We don’t attend the National Restaurant show for reasons we’ve discussed previously. But if you attended, or simply had your head above water while the show was running, you doubtless heard about Jamba Juice ejecting Aloha and choosing Toast for their POS needs.
We thought this was a great learning opportunity to discuss what this means for POS, and the brick and mortar industries POS serves.
First and foremost we have long heard skeptics proclaim that cloud POS was too lightweight and wholly unfit for the big leagues. Nobody sober would claim Jamba Juice has the same functionality needs as a full service restaurant chain but it still comprises near 1,000 locations. More than anything the decision to pick a cloud solution over a “reliable” legacy POS (NCR’s Aloha) shows that cloud solutions are being legitimately considered as enterprise retailers are looking to refresh their technology stack. To us, this further strengthens our prognostication that cloud POS will be 50% of all systems by 2023.
Second, one has to wonder how far into the future merchants think about SMOPP, or the risk of selecting a POS with only one payments option. Jamba Juice executives told us that they were sure to limit their exposure to these types of shenanigans by agreeing to fixed rates for a number of years.
It’s well-known that processing margins are very thin on larger merchants, so it’s not totally unexpected for Jamba to put a limit on their exposure: it’s what larger merchants have done for a long time. Since Toast seems be very keen on earning high payments margins from their traditional customers, why this departure?
Toast has raised a new round of funding as we predicted they would need to do after their last round. This new round puts Toast at over a billion-dollar valuation, meaning investors readily anticipate an exit to the public markets. In an IPO, it’s better if a company can talk about some household names. This makes the story more sellable to the average retail investor. So even if Jamba earns Toast no money (or loses them money as Starbucks did for Square) it becomes a pretty clear PR play.
Third, legacy POS systems, in this case Aloha, are in trouble. Although these systems boast “more features”, what you’re increasingly finding are customers finally rationalizing that a few, market-relevant features are more useful than a long list of features they’ll never touch. When talking with other enterprise customers on Aloha, these concerns were voiced as reasons for shopping POS:
- Connected Payments didn’t work on their versions of Aloha
- Additional integration fees to use third party solutions made it compelling to look at systems without fees
- Additional fees to use tools that are free with cloud POS, notably Pulse and Console, also felt wrong
Lastly, sex sells. We’ve seen numerous merchants choose POS systems that are horrible fits for their business but they liked the way the terminal looked on their counter. That’s not to say Toast isn’t a good fit but rather that they’re doing their damnedest to put lipstick on the POS pig. And it’s working.
Toast has been spending an enormous sum on marketing, producing lots of original content and building hardware and software that looks modern. This has put Toast first in a lot of organic search results. At the NRA show there was a reported line at the Toast booth while other POS companies looked on in awe. By the way, here are the results for “restaurant food cost” and “restaurant labor” searches on Google – Toast is the first unpaid result in each despite having a much smaller footprint than Micros or Aloha. How does Toast rank higher? Because they’re fundamentally a tech company that knows how SEO works: good content = higher rankings.
In our opinion the verdict is clear: you have to invest in your solutions if you want to remain relevant. If you can’t find the capital to do it yourself then at least partner with folks that can augment your offering.
Toast is doing a great job of producing a POS that merchants want. Are these products ultimately affordable for merchants who don’t have a guaranteed rate limit (like Jamba Juice), and can Toast sustain its sales and support engine when investor money runs out? These are other debates altogether.
But at least Toast is innovating. If you don’t innovate you’re dead.
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