{"id":412,"date":"2017-01-31T14:46:25","date_gmt":"2017-01-31T14:46:25","guid":{"rendered":"http:\/\/reformingretail.com\/?p=412"},"modified":"2019-01-23T07:45:05","modified_gmt":"2019-01-23T13:45:05","slug":"proof-that-downmarket-pos-vars-are-dangerously-treading-water","status":"publish","type":"post","link":"https:\/\/reformingretail.com\/index.php\/2017\/01\/31\/proof-that-downmarket-pos-vars-are-dangerously-treading-water\/","title":{"rendered":"Proof That Downmarket POS VARs Are Dangerously Treading Water"},"content":{"rendered":"<p>RestaurantOwner.com released its&nbsp;<a href=\"http:\/\/www.restaurantowner.com\/public\/2017-POS-Survey-Report.cfm\">2017 POS Survey Report<\/a>. The report summarizes input from 1,190 independent restaurant owners from around the world regarding over 100 different brands of POS software systems, focusing on several critical aspects including cost, installation and support experience, and features.<\/p>\n<p>It&#8217;s a small sample size but it&#8217;s still better than <strong>NO<\/strong> sample size. I&#8217;ll go through the results, and then tell you what I&#8217;m finding the most shocking.<\/p>\n<blockquote><p>The average cost for a restaurant POS system has notably decreased since 2012. In 2012, the average cost&nbsp;for a POS system was just over $18,000, as opposed to $13,344, currently.<\/p><\/blockquote>\n<p>Think of it this way: from 2012 to now the <a href=\"http:\/\/www.inflation.eu\/inflation-rates\/united-states\/historic-inflation\/cpi-inflation-united-states.aspx\">rate of inflation<\/a> has been an aggregate of 6.8%. So that 2012 POS price of $18,000 should rise to $19,244, not fall by 25% to $13,344. Cloud is incredibly responsible for this pricing trend (a real price drop of 31.8%) as it&#8217;s <a href=\"http:\/\/reformingretail.com\/index.php\/2016\/10\/19\/another-nail-in-the-pos-dealer-coffin\/\">dropping hardware, software and even support costs<\/a>. This is making it harder for POS dealers to eke a living.<\/p>\n<blockquote><p>The top seven POS solutions were Aloha POS, MICROS, Digital Dining, Clover, Aldelo POS, Future POS**, and POSitouch. These top seven POS systems accounted for 47.5% of the market. Beyond the top seven, all other POS brands each accounted for less than 3% of the market share.<\/p><\/blockquote>\n<p>I expect these results to be skewed depending on the sampling method. For instance, calling large restaurants in major metro areas will skew more towards legacy** Micros and Aloha since cloud POS has mostly started gobbling market share in the long tail of smaller establishments. However, one cloud system did make the list: <a href=\"https:\/\/www.clover.com\/\">Clover POS<\/a>.<\/p>\n<p>Clover is a POS company that was <a href=\"https:\/\/techcrunch.com\/2013\/10\/09\/first-data-quietly-buys-payments-startup-clover-launches-point-of-sale-platform-for-merchants\/\">acquired by First Data in late 2013<\/a> and is now being heavily pushed by First Data direct sales reps and their channel of payment partners. If you <em>assume<\/em> that this survey sampling method is free of bias, then you&#8217;ll note that Clover has itself been as popular as POS providers that have been around for decades.<\/p>\n<ul>\n<li>Aloha Technologies: <a href=\"http:\/\/www.bloomberg.com\/research\/stocks\/private\/snapshot.asp?privcapId=6812447\">founded 1992<\/a>&nbsp;but Radiant had been selling POS <a href=\"https:\/\/en.wikipedia.org\/wiki\/Radiant_Systems\">since 1985<\/a><\/li>\n<li>Micros Systems: <a href=\"https:\/\/en.wikipedia.org\/wiki\/MICROS_Systems\">founded 1977<\/a><\/li>\n<li>Digital Dining: <a href=\"http:\/\/www.digitaldining.com\/about-us\/\">founded 1978<\/a><\/li>\n<li>POSitouch: <a href=\"http:\/\/positouch.com\/\">founded 1980<\/a><\/li>\n<li>Future POS:<a href=\"http:\/\/web.futurepos.com\/about-future-pos\/\"> founded 1998<\/a><\/li>\n<\/ul>\n[bctt tweet=&#8221;In essence Clover has swallowed as much market share in three short years as your average legacy POS company did in&nbsp;33 years of effort.&#8221; username=&#8221;&#8221;]\n<p>This is the power of transformational changes in&nbsp;technology and aggressive channels that are set up to deliver.<\/p>\n<p><strong>**NOTE: Future POS (while defined as legacy) has made very impressive strides over the past few months on data replication and we expect them to&nbsp;be a force <a href=\"http:\/\/reformingretail.com\/index.php\/2016\/10\/19\/legacy-pos-is-dead-it-just-doesnt-know-it-yet\/\">per this explanation<\/a>.&nbsp;<\/strong><\/p>\n<blockquote><p>We identified a shift toward cloud-based systems and POS solutions offered by credit card processors. Clover, Dinerware, Harbor Touch, and Square were the top credit card processor provided POS solutions, accounting for nearly 11% of total market share.<\/p><\/blockquote>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"9\"><a href=\"http:\/\/www.harbortouch.com\/\">HarborTouch<\/a> started this trend and the results are paying off. Instead of requiring two entry points (and thus doubling distribution costs) into a merchant, the marrying of POS and payments processing has huge economic benefits to a&nbsp;merchant&#8217;s end-cost.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"9\">Here&#8217;s an example.