Reforming Retail

Payments Data Is As Important As POS Data. When Do Merchants Wake up?

A bit of history for everyone.

In 2007, Domino’s franchisees sued Domino’s corporate for mandating that franchisees use their homegrown point of sale system, called PULSE. Domino’s ultimately won the suit in federal appeals court in 2008.

Today, Domino’s franchisees pay what amounts to $400/mo for their Pulse POS.

And since winning the 2008 lawsuit, Domino’s stock looks like a rocket ship.

Now you luddites out there might be asking how Domino’s has performed so well while other restaurants have struggled to match the pace of a public index.

For an example of a less tech-centric restaurant, here’s Cheesecake Factory versus the Nasdaq and S&P 500, underperforming by 9x and 4.5x respectively.

Der der der, why IZ Domino’s performun so goooood?

A few things.

First, Domino’s has benefitted from a cuisine type with high repeatability, near-perfect off-premises quality stability, and great margins.

But more importantly, Domino’s used centralized ordering data that it collected from their mandated PULSE POS system to lean on their advantages and really take market share from competition.

With unified POS data Domino’s could:

  • Understand product velocity for intelligent COGS + labor management
  • Measure efficacy of marketing and promotions
  • Centralize customer ordering data and build intelligent marketing personas
  • A whole bunch of other things that we don’t want to list

The takeaway here is that data + tech is going to win.

And win big.

Especially in a low margin vertical where tech-enabled margins truly get to brag about being incremental.

And it’s not really rocket science, but when competition struggles to rub two sticks together then you can clearly earn large returns at their expense.

With all of this as background, it sets the stage for our next argument.

As Domino’s has hopefully made clear, franchisors have a lot to gain by mandating POS to consolidate data.

But there’s another set of data that we expect to become just as valuable when merchants finally wake up…

Payments data.

Ecommerce/online ordering/delivery is undoubtedly a growing part of the restaurant industry, but it’s still the minority.

By a long shot.

Not to say it won’t change, but because breeding requires physical proximity (at least to be enjoyable), people still want to be entertained and leave their homes.

Most of these on-prem diners are unknown to the merchant.

The shortest leap to understanding these customers – and their behaviors – is to follow their credit card.

But choosing the wrong payments provider completely blocks you from accessing this data.

Toast, for example, has refused to share this data with their merchants.

Even though it’s their merchants’ data.

You know, this Toast company is starting to sound like a bunch of bad actors…

As some (and sadly too few) offline merchants recognize the need to track customer payment data, the larger processors – who have no organic growth and resort to scheming bullshit fees – have started to charge merchants for this data.

The merchant’s own data, technically, but contracts have never prevented a processor from making money in unscrupulous ways.

We’ve even seen the gall of some of these processors to ask for hundreds of thousands of dollars annually to deliver a merchant’s own payments data.

Total. Bupkis.

Guess what?

Turns out payments is commoditized, and the processors who would charge you for your own data are also highly likely to be jamming you full of trash fees when you’re not paying attention.

So we expect merchants to wake up and start demanding higher quality data from their processors. And when they can’t get it, they’ll probably save money in moving processors.

Because no, this doesn’t become a new revenue stream for processors: this becomes table stakes.

Anyone who tells you otherwise is full of shit.

We’ve personally had to move billions in processing volume for our customers to ensure they get the necessary payments data to make more money with Aben’s marketing tools.

Most merchants won’t understand this for another decade, just like it took a decade for merchants to realize POS data mattered.

Franchisors that mandate payments might find themselves entangled in franchisee lawsuits, even though increased processing volume across a franchisee base would all but guarantee a lower payments rates for franchisees.

But if you want returns that look like those of Domino’s, you really gotta get consistent payments data.

When you’re ready to un-fuck yourself, drop us a line.

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