Square has seen significant growth in their largest merchant segment, defying even our initial skepticism. Defined as merchants that do more than $500K in annual gross processing volume (GPV), this segment of Square’s merchants has doubled over the past 3 years and it now makes up more than 20% of Square’s overall customer base.
Square wants to continue moving in this direction, we presume, for two main reasons.
- Square’s small merchants grow into larger merchants. Smaller merchants cannot pay for much other than Square’s processing. Marketing, analytics and other services where Square might earn money are more appealing to larger merchants who have more discretionary spend
- Smaller merchants churn in high numbers. Larger merchants are stickier and can generate higher lifetime values for Square
The biggest problem Square faces with larger merchants is local presence: larger merchants want a Johnny-on-the-spot when something goes wrong. These merchants happily exchange money for time and remote support won’t cut it in all scenarios.
What’s Square to do?
We connected with Pankaj Bengani, Square’s Head of Global Partnerships, to understand a recent development that might give us an answer.
Larger sellers [his term for merchant] have more complex needs. They need help with invoicing, customization, accounting, tax, and other tasks. Square realized that we could partially address these needs with simple API integrations but larger problems needed partnerships to solve.
That’s why Square has been working on their Solution Partner Program over the past 9 months. In that time Square has attracted more than 70 partners, though they’re a diverse bunch. When looking at the group assembled they read more like systems integrator than traditional POS reseller. Some are building omnichannel platforms, others are doing very specific integrations, and there’s a lot of activity outside the restaurant vertical. Still, they’re doing things Square doesn’t want to be doing.
We had this multi-location retailer that needed some ERP implementations. We finagled some Square engineers to work on the implementation but nobody wanted to keep doing it. That’s when we realized that there’s an entire ecosystem of system integrations and consultants that could help merchants where Square couldn’t.
Ultimately Pankaj explained that Square can give merchants the appropriate tools but it can’t manage all of the implementations. The Solutions Partner Program aims to solve that.
We had a number of questions about this, particularly as it related to an ability to move upmarket.
How will Square attract and train participants for its new Program?
We’re hoping by making the announcement on the Square blog, having our partners announce to their existing clients and also by networking with niche outlets like yourself that we will start to spread the word about the new program to the right people. We also launched a new website where people can apply and that can be found here.
What’s a Partner to expect for revenue share and how does that change if they sell a 3rd party app?
We don’t publish our economics beyond what is available in our quarterly earning reports, but it’s our goal to incentivize our solutions partners with two important things. The first is to be a part of a best in class product experiences and work directly with Square to create the unique solution for their client, and secondly that the economic incentives reward for customer sign up and retention. Our economics are comparable for first and third party; we support an open platform and want our partners and sellers to decide which integration works best for them.
Because the program is less formal than a traditional reseller program (there are no quotas or exclusive territories). Which, to us, seems the most risky if Square really intends to ride its Solution Partners Program upmarket, particularly into larger restaurants.
For historical purposes Lightspeed POS had a systems integrator (SI) program along with a reseller program. The former were for people who wanted to sell their services and integrations on top of Lightspeed while the latter were for those who really wanted to become experts in Lightspeed POS: they had territories, quotas, and certified training. In talking with Lightspeed, a dedicated reseller program was needed to move the needle in the channel and larger merchants wanted solution experts who were committed to their business systems.
Square is at least recognizing that remote support is not a workable solution for every merchant. For larger groups, local experts will be necessary. That said, we’d like to see Square commit more formally to a reseller program – at least for restaurants. In retail, where operations are substantially simpler than foodservice, Square’s Partner Program might suffice. But the knowledge required to make a larger restaurant feel confident in your services requires dedication and fluency to a solution. That reads more like reseller to us.
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