The New POS Model: Direct to End User?
The existing model of VARs (value added resellers) as middlemen between POS (point of sale) suppliers and end users is being challenged by direct-to-merchant POS solutions. Square, Flint, eMobile and other small footprint systems are elbowing their way into the traditional POS structure.
The competition is coming from payment processing companies that bring low-priced hardware and software alternatives directly to the retail and hospitality market, along with lower transaction fees. Retailers are becoming lured by the high-tech cachet of tablet-based POS solutions that are inexpensive, pick and play and tablet-based POS. And the increasing cost to merchants for credit card transactions and processing fees which went into effect in January of 2013 are also impacting their decisions on which POS to integrate into their business.
Square, for example, one of the largest mobile payment processing POS, recently introduced new hardware for iPad users. The Square Stand turns an iPad into a true POS system that is low-profile, inexpensive and simple, all features that would be attractive to retail, restaurant and hospitality venues. And their payment processing fee is one of the lowest in the industry, giving a merchant the option of paying a blanket rate of $275 per month with no individual fees; or 2.75% per sale with no monthly fees.
Flint allows mobile devices to accept credit cards without the need for a card reader or additional hardware. A retailer can simply use a phone or tablet to take a picture of the credit card numbers to receive payment. Fees for debit card transactions are 1.95% + $0.20 per charge. Fees for credit cards are 2.95% + $0.20.
While most POS systems don’t have the flexibility to adjust the high cost to merchants of transaction fees, some VARs are addressing the challenge of up-front costs by offering POS solutions to retailers as SaaS (Sales as a Service) bundled solutions that can include hardware, software, credit card processing, security, infrastructure and more, all billed as a monthly fee, as opposed to selling the equipment outright. It’s less expensive for VAR customers and creates a steady revenue stream for the VAR while enhancing long-term relationship with the customer, allowing for networking opportunities as well as expansion of service sales as they become available. While still essentially a “middle man” in the transaction, the VAR is offering its expertise in helping less experienced retailers with providing the most appropriate solutions for their specific needs.
Of course, there are challenges to changing a VAR business model. Questions to ask include, “Is your corporate mindset ready to change? Is your staff, technical and sales, prepared to offer and support a new model? Is the company solvent enough to fund it in the short term? Will your vendors be flexible as you transition?” These are hard questions that must be addressed, but the future of the company’s POS dealership could be at stake. The most important thing is to listen to your customers, nurture trust, and help them select and use the most practical and appropriate technology for their business.
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