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"9\">You pay someone $100\/day. Person A takes 10 days to convince a merchant to buy their processing. Person B takes 20 days to convince a merchant to buy their POS. Keeping these roles separate costs $3,000 (30 days @ $100\/day).<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"9\">By having one person sell <span style=\"text-decoration: underline;\">BOTH<\/span> POS and payments, you&#8217;ve cut your distribution costs drastically.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"9\">Heartland\/Global will throw&nbsp;another hat in this ring&nbsp;when it launches its cloud POS product this year, and more partnerships will come to fruition as payments and POS revenues fall further and&nbsp;synergies make economic sense looking forward.<\/p>\n<blockquote>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"9\">Despite the increased use of cloud-based and mobile systems, less than 10% of independent restaurant owners indicated they use pay-at-the-table devices. Moreover, only 31% of restaurants reported using EMV compliant POS systems. This is particularly noteworthy considering the fraud liability shift that took place in October 2015, mandating that merchants upgrade to EMV chip technology or accept increased liability for fraudulent transactions.<\/p>\n<\/blockquote>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">I don&#8217;t find this that surprising. Doing anything in brick and mortar takes forever. It takes even longer when you&#8217;re reliant on non-product companies to make product changes. Legacy POS software companies, despite selling and developing&nbsp;software, are not run like conventional software product companies like Google, Uber or Airbnb. The culture is totally different.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">That&#8217;s why I&#8217;m not shocked to learn that many ISVs weren&#8217;t compliant&nbsp;by the liability shift deadline. In fact I&#8217;ve heard (anecdotally) that many merchants using legacy POS systems were purchasing Clover mini&#8217;s so they would be EMV-compliant as their legacy providers were far away from being ready.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">But this last survey result might be the real&nbsp;icing on the cake&#8230;<\/p>\n<blockquote>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">Improvements in plug-and-play components, increased Wi-Fi capability, and a tech savvy labor pool are allowing many restaurant owners to opt for self-installation and remote support. As a consequence, only 74% reported using an authorized POS vendor for programming, training, and support.<\/p>\n<\/blockquote>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">This is wild.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">Most investors acknowledge that the B2B world lags behind the B2C world by 5-10 years. Yet while consumers are <a href=\"https:\/\/www.technologyreview.com\/s\/520821\/best-buy-battles-back-online\/\">buying about 25% of their electronics online directly<\/a>, it would appear that 26% of merchants are buying their POS directly.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">This means that, for whatever reason, B2B merchants are on pace <span style=\"text-decoration: underline;\">if not downright outpacing<\/span> consumer purchase channel trends. This is even more aggressive than our earlier analysis showing&nbsp;<a href=\"http:\/\/reformingretail.com\/index.php\/2017\/01\/09\/data-that-proves-cloud-pos-migration-is-happening-faster-than-believed\/\">8% of merchants buying POS directly <\/a>without a dealer.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">I&#8217;m going to go out on a limb and make another statement:<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\"><strong>26% of the merchants surveyed were already using a cloud POS. <\/strong><\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">How did I come up with that? Legacy systems are much more complicated to install and service. Thus those 26% of survey respondents that didn&#8217;t use a dealer were <em>probably<\/em> using a cloud POS system. This would only strengthen our assessment that half the market will be cloud by 2022.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">For instance, here&#8217;s a <a href=\"https:\/\/www.youtube.com\/watch?v=GiTchGZ-h2o&amp;list=PLXOHyaexNr9R9rDxOlnqskTU16ZvURIcP\">series of videos for Shopkeep setup <\/a>on Youtube. Now&nbsp;<a href=\"https:\/\/www.youtube.com\/results?search_query=aloha+pos+installation\">here&#8217;s a video search<\/a> for Aloha POS setup. Notice the difference?<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\"><strong>All in all this is horrible news for POS dealers. But we have some thoughts before we end it on&nbsp;this down note.<\/strong><\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">Cloud POS has been mostly focused on the cost-conscious merchant. The first successes of cloud were small merchants who were either changing from a cash register to a POS for the first time, or from pen and paper to software.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">These smaller merchants will look to keep costs low any way possible. If that means spending a few hours to set up their systems and do programming and training themselves, no sweat.