POS Companies Must Play Role of Amazon for Their Merchants

Local merchants are struggling. This is particularly evident in retail, where Amazon has eaten $1T (that’s a trillion dollars) in value. Some retailing concepts have been much more affected than others.

Foodservice has been mostly insulated due to the nature of food itself: food doesn’t have a great shelf life and meals must be prepared by someone in close proximity to the end consumer. Still, there are data-driven professionals entering this industry and they will eventually displace restauranteurs by using data in the same way Amazon has used data to massively disrupt retail.

Which is why point of sale (POS) providers are vital to keeping merchants alive and well.

POS providers are in a unique position in that they have access to all of a merchant’s transaction data. This data is crucial for so many value-add services we’ve dedicated entire articles to this previously. And before you respond with some knucklehead reaction that it’s not the POS provider’s job to touch that transaction data, know this:

We see data from mom-and-pop merchants all the way up to public restaurant chains. We will profess, without hesitation, that there is very little difference in sophistication between the two sizes of operators when you audit the data. Here’s why that is.

So yes, it IS the job of the POS company to turn that data into something useful for their customers… if they want their customers to remain solvent.

As the market has evolved we believe that the POS provider now has two major responsibilities, and they are both developments Amazon has executed incredibly well.

First, the POS must give consumers – the customers of their merchants – the Amazon experience. Consumers are demanding greater convenience, more choice and transparency, and personalization. POS companies can help their merchants better compete by doing a few things:

1. Open your API for integration. If there are great third parties that can significantly extend the reach of your merchant, make sure the merchant can easily connect your POS system to those third parties. Do not cripple your merchant’s chances of success by hobbling your API or forcing merchants to use your shitty homegrown solution instead. We’re going to guess Exxon Mobile is just a tad bit bigger than you and yet, somehow, they’re using Halliburton and Schlumberger for things that they know they can’t do well. Don’t be a moron.
2. Help your merchants make rational business decisions regarding solutions that can create more of an Amazon experience for their customers. Your job – if you want to exist as POS becomes more commoditized – is to serve as an advisor and help merchants choose the right solutions. Since you’re serving as the hub for integrations you should know what products are working and why. Should the merchant extend its channels with delivery and online ordering? If so from whom, and why? If you can’t stay on top of this yourself (which is the reality) find partners that will.
3. Pursuant to the second point, it’s your job to curate partnerships that can further the success of your merchants as it relates to a consumer Amazon experience. We’ve given some concrete examples of this before, and we’ve even laid out your internal plan to execute this. Unless you want a company like Amazon or Uber or Grubhub sucking up all your merchants’ transaction data and building a competitive POS offering get your ass in gear. This point has great carry over into the next responsibility POS providers now have…

Second, POS providers must also drive an Amazon-level of operational discipline for their merchants. They must do this because their merchants can’t and won’t do it themselves. Don’t believe us? We’ve seen large chain operators spend millions on BI tools and analysts only for the business to have no net change when it’s all said and done. You think Amazon accepts this behavior in a low margin industry? Which is why POS providers need to do the following to keep their merchants around:

1. Get your transaction data in order. Everyone should own a copy of their merchants’ transaction data and that’s a good thing (we refuse to hear arguments to the contrary: every “Silicon Valley” cloud POS has these rights and look at all the tools companies like Square have been able to offer because of it). Make sure your data is well formatted and that you have all the rights to put the data to work on behalf of your merchants. If you need some sample language send us a note.
2. Automate everything. That’s right: don’t let the merchants screw up decisions by taking the decisions out of their hands entirely. These are generally people who have hobbies or passions and are trying to turn them into a business. Even at the highest levels of chain operators you’re not finding someone from Goldman Sachs or McKinsey: they’re people who have worked their way up from that fry cook position 25 years ago. Let them focus on the human elements by automating the the things machines are good at through the right partnerships around inventory, labor, and other operational components.
3. Keep an open mind. Merchant operations are changing quickly with the aggressive entrance of tech giants and the rapid pace of legislative complexity from bored legislators. It must be your job to stay on top of it. Find partners who are leading the charge and figure out how to involve them substantially.

Success is up to you. Don’t let your myopic view of your POS fiefdom crash your business and those of your merchants. That’s not right.