Recently we were invited to Restaurant Technology Guy’s podcast. If you weren’t already a listener, they release a podcast every week covering all things restaurant, with a heavy focus on tech and innovation. The podcast is run by CBS, one of the country’s largest POS resellers who then built Northstar, a cloud POS system giving a real challenge to the legacy incumbents in enterprise.
Jeremy Julian, the podcast’s host, and I discussed industry data trends, and how tech is shaping to wrangle all the data into useful, and dare we say, “actionable”, information. Pretty quickly we aligned to the two main problems facing the retail industry, which includes the restaurant vertical.
The first problem is what we like to colloquially express as,
The math must pencil.
By that we mean the time and cost investments need to make financial sense. Investors hate retail for a few reasons.
First, there’s this thing called Amazon that’s crushing nearly everything in retail. So putting money into retail is putting money into a shrinking category with sophisticated and well funded competition looking to take everything you own.
Second, retailers – definitely inclusive of restaurants – are so unsophisticated that the sales cycle almost never make sense. This is sadly common in even the enterprise segments of the market where “executives” often lack outside experience and eschew modernization for the fear of looking unqualified for their overpaid jobs… which is the the inescapable truth 90-something percent of the time.
-> Pulling out an oldie but goodie – read this if you want all the data you need on the ridiculousness of enterprise restaurants. Here’s a quote from that article:
This simplistic comparison of grocery to restaurants highlights the major risks: even though restaurant and grocery markets are nearly the same size (~$700B/year in the US), investors have put 10x more money in 1/5th the time into a solution that serves grocery over one that serves restaurants. Another way to frame it is that investors think restaurants are 50x riskier than grocers as measured by the time it takes them to become educated on innovation – and they put their money where their mouth is.
https://reformingretail.com/index.php/2016/12/27/why-restaurants-cant-and-dont-have-nice-things/
But back to the breakdown of average SaaS sales cycles by annual revenue (ACV).
Retailers far exceed these averages. To make matter worse, they pay so little for anything (except for payments processing, where they get absolutely savaged because some of them literally – hold your laughter – believe POS / other tools that time a lot of time and money to build are legitimately free) that these numbers end up looking really skewed.
The second problem is intricately related to the first problem:
Vendors in retail don’t invest in data science and automation.
Data scientists are expensive, and building products more evolved than a basic reporting interface (which is the status quo for nearly every provider out there) takes a lot of time. Just think about it: giving you a dashboard is 1 on a scale of 1 to 10. Telling you what you should do, quantifying that value, then auditing data to see if the action was taken and what financial gain was realized is exponentially more work, and therefore exponentially more expensive.
It gets even more fascinating when you learn that even if you invested a lot of money into building products that demonstrate higher ROI and make lives easier, retailers almost never pay for the value (probably because they’re busy giving all their customers away to third parties or taking a ride on the payments sodomy train).
This gets us to a vicious cycle: how/why invest in products if the customers don’t pay for the value? POS is classic example, where ERP systems of similar magnitude command a 10x price. Yet for brick and mortar merchants, half of whom literally believe POS is “free”, they’ll quibble over $50/mo per location for the solution that’s running their whole fucking business! Payments only exacerbates the problem, investing the minimum possible to win payments accounts while convincing the merchant that everything is gratis.
If you want better solutions you
- Need leadership that believes in data and software. This means you probably have to fire everyone at the company
- Need to move faster. You can’t spend six years deciding if you should use data to change item prices. Wake the hell up
- Need to pay for value. You can’t expect quality solutions with reasonable support if you’re not willing to pay for what software costs. News flash: software engineers don’t make $8/hr.
It’s actually a pretty easy fix but it won’t happen. You know where the above three items are happening though?
At Amazon, and at third party delivery companies like UberEats et al. Without material change, guess who’s going to win that battle?
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