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">Dealers are not going to be able to survive&nbsp;in this segment of the market. Period. These merchants don&#8217;t have much to spend and they&#8217;re willingly trading the risk of remote support for the cost of in-person service. I don&#8217;t see this changing.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">As you move upmarket&nbsp;to larger merchants you&#8217;ll find customers&nbsp;that are willing to trade time for money. An owner of a five-unit outlet will pay someone $1,000 to set up their new system&nbsp;so they can watch their kids play soccer instead. If a system goes down during rush hour they want someone onsite ASAP to fix it.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">These clients also have more disposable income for services that dealers can sell: analytics, loyalty, marketing, security, business consulting, etc.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">In essence we&#8217;re starting to see a clear bifurcation in the market, with cloud POS dominating the long tail of frugal merchants.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-428\" src=\"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/Screen-Shot-2017-01-27-at-2.37.57-PM-1024x458.png?resize=670%2C300\" alt=\"\" width=\"670\" height=\"300\" srcset=\"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/Screen-Shot-2017-01-27-at-2.37.57-PM.png?resize=1024%2C458&amp;ssl=1 1024w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/Screen-Shot-2017-01-27-at-2.37.57-PM.png?resize=300%2C134&amp;ssl=1 300w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/Screen-Shot-2017-01-27-at-2.37.57-PM.png?resize=768%2C344&amp;ssl=1 768w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/Screen-Shot-2017-01-27-at-2.37.57-PM.png?resize=370%2C165&amp;ssl=1 370w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/Screen-Shot-2017-01-27-at-2.37.57-PM.png?resize=270%2C121&amp;ssl=1 270w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/Screen-Shot-2017-01-27-at-2.37.57-PM.png?resize=740%2C331&amp;ssl=1 740w, https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/Screen-Shot-2017-01-27-at-2.37.57-PM.png?w=1176&amp;ssl=1 1176w\" sizes=\"auto, (max-width: 670px) 100vw, 670px\" \/><\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">However, it&#8217;s just as&nbsp;foolish to think that dealers will forever be safe upmarket. Eventually the POS systems will be so easy to install, and so stable to operate, that a smart IT manager will ask,<\/p>\n<blockquote>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">It&#8217;s going to take me an hour to install this and I&#8217;ll have a support issue once a year. Maybe. Why am I paying you thousands of dollars?<\/p>\n<\/blockquote>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">This is why it&#8217;s critical for dealers to learn how to place value on their knowledge and continue learning about new products they can crossell.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\" data-type=\"text\" data-reactid=\"10\">But those&nbsp;specifics we&#8217;ll save for another post&#8230;<\/p>\n<p><script async=\"\" src=\"https:\/\/widget.websitevoice.com\/UMwLESBjj1uq-UOHwOeBBw\"><\/script><br \/>\n<script>\n  window.wvData=window.wvData||{};function wvtag(a,b){wvData[a]=b;}\n  wvtag('id', 'UMwLESBjj1uq-UOHwOeBBw');\n  wvtag('widget-style', {\n    backgroundColor: '#F5953E',\n    contrast: 'wv-contrast-dark'\n  });\n<\/script><\/p>\n","protected":false},"excerpt":{"rendered":"<p>RestaurantOwner.com released its&nbsp;2017 POS Survey Report. The report summarizes input from 1,190 independent restaurant owners from around the world regarding over 100 different brands of POS software systems, focusing on several critical aspects including cost, installation and support experience, and features. It&#8217;s a small sample size but it&#8217;s still better than NO sample size. I&#8217;ll [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":2522,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":true,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[5,3],"tags":[],"class_list":["post-412","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-solutions","category-pos"],"jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p81nA2-6E","jetpack_featured_media_url":"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2017\/01\/a1-5.png?fit=1024%2C458&ssl=1","_links":{"self":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/412","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/comments?post=412"}],"version-history":[{"count":11,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/412\/revisions"}],"predecessor-version":[{"id":4089,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/412\/revisions\/4089"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/media\/2522"}],"wp:attachment":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/media?parent=412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/categories?post=412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/tags?post=412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}