This is (to me) the most interesting thing I've seen Square do since they launched. It's a bit pricey, but there are lots of great examples of pickup/takeout working well -- chipotle, for one. If smaller stores could do this easily, I'd be a lot more likely to order from them, especially if it's a larger/group order where spending the time on the phone is a pain (and often incorrect).
I don't think the economics of a lot of the delivery services work, especially for single-person or other small orders; here, it's pure cost savings. The 8% cut is ...ambitious, but it might make sense, and they can always drop it to something more reasonable like 5%.
For business with a limited sales window and highly perishable inventory (bagel store in the morning), standing in line may be the bottleneck preventing more customer and order throughput. If the store is able to expand their capacity via an order ahead app allowing them to capture new sales they would not have otherwise gotten, 8% seems much more reasonable.
Of course, some existing customers and sales will also move in that direction, so the answer here may be, as is often the case, it depends.
What I find truly fascinating is that Square is(was) a "payments" company. Or, more specifically, a credit card terminal company. But this offering and their recent acquisition of BookFresh makes them more of a back-end for small business. They may be one of the few companies to have figured out how to sell to small business at scale.
Apparently the answer there is, find something small, complicated, and annoying... fix it. Build that toehold into a platform to take on the larger opportunity.
I agree with you on the Chipotle experience, surprisingly well done.
Ambitious is right - I feel like the 8% is too steep a barrier to entry. If they launched it at 5% I could see it getting much higher adoption. Do you think it's as simple as "they can always drop it" or might a competitor outdo them on price and become the standard?
I don't think most people realize how hard online-to-local-pickup is for a retailer. "Interested in local pickup? Give us a call." is going to be a better customer experience 9 times out of 10. I hope Square gets it. Retailers - many of them with limited resources and technical skills - face big technical, UI, and logistical issues. I'll give one implementation example that shows all three; this applies to all retailers who don't stock everything in the store OR have multiple locations.
The retailer must essentially keep availability counts for items that can be sold online (if different), then a separate list per store. These lists must be accurate or you're going to have angry customers showing up to grab items you don't have - and anyone who has done retail knows how hard accurate inventory can be, especially with entry-level staff.
Once inventory is accurate, these retailers must then program their sites to show which items are available for pickup at which locations. THEN if you want to allow customers to pick up items that aren't in the store, you need to communicate when they can pick it up based on delivery time.
It gets complicated: do you have the customer choose their closest store up front, even if they don't want to do local pickup? This implementation wastes online buyers' time and creates a barrier to browsing. Do you have customers choose the store when they check out? If so, the option might not be available for the items they've chosen thereby frustrating your customer. Do they choose the store on the product page? The product page is usually your busiest page already, and you generally don't want to add any steps between it and checkout.
Regardless of which option you choose, you then have to figure out how to deal with available at nearby locations. Do you really want your user selecting all 3 nearby locations to check availability for pickup? Do you want to display every nearby store that could fulfill pickup? How do you give them the message that it's available nearby? Should you share the negative when it's not available nearby either to prevent them from checking each store?
The questions just go on.
It's not impossible, but there's a lot that could go wrong here for two or three-store retailer. Even Target got it wrong when I recently tried to buy a wedding gift. They wanted me to wait 2 days for them to deliver a vacuum to the store, even though they had half a dozen in stock when I called.
Not related to Square, per se, but to give you an example from a completely different domain-- car sales.
My wife and I were researching minivans in our metro area. We got calls from the dealership asking if we're still interested in the vehicle. We said 'yes'. One hour before we drove to the 'burbs' to check it out, I called to confirm the availability of said vehicle. They said 'yes, it's still here.' We get to the dealership only to find out that the vehicle was sold THE DAY BEFORE. A major car dealership didn't have a system in place to know their inventory at any given point in time. They're a part of a weird "sharing" system between dealerships that can borrow/trade/steal vehicles from their partner dealerships-- all within the same "family" company. But they clearly had no way to track this activity.
It seems that inventory control/management spans many domains. Needless to say, they lost our business and we bought from someone else.
It's possible, especially given the research available to anyone with a smartphone. They were a big dealership, but the whole experience smelled of a shady used car salesman.
Yes sadly the sales guy thinks like this i) Tell him the car is not here they don't come chance of sale = 0%. ii) Tell them the car is here then it's not here but maybe sell them something else = 10%.
