Slice has been going after the independent pizza space like a fat kid (figuratively) chasing after cake. We’ve seen Slice from the consumer’s perspective over the last few years, but really didn’t think much of it since it was outside our wheelhouse of general interests (data, POS, payments, etc).
However, that all changed when they acquired Instore, a cloud POS that focused on independent retail and restaurant merchants. In fact, Instore was the first POS company we ever saw building loyalty programs tied to the credit card, far outpacing companies like Square and even rivaling Thanx. Matt Niehaus, Instore’s founder, was truly way ahead of his time.
As Instore’s competitors started inhaling massive amounts of capital, it was either raise big or find a buyer, and Instore chose the latter. With the story lines converging we started to pay attention.
Slice already counts 16,000 independent pizzerias as customers, which is about a quarter of the US independent pizzeria market of 57,000 locations. What fascinates us most about this dynamic is that it’s contrary to what we traditionally witness: POS company slowly tries (and fails) to monopolize the stack.
In Slice’s case the company started with a consumer platform and went into POS. For the record, it’s precisely what we expect the third party delivery companies to do, and it’s what some of them have already been doing. Slice might just be a little further ahead than most.
Accordingly, Slice doesn’t think of itself as a POS company. Matt Niehaus tells us that Slice views itself as “Dominos for independent pizzerias”. “Dominos crushed online and ecommerce, with 75% of franchise volume coming in online. That creates a massive repository of customer information and Dominos has exploited the weakness of their competitors in understanding and making use of this data. Our goal is to make independent pizzerias as successful as Domino’s, and POS is an important part of that equation.”
Matt views Slice Register (the POS based on Instore’s platform) as the independent operator’s onramp to the digital world. “When we start combining the offline world with the online world there are some pretty magical things that happen for our customers,” says Matt. As an example, Register allows Slice merchants to take offline customers, identify them, and convert them to online customers.
Slice pizzerias are also benefiting from a unified marketplace app, where consumers can search and order from any of Slice’s pizzerias. The app is so prevalent that even regional chains like Roundtable Pizza have leaned heavily on its capabilities. How much does ordering from Slice’s app cost the merchant?
A meager 10%.
Yea, that’s right – 67% less than the name brand third party delivery and ordering companies. Slice might as well brand themselves UNICEF by comparison. “We need to make sure our tools are profitable for our customers and we don’t think higher commission fees on orders accomplish this for restaurants anywhere,” Matt tells us.
Additionally, Slice will power local pizzerias with their own websites and digital content. “Slice Register allows us to capture the offline data for a network-wide loyalty program, Slice Rewards, where a user will earn a free cheese pizza at any Slice pizzeria after 8 orders over $15.” Part of this includes assistance with Google Ordering and Google My Business management.
Somewhere in this marketing story is Accelerate, where Slice underwrites a shop rebrand and assists with digital marketing for shops on the program. “Accelerate is a major investment by Slice in individual pizzerias. Our early results have seen merchant revenue up 30% after joining the Accelerate program; as the shop grows, our business grows alongside them, providing return on our investment.” This is one of the coolest programs we’ve seen in the industry and we suspect this becomes standard: a merchant’s marketing becomes free in exchange for a share of proven results. Slice hasn’t taken things to this degree quite yet, but from our own personal experience merchants hate spending money on marketing without knowing if it worked; this has been the allure of the 3PDs who only charge for proven revenue and we think the model becomes commonplace as marketing matures and ROI can be more tangibly measured.
On the payments side of the house, Slice has leveraged Stripe for online payments. “We’re moving to card present payments now, where Register can help us create economies of scale and lower processing costs across our entire shop portfolio.” Stripe is a great payment option, but it’s not exactly cheap: you pay for its ease of use and reliability. We’ll be curious to see just how much leverage Slice can create.
One thing that we’ve noted is Slice’s reliance on overseas labor. We don’t question why: independent merchants pay next to nothing for solutions and shelling out $500,000 a year for a data scientist will be lost on an SMB who shits all over your product. Slice specifically uses Macedonia for a large percentage of sales and support functions, giving them a cost advantage over companies that have US-based sales operations.
We’ll end with this:
Pizza POS is really hard due to myriad configurations and toppings combinations. Focusing on one segment makes a lot of sense and it’s likely that Slice will have the best pure-pizza POS in short order. Is the pizza market TAM large enough to become a multi-billion dollar company?
That’s a different question altogether. But we like what we’re seeing.
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