In early 2017 we made a logical plea to the POS industry:
Get your shit together or find yourself replaced by technology companies like Uber and Amazon.
These tech companies are building inroads to merchants directly and are very savvy data thinkers. Many of them are already placing hardware within a merchant’s four walls and it’s not a massive leap to update that tablet software to function more like a POS. If two guys can build a functioning POS in their basement over 12 months then a few million bucks in the hands of more sophisticated engineers can build a much higher quality POS system in the same amount of time.
Yet the POS industry pretty much ignored our advice and kept reinforcing their walled gardens. If you thought the behavior was isolated to the legacy POS providers, think again (see Lavu and possibly Lightspeed for reference).
The simple fact is this: these technology companies are run by very smart people. Compared to the brick and mortar ecosystem it’s like Watson vs a toddler in a round of Jeopardy. Add cheap capital into the mix and there’s no telling what might happen.
Which is why we continue to warn merchants about the data they’re freely turning over to these “partners” as they facilitate the merchant’s online orders and deliveries. Do you think these tech companies are so dumb that they’re not doing anything with your transaction data? That they’re not learning what SKUs sell at what price and what velocity based upon geography, time of day, or customer demographics (which, by the way, they get from the customer’s name and payment credentials on their websites)?
Of course they are. And it even gets borderline unethical when these third party “partners” already have other lines of business that compete with their merchant “customers”. Case in point, now that Amazon owns Whole Foods and sells its own meal kits you think they’re not aggregating transaction data from their Amazon Restaurants division to figure out what to source in their stores or manufacture in their kits?
Don’t be a dolt.
But to one-up all of this, these “partners” are coming out and announcing to their customer base that they’re going to selectively compete with them head-on. Yes, the ultimate F-U is already underway and merchants can’t seem to be less bothered.
What do we mean?
Uber just announced plans to help certain operators expand operations using a virtual kitchen model (i.e. the restaurant only makes food to-go). How will Uber know what to sell, and at what price point to sell what it has operators make in its virtual kitchens?
By using the sales data it’s been collecting from your restaurants as part of its online ordering and delivery services.
When the virtual restaurant team notices supply gaps in any given neighborhood—if, say, the data show that the number of brunch places is lower than could be served based on searches—they’ll begin contacting businesses in the area. “We’d say, ‘If you served brunch, that would be good for your delivery business,’ ” Droege says. For restaurateurs, it can be a chance to spread their fixed costs over a higher volume of orders.
And don’t think that these third party “partners” will stop there: in a means to find continued growth (which is hard to do when you’re a $1200B company like Uber) don’t be surprised if these companies start operating virtual restaurants themselves – like Deliveroo has done in Hong Kong.
Seriously, only in brick and mortar could you pull this off and nobody bother to think more about it. Groupon, GrubHub, Uber Eats and others will pillage this industry until there’s nothing left; it’s their fiduciary responsibility to their shareholders. As increasing sales volume flows through these third parties the likelihood that they replace existing in-store technology providers – and ultimately the merchant themselves – looks more likely.
Brick and mortar ecosystem: wake the f*ck up.
And POS companies? You’ve run out of excuses to prevent your merchants from realizing this value through data partnerships.
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