Car dealerships are apparently still pretty primitive in terms of inventory management - which I guess is unsurprising given that they're mostly small businesses. NPR recently did a piece on one of the top Jeep dealerships on Long Island and they had issues like selling the same car twice, or selling a car that was no longer on the lot, because they were literally using a whiteboard to track what had been sold (and even more informal methods for tracking cars that had been "put on hold".)
It was a very informative episode, and did a great job highlighting the financial difficulties faced by car dealerships. It made me sympathetic to their plight, but it's an old business model and I still prefer the direct sales method being championed by Tesla.
In 1997, I bought a new car. Look at that dot matrix printer in the finance office. Bet I'll never see one of those again for the rest of my life.
I got into my financial situation by not wasting money, and it seems a properly maintained 90s car could last 16 years..
You guessed it, October of 2014 and there's still a dot matrix printer in the financial office.
I've worked with cheap lasers and I've worked with expensive lasers and from a labor cost perspective it would take several thousand dollars to get a new laser as fast as the dot matrix, so I can't blame them. The latency of completely printing a form was perhaps 1/4 the time it takes a typical laser to warm the fuser, and surely the energy cost is lower...
It works a lot better for food & drink — Starbucks or your local coffee shop has very few items and they better be in stock!
For local inventory — I work for a team which has been trying to collect this data for years. You're 100% right ... it is extraordinarily hard. What's particularly crazy to me is that consumers are already starting to _expect_ it from businesses, and are shocked/angry when it isn't perfectly accurate. I think it is a carry-over from web shopping — it works there, why shouldn't it work in a store?
This would work for people who are just trying to avoid the line at the coffee shop, though. Coffee (pastries, etc.) are made-to-order, and I would be fine ordering on an app before I even got in the car if it meant that I didn't have to sit in a line when I got there (assuming it's a busy time)
> Even Target got it wrong when I recently tried to buy a wedding gift. They wanted me to wait 2 days for them to deliver a vacuum to the store, even though they had half a dozen in stock when I called.
Had a similar experience ordering from Chapters Indigo around Christmas. I had the option to pick it up in-store, or ship it to my home. It was quicker to ship it to my home, because they wanted to ship it from their warehouse to the store I would pick it up at... even though that store had the item in-stock. This service would take up to 2-3 weeks to happen, IIRC (though I may be remembering wrong).
For food trucks, this seems interesting. Most food trucks I see using square enter the orders directly into square already. If I can avoid the line at a food truck by putting in my order and just wait for them to call my name with my food, that would be pretty amazing.
Busy food truck lines are not great for calling names out. With a line of people yapping, and traffic noise, you have to be nearly under the canopy to hear your name called, and there's only room there for ~8 people (crowded). So they'd have to send you an update to your mobile device, which now creates more questions like, how to communicate to the person in line that's been waiting for 15 minutes that no, you are not cutting in line. Once you navigate the line to the truck, do you show your phone to the person and hope they have good organization of orders pending pickup? Does Square help the business with that aspect?
> So they'd have to send you an update to your mobile device, which now creates more questions like, how to communicate to the person in line that's been waiting for 15 minutes that no, you are not cutting in line.
Something like a pick-up window would work.
> do you show your phone to the person and hope they have good organization of orders pending pickup?
In my opinion, if the food truck has implemented this Square software, they might keep "organization of orders pending pickup" in mind. Showing your phone to the person should be enough, (with some sort of simple identification on the phone message).
I don't know if Square Pickup does this but I'm just arguing against your doubt that it wouldn't work.
I used Paypal to pay for something in-store recently and they identified me by matching the selfie that I took in the app (that showed up on their iPad screen tied to my name) to the same one shown on the app on my phone that I held up for them. Pretty neat/clever and would work just as well here.
Overall I can't help shake the impression that this is kind of a "Yelp move": your core business model isn't that hot, so break the glass of the nearest hot business model and copy it. Yelp's done that with daily deals, checkins, etc.. This is Square doing a "GrubHub".
But, finally a product from Square with a fat profit margin (an extra 5.25%). I wonder if this is a sign of their future monetization strategy.
Their base processing fee of 2.75% + $0.00 is probably actually pretty low-margin for the particular "very small business" market they're targeting. There are big advertising costs, lower volumes per business and probably higher fraud rates.
And upmarket from that, medium-sized businesses are used to commodity processing fees closer to 2%. The whole "free reader/register" pitch is not as appealing there, where a higher processing fee would end up costing a lot more.
Maybe their strategy is to break even on the base processing to get mindshare and sell premium services like this. The challenge, as with all "Yelp moves", is that it makes you a follower not a leader.
