{"id":6445,"date":"2020-03-05T07:01:49","date_gmt":"2020-03-05T13:01:49","guid":{"rendered":"https:\/\/reformingretail.com\/?p=6445"},"modified":"2020-03-05T07:01:57","modified_gmt":"2020-03-05T13:01:57","slug":"lightspeed-is-buying-market-share-but-at-a-real-cost","status":"publish","type":"post","link":"https:\/\/reformingretail.com\/index.php\/2020\/03\/05\/lightspeed-is-buying-market-share-but-at-a-real-cost\/","title":{"rendered":"Lightspeed Is Buying Market Share, But at A Real Cost"},"content":{"rendered":"\n

Lightspeed POS has picked up a few POS companies over the past few quarters that have been raising some eyebrows. From Kounta in Australia<\/a> to Gastrofix in Germany<\/a>, these acquisitions give Lightspeed a foothold in new geographies.<\/p>\n\n\n\n

Financially speaking the transactions make a lot of sense for Lightspeed: Lighstpeed can buy a company at 5-6x revenue, hold it for a quarter, then get the market to give them 15-20x revenue value for the same<\/em> business. This is what we would call arbitrage, and it’s a tried-and-true financial trick.<\/p>\n\n\n\n

Lightspeed shared that their underlying business strategy in acquiring other assets was to get a foothold in new markets. While companies like Toast are sucking up all the air in the US, they haven’t yet crossed the pond in a meaningful way. TouchBistro has some overseas forays, as does Revel, but nobody has raised $50M to build a POS business outside the US that we know of (Vend is a close exception having raised $46M in NZ). Buying a leading POS in these relatively virgin geographies can give Lightspeed a head start.<\/p>\n\n\n\n

But this doesn’t come without some other considerations.<\/p>\n\n\n\n

Software is hard to build. It’s not payments, which is second only to inheritance on the scale of easy money. If Lightspeed were buying bolt-ons – let’s say loyalty – it would be much easier to integrate the bolt-on to Lightspeed merchants. But Lightspeed is buying POS. This is a different story.<\/p>\n\n\n\n

The code base for one POS is way different than the code base for another. Odds are that they aren’t written in the same languages, and we couldn’t imagine trying to string them together on a feature-by-feature basis.<\/p>\n\n\n\n

This is going to make sales and support increasingly difficult. If Lightspeed wants to add a new feature, how do they migrate that feature to one of their acquisitions? They can’t. Or at least can’t do it quickly. For all intents and purposes these are totally different products, even if they serve the same type of customer.<\/p>\n\n\n\n

Where this will really get sticky is when Lightspeed wants to offer a consistent user experience. If you’re a third party company you can no longer just integrate to a Lightspeed API and serve all of their merchants. Now you probably need to integrate to multiple APIs, and what works for Lightspeed won’t work for Gastrofix. It’s why, as Lighstpeed customers tell us, Lightspeed has even struggled when handling customers with both Lightspeed’s cloud POS and Lightspeed’s on-prem POS (recall that Lightspeed’s cloud system was acquired)<\/a>.<\/p>\n\n\n\n

We don’t think Lightspeed will do what payments companies do and give up on their software acquisitions (RIP anything at Heartland that isn’t Mobilebytes<\/a>, and probably<\/em> RIP anything at Shift4 that isn’t Harbortouch Bar and Restaurant). But it’s not going to be smooth sailing, either. Lightspeed doesn’t want to be a software holding company, so it will need to be mindful of how it executes the customer experience going forward. These are long-term considerations any shareholder must be aware of.<\/p>\n