Apparently I struck a nerve in our industry when I published my post titled “There’s a clear roadmap for POS resellers in 2019. Are you being left behind?” a few weeks back. I opined that the only two paths forward for point of sale VARs are to (1) stop selling to micro-merchants and focus on SMB or large/chain merchants or (2) run very lean internally and sell only to a niche vertical. There was a day POS resellers could build a healthy business on only hardware sales and payments residuals, but I don’t believe that day is anywhere on this year’s (or next year’s) calendar.
Several industry executives reached out to me to offer their thoughts on my supposition – can I dub this the Roddy Reseller Roadmap Theorem? – and I’d like to share portions of our email exchanges with you. The names of all individuals, companies, and locations have been removed to maintain anonymity.
POS VAR’s “personal struggle”
Great editorial on the roadmap for 2019. As a small – very small – POS VAR in [location], I am fighting against the tablet players, and the heavily marketed [competitor]. Many of my existing table service clients and new prospects are easily swayed into the lower upfront, merchant processing driven sale vs. a feature/service/open architecture driven solution the VARs are used to providing.
My personal struggle is a fight between mimicking that same merchant processing business model – through sweat and tears as you similarly wrote – or catering to the SMBs, which are also looking to change their business operations model. I have a few concepts between 8-50 locations. At least three of them have decreased their administration office square footage, consolidated administration operations in terms of labor in favor of automated services, and passed on more responsibilities to their regional/district managers.
For my business, I choose to see this as an opportunity as these clients are now saving hundreds, if not millions of dollars in OPEX (operating expenses), thus making sure my contracts are paid. The value for our services is still there, as I hope to provide a valuable irreplaceable asset. My only hope is the economy at least maintains its hunger – affords to feed it.
Thanks for the feedback. I appreciate you taking the time to share your perspective. I think you’ve identified a great opportunity with those SMB merchants. They are looking to reduce their overhead without reducing functionality. That can be accomplished with the steps you mentioned + technology/automation filling in the gaps where manual labor was needed before.
I was just talking with a traditional POS reseller about dropping “POS” from their company name and instead going with something like “_____ Restaurant Solutions” to show they provide products and services beyond the POS. If you can market yourself as a company who can affordably fill in their management gaps and then can deliver on that promise, you will be an irreplaceable asset!
Early adopter: “Model is holding up”
Interesting that the conclusion for resellers is either focus on SMB or large/chain customers or only sell niche verticals. We concluded that in the early-mid 90s. At the time, [competitor] was selling Royal brand cash registers at $200-$300, and the micro-merchants went there. The bigger mini-retailers wanted a solution specific to their business.
We couldn’t support specific solutions if we only had a few in our territory, so the conclusion was either focus the solution on a very broad geography or sell something there was a lot of in our current territory. We decided to focus on restaurants and grocery. As territory opened up (or we saw weakness in a neighboring dealer) we expanded but stayed with our focus.
Today we are 95% QSR and grocery with a focus on franchisees and franchisors. It’s a good thing everyone has to eat since that’s our market! It’ll be interesting to see if our current model holds up and for how long ... it’s a different challenge (almost) every day.
Thanks for sharing those details. Someone might say that you were “ahead of your time” in the 90s but I’m guessing that’s not from blind luck. I would suppose it’s more a result of you and your management team (1) analyzing the situation, (2) wanting more than a mom-and-pop dealership, and (3) sticking to your principles and target market over time.
I’m attempting to help retail IT resellers with Step 1 through my content and with Step 3 through my one-on-one consultations. But the “you gotta wanna” phase (Step 2) is up to them!
I agree with your premise that mid-market and up is where the VAr (I did that on purpose with the caps) opportunity is, but I wonder what the opportunity is in the micro/SMB merchant space. Can it be served by new models relying on automation and remote services? Needs scale to be profitable.
Thank you for that thought. I think the [Company A] and [Company B] of the world are going to be all over those tiny merchants. I regularly talk with resellers who are realizing one merchant at a time that (1) a “lite” POS system is all that those micro-merchants want/need and (2) they’re not willing to pay for a middle man and/or the services the reseller offers. It’s sad, but that’s the reality they’re facing.
I agree totally … unless we learn to look beyond the POS to everything a small retailer needs … AND MAKE IT SIMPLE!
Reseller “facing serious discussions”
I always leave your emails in my inbox until I have a chance to read them. Sometimes they get read and sometimes they don’t. But, I am definitely glad I just took a few moments to read this. That first paragraph hit the nail on the head. We are facing some serious discussions on where we are headed and continuing to change our business model based on the needs or more importantly perceived wants of the industry.
I initially scoffed at your first option for VARs. There are always many moving parts to winning a multi-location customer with one of their biggest questions being, “Do you have the staff to support multiple locations?” We are in the running for an 18-location opportunity, so it’s not completely out of the realm for us. The more I think about it, the more it just might be possible ...
Thanks for the note – I’m glad you found that article valuable. The #1 thing I took from your note is that you’re changing your business model to meet the needs and wants of your customers. When I talk with longtime, successful business leaders, that has been their key – staying super close to their clients and adjusting appropriately. There’s no magic bullet to replace that.
Since you confessed that you don’t hang on every word I write LJ, here’s a link to excerpts from a panel discussion I moderated a couple months back that touches on that topic. These are long-tenured Worldpay partners detailing how they stay close to customers, increase sales, adjust for the future, etc.:
And as far as moving upstream to sell to larger customers, what I’ve seen is that you need: (1) to decide to go after them, (2) win one, (3) use that successful installation as evidence you can fit the needs of larger customers, and then (4) go after more of them. The good news is that with today’s technology, you don’t have to be a large company yourself to provide all the products and services larger merchants need. You might need more labor for the initial install, but that’s only temporary. Thanks to automation, the cloud, and managed services, David doesn’t need divine intervention to slay Goliath.