. From Uber’s video, it appears that their tool helps restaurants with optimizing their menu, scheduling labor, determining CAPEX for operations, and “more”.

That’s a pretty far leap for a company that is only seeing a few percentage points of overall commercial activity (e.g. seeing delivery-only transactions and not all transactions). Though we know that Uber has been requesting full access to the entire POS data stream.

And why not?

It’s not as if the POS software manufacturers (ISVs) are doing anything with it.

You have this quaint bifurcation occurring with the majority (95%) of the POS industry.

  1. ISVs think they’re the all-in-one solution and are building every possible feature, most certainly with horrible outcomes (because POS is NOT a high margin business)
  2. ISVs refuse to make any investment in anything. Even if their customers want it. Even if they need to do it to stay in business. Logic be damned.

Taking total advantage of this gap, Uber has summarily said,

Merchant, I notice your POS is not giving you solutions to make your business run better. I don’t know anything about POS, but I know the basic tenets of running a business. Using the data we see, here are some pretty obvious opportunities to your top and bottom lines.

Oh, and we’re going to make the solution actionable so you don’t need to spend 8 hours on your Saturday interpreting charts. And the user interface will be easy to navigate and won’t look like a 1985 seizure.

If we put our thinking caps back on there’s no reason for Uber to be in this dominant position.

First, we’ve got their economics. Deliveries (and online orders for that matter) that charge material percentages of an overall order are a shot to the gut. Merchants are really, really bad at math and they shouldn’t be thinking a 3% margin business can afford 30% fees for these services. This is Groupon all over again.

Second, and perhaps most importantly, ISVs should have access to all the data Uber is using to produce its analytics software. (Yes, Uber has access to customer review data that ISVs don’t, but ISV’s could easily negotiate that with consumer platforms if they knew what they were doing.)

ISVs should be collecting payments data (don’t feed me the joke of PCI as the excuse) so they can match repeat orders by the same customers to determine what’s popular.

ISVs should be default cloud, collecting all this transaction data so someone (but not the ISV… we’ve already seen how crappy their bolt-on products are) can pinpoint operation and marketing improvements.

ISVs should be collecting all labor data and ensuring that their merchants are logging employee clock-ins appropriately.

ISVs should recognize their limitations and find best-of-breed partners (for bolt-ons) that can keep customers happy, and profit flowing back into the ISV coffers.

Because here’s what happens if they don’t.

Tech companies losing billions of dollars a year will steal the opportunity with subpar products because there’s nothing in the void.

Tech companies losing billions of dollars a year will build better relationships with the merchant, ultimately controlling the merchant’s customer relationships and the merchant’s data.

Tech companies losing billions of dollars a year will say, “Hey, this POS tech is total pile of shit. There has to be a list of finite features. Let’s just go buy one and give it out for free so we can own everything.”

How long do you really think it will be before a technology company with serious scale realizes they can become the POS of record and dominate the industry? Many of these companies are already placing ordering tablets inside a merchant’s four walls… what’s to keep them from a quick software update to make it full-fledged POS software?

They’ve already shown they’re willing to lose billions to try it.

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