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Summary:

Shopify, a Ottawa, Canada-based e-commerce platform provider is jumping into the bitterly contested point of sale business and is taking on Square, GroupOn and its more traditional competitors. The move is a smart for the 65,000-seller strong online platform to ward off looming competition.

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Point of sale systems are the new black — everyone wants to build them and I blame Jack Dorsey and his startup, Square for it. The emergence of Square has woken up a lot of latent (or as a skeptical friend says, defensive) energy in companies, big and small. PayPal, GroupOn and Yelp are three of the publicly traded players who have accelerated their plans for point of sale systems and each one has their own unique twist. There is the incumbent, Verifone. And today we should add Ottawa, Canada-based commerce platform, Shopify to the mix.

The company today is launching Shopify POS, an iPad-based point of sale system that will basically allow anyone to extend their online stores offline and give them the ability to sell goods in the real in real world. The new point of sale system comes with a card reader, that makes it easy to take (and process) credit card payments. The Shopify Hardware Kit which includes a top-of-the-line receipt printer, cash drawer and credit card reader is a competitor to the Square Stand and the Square Business in a Box offering. Shopify POS will come in two flavors and will cost between $29 and $49.

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“The future of retail isn’t online versus in-store, it’s a seamless combination of both,” said Adam McNamara, Shopify Vice President of Product. Of Shopify’s 65,000 e-commerce stores, nearly 30 percent have a physical presence. Shopify, which started in 2006 has raised about $22 million in two rounds of funding from the likes of Bessemer Ventures, Felicis Ventures and FirstMark Capital.

The company wants to take what it has — a smart team and a good platform — and ward off challenge to its core business: providing services to online merchants.  McNamara in his conversation with me argued that today offline and online retail are a different experience from a retailer’s standpoint — two different product catalogs, payments systems are different and inventory systems are diverse. What they want to do is build a unified experience. McNamara pointed out that more and more online commerce merchants have been going offline and it made sense for them to essentially listen to their community, which had been clamoring for a similar offering.

The timing of Shopify’s big move comes at a curious time. The company is facing competitive pressures from the likes of BigCommerce and GoDaddy in addition to the newer, more well funded players such as Square and GroupOn. Shopify, he said is being used by retailers who have many thousands of items and quite a few of them have daily sales that surpass hundreds of thousands of dollars. As a result, they have a built in advantage over others such as Square who are providing services for very small scale outlets, such as coffee shops.

“Square is designed for taking payments and we are offering the entire platform – payments, marketing, product catalog, the CRM and now the point of sale system,” said McNamara, in response to my questions. “We are more than a payments provider and less than a full ERP system (used by big chains.)”

One of the reasons why everyone is launching these point of sale systems is because they offer a way to lock-in retailers and allows companies to process payments and offer multiple services. In addition, they offer an opportunity to gather retail data and build newer offerings — ones that platform providers can charge for. Now whether anyone (including Square) will run away with the market, remains to be seen, but for now watching the race is pure fun.

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  1. Matthew Mulligan Wednesday, August 28, 2013

    so shopify doesn’t take percentage of each sale?

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    1. They charge credit card processing fee which is between 2.1%-2.5% of the transaction.

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  2. handmadebusiness Wednesday, August 28, 2013

    I’m a small business currently with shopify as our web shop and square for POS. I adore shopify for the professional features and great customer service. However – NO WAY would we leave Square for such a monthly fee on software. Shopify just took over the card processing for Stripe but now offers a monthly fee for something that should be PART of their service. Happy to pay the transaction charge or for hardware – but to pay for the software seems a non-strategic choice. I’m sticking with SQUARE on this one until the landscape changes.

    (ps – also a seller who has been saddened watching etsy make policies that do not support handmade. It’s well demonstrated that market integrity is a priority – Particularly the fiasco last april when they featured a furniture importer as a featured seller – many vocal shops were deleted).

    Finding one’s way as a small independent handmade business remains a constant challenge!!! Thanks Om – for covering so many issues relevant to emerging independent businesses!

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    1. $50/month seems pretty reasonable to have all your brick/mortar information to sync with your online store. See everything in one portal despite having numerous channels.

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      1. Natasha Laity Snyder Thursday, August 29, 2013

        Only if you are a large business.

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    2. Natasha Laity Snyder Thursday, August 29, 2013

      Exactly my thoughts, I just did the math and without the extra monthly charge I will be paying thirty cents extra with Shopify vs Square on a average sale. No thank you. You would REALLY have to want your shop to sync for that kind of money.

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  3. Most of people prefer credit card processing services that are fast, secure, and easy to integrate.

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