Merchants are rightfully skeptical of solution providers. Between payments processors who sneak in fees to daily deal providers that rarely made economic sense, the local merchant has few people to lean on in times of distress. That only makes this past week’s events that much more disheartening.
What instigated this very necessary discussion was a restaurant consultant’s posting of a POS sales rebuttal from Epos Now, a cloud POS company. The consultant’s perspective was that the sales agent from Epos was “badmouthing” a POS competitor – Toast – by bringing to light Toast’s economic model. The consultant didn’t redact any of the contact information of the Epos sales agent, which is not something we would have done as a third party who receives similar information; the consultant’s position could still be made clear without compromising the individuals involved.
We’re posting the redacted email rebuttal here for easy referral.
There are a number of thoughts that come to mind when digging through this, so let’s lay them out.
First, the Epos sales rep did not “badmouth” the competition. They instead made sure that the potential customer understood the entire scope of Toast’s business model. As proof of this, the sales rep copied a Toast review that was positive: a review with a 5 out of 5 rating that demonstrated the sales rep’s point that there are potential pitfalls when POS providers engage in SMOPP. If Epos were truly badmouthing Toast they would have chosen a 1 out of 5 review. Toast might not ratchet processing rates on this merchant but at least the sales rep made it clear that this was a distinct possibility.
Second, we are questioning the impartial nature of the consultant which, by the way, is not a problem so long as it is disclosed. The consultant has authored 49 articles for Toast since early 2015. Toast features the author prominently on their website and the consultant reciprocates on his.
The affiliation, however loose, is further referenced on the consultant’s social media profile:
Let us be clear: there is nothing wrong with affiliations and partnerships. In fact we encourage them: this industry could benefit from more sharing of ideas, not less. We are not criticizing the consultant nor Toast’s affiliations but rather ensuring that we make them transparent. (Side note: reciprocity is a major psychological lever and it could very well explain the behavior between the consultant and Toast. Robert Cialdini has discussed this at-length and if you’re interested you can learn from specific examples in Robert’s book Pre-Suasion.)
Third, we’re not buying the consultant’s rebuttal to the rebuttal (confused yet?) that payment processing costs are trivial. Quoting the consultant’s response, “I am bringing attention to others that merchant services don’t close down restaurants and to say that it does it the stupidest fucking statement I have heard.” There are certainly larger line items for a merchant to manage – like labor and inventory – but we aren’t convinced high processing fees never bankrupted a merchant either. Restaurants are not exactly a high margin industry and there are many merchants who ride the thin line between profit and loss every year. It is entirely conceivable that a high processing rate pushed such a merchant into the red. This is particularly troubling considering payment processing fees add no value and are direct hits to a merchant’s bottom line.
If you’re a merchant who’s reading this you should absolutely analyze and manage your processing rates since lower rates equates to free money. To ignore your processing costs is a grave mistake. An analogy would be if we broke into your home and stole the cash in your change jar every time you went to work. The consultant’s position is that you shouldn’t worry about this since you’re making more money at your job than we’re stealing from your change jar. And the consultant would be right. But what if the economy takes a nosedive and you lose your income for a short period of time? You’re counting on the money in the change jar to pay for your groceries only there’s no money there. Whoops.
Lastly, we need to discuss the most troubling aspect of this entire exchange:
Some industry insiders appear to strongly discourage and even muzzle free thinking.
This is the most damning piece of evidence we’ve seen and yet it almost too-perfectly explains the trouble the industry finds itself in. How is this industry expected to lift itself from the 1500’s if those that are supposed to be helping merchants don’t want them questioning anything? Imagine how many businesses might have been saved had someone stepped up and shone a light on the economics of the predatory daily deal providers circa 2008-2010. This only happens if someone thoughtfully questions what they’re being told – particularly from hired “experts”.
It is utterly shameful that there are leaders in this industry that are willing to suppresses transparency to further their own personal gains. Not that other industries are immune to this behavior, but in this low-margin vertical it continues to perpetuate at even the largest brands and it’s obviously happening at the lower levels too.
What harm comes from ensuring the customer makes the most informed decision? Is this something that should be publicly ostracized? Are we at a place in brick and mortar’s life where critical thinking, question raising, and assumption challenging is tantamount to heresy? How many bright lights were snuffed out by the Spanish Inquisition and their ilk?
With these bully tactics it’s no wonder this industry has seen so few Galileos.
Here’s a recent email we received from a merchant who similarly finds needless confusion in the contracts of POS and payments providers. Can you imagine how many merchants haven’t been as fortunate to have read the content we’ve produced and instead sign agreements blindly?
We are a fast casual pizza place looking for a new POS system. We currently use Aldelo. We are considering Revel, Toast, and Mobilebytes. We like the end user functions, but we are having trouble filtering through all the fine print of charges, fees, ETF, etc. We also are having trouble evaluating the reliability of the systems. Can you help?
The industry needs more transparency and open dialogue. Only then might merchants become more educated, less skeptical of their service providers, and find greater financial success.
Toast may very well be the best solution for this business but nobody is doing any favors by slamming the door on free thinking. Those that do so under the guise of helping merchants should be embarrassed.
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