(P.S. I don't mean to single out Yelp too much here.. plenty companies do it. I think they came to mind because they're also in the small business space.)
You can't just make a statement like that and play it off. Citations? I see Square devices used everywhere in retail, and no, I don't live in San Francisco or the Bay Area.
That's not their problem. There was some scrutiny of their business model around their recent IPO postponement & acquisition rumors. Here's a citation:
But Square's business yields razor-thin profit margins, if any... About four-fifths of that money is spent on fees to payment networks... other financial intermediaries and fraud costs...
Square's gross margin, the portion of revenue remaining after paying processors and covering other costs like fraud, fell to 21% in 2013, from 27% in 2012, according to a copy of Square's results viewed by The Wall Street Journal.
Square has been adding services that could eventually be more profitable than its main payments business.
But in recent weeks, people close to Square have indicated to Wall Street executives that a 2014 offering is unlikely because the company has run into problems with its "revenue run rate," a key projection of future performance. It has been reported that Square is unprofitable, but that 2013 revenues exceeded $100 million.
I do live in the Bay Area and the only place I have seen Square is at coffee shops and farmers market stands. I don't think it has that much traction and their growth is reported to be poor (or negative, I forget which). The mag stripe reader was a cute hack but when you get down to it the service is pretty expensive and you need a huge up-front investment in equipment, compared to ordinary cash registers which are dirt cheap.
Square is a POS system, comparing it with a cash register is ridiculous. Many POS systems sold to restaurants fly well above the thousands of dollars with shitty UIs that take hours for employees to learn (knowing the turnover in the food industry, it's a lot of wasted time).
From a quick read of the docs, it's just simple status management - basically a kitchen ticket tracker. Orders move from Pending to Accepted to Done and parties are notified along the way.
"Square’s standard fee of 2.75% will be applied to the total amount of each pickup sale for a limited time, until July 1st, 2014. After this time, the fee will be 8% per pickup order."
"While the 8% fee seems high compared to Square's standard 2.75% transaction fee, the average merchant fee for food ordering services is about 13.5%, McKee says. Square is offering a promotional rate of 2.75% per order through July 1."
GrubHub is a service that bolts on delivery to restaurants that may not normally deliver.
This is just a feature where Square-powered stores can offer customers the ability to place an order for a product remotely, and then be notified of when it's ready. At which point the customer can go to the physical storefront and pick up the item. There's no addition of delivery and it's not limited to food.
EDIT: Looks like GrubHub offers take-out services as well as delivery. I didn't know this because they aren't available in my city so I haven't kept up with them.
Actually GrubHub is an aggregator of restaurants that offer delivery. You browse GrubHub to find all nearby restaurants that will deliver (or offer take-out), you place your order through GrubHub, and then GrubHub relays that order to the restaurant.
In Square Pickup's case, this is an easy storefront for restaurants to offer their own online take-out interface. It looks like each restaurant gets their own white-labeled website, rather than just being a behind-the-scenes supplier to Square. You go to the website of the restaurant you want to order from and place the order directly with them.
I think this is closer to OrderAhead, which is an app that (at least in SF) a lot of restaurants use to allow you to place an order and pay for it, then just pick it up without having to wait on a register/checkout process.
(My one complaint about OrderAhead - they split any tip you give with the business, rather than just giving it all over to the business for the employees. That seems unfair to the employees.)
It seems like they currently have two products: Square Market, for online sellers, and the Square Reader, for retail point-of-sale. This product connects them, so you can use the online storefront to buy things that are delivered at the point-of-sale.
This is totally the right direction Square is heading to: provide complimentary service which makes the real profit. 8% seems steep but you get their super low 2.75% credit card processing fee so the total package is still appealing.
It's like bundle sale: have something charming as primary item and earn real money by less attractive add-ons.
One other contender in the restaurant domain is EatStreet.
As a consumer I've had great service from EatStreet and their local restaurant partners. No idea what the vendor side of the process is like. Square is building quite a tie-in to their handy hardware as much as the app itself.
Novel, but I sure hope they aren't banking on this.
I worked for a retail store in College that had this implemented with their POS. The setup was similar, without the iPads. More customers would still order the product from the warehouse and have it delivered to the store rather than pick it up that day out of the stores stock.
So, it's my experience that this will not work. However, I wish them the best. Maybe they can shake things up a bit.
I don't think the economics of a lot of the delivery services work, especially for single-person or other small orders; here, it's pure cost savings. The 8% cut is ...ambitious, but it might make sense, and they can always drop it to something more reasonable like 5%.