Just yesterday I received an email from a reader who questioned an opinion article from Matt Pillar, the editor in chief of Integrated Solutions for Retailers (ISMR). While ISMR is an end-user/retailer-focused publication, Pillar has recently been talking with VARs and integrators and doing some writing for Business Solutions. With his recent insight into the channel, Pillar wrote in ISMR that retailers interested in adopting a mobile POS strategy might not find an enthusiastic partner in their VARs, who aren’t eager to sell such low-margin solutions.
The reader wrote me:
We were a little taken aback by the statements about VARs not deploying POS solutions on mobile devices when we see it being done (at a growing rate & quite successfully with some of the largest retailers in the world) throughout the industry. It also seems contrary to your editorials about VARs getting in the mobile POS game and diversifying their businesses to support retailers’ mobile initiatives. Also, there’s the issue of incorporating consumer-grade devices into systems, a process being made much smoother with [POS hardware] companies providing SDKs to shorten or eliminate development time. Just wanted to get your thoughts, as this editorial seemed to negate the efforts of so many VARs & ISVs out there who are embracing mobile POS.”
Here was my response:
While you might be seeing mobile solutions being done at a growing rate and successfully with some of the largest retailers in the world, those retailers most likely didn’t use the typical POS VAR who reads Business Solutions or who you’d see at RetailNOW. I’d wager that many of those retailers have their own IT departments who handled the rollout or worked hand-in-hand with the developer or the hardware manufacturer directly (something most cannot claim to do).
The reason I’m writing about it so much is because I don’t think the typical VAR *is* selling these solutions. I do think it’s a great opportunity. However, I think most VARs don’t know what to do with the opportunity and challenges. If I were a VAR and my mom-and-pop customers were asking me about a mobile solution on an iPad, I’m not sure how I would respond. How can a small VAR make money off these sales? Zero hardware margins and maybe a couple software licenses for a mobile device. The best I can come up with is that — at the least — it gives you an opportunity to engage with your customer about its business challenges.
If I were to take a snapshot of the POS dealer channel, I’d see a (regrettably and) generally old crew planning their exit strategies and letting the new guard figure out how to make money off of the latest technologies. Quick aside, remember last year’s roundtable at RSPA RetailNOW when David Gosman was talking about mobile marketing (another great growth opportunity) and I stopped and asked the crowd if they knew what FourSquare was? Not many raised their hands. One year later, and I’d bet not many more have taken the time to learn. End digression.
For the large VARs lucky enough to work with the largest retailers, mobility is a huge opportunity. Rolling out thousands of mobile devices and printers to a retail chain is a project someone can make money off of. Unfortunately, most VARs aren’t that lucky. 67% of BSM’s audience has annual sales of less than $10M. 38% make less than $1M. To the majority of these guys, the SMB crowd, mobility isn’t a real opportunity at this point. Or, at least, a puzzle they’ve been able to effectively solve and take to the bank.
Everything above is concerning VARs. For software developers, the story is a little different. Every smart software company is scrambling to make mobile versions of its software. Hardware companies are wisely providing every tool possible to help bridge the gaps between the software, mobile device, and hardware. If those software companies have direct relationships with large retailers, I’d guess that the mobile revolution will be lucrative for them. However, if that software developer relies on VARs that target smaller retailers, I’ll again point to my above comments and say the money will be slow coming.
I guess I pretty much agree with what Matt wrote because he’s talking about the average VAR who I tend to write to, not those large ones on the cutting edge.”
So, what are your thoughts on this topic? Are you a smaller VAR having success and making money selling mobile solutions?
May 31, 2012 at 11:45 am
Mike:
In my opinion you are spot on with your observations.
The market is in transition and will continue to evolve ever more quickly as the cost of hardware decreases and software is provided on a subscription basis.
Where’s the margin for the VAR?
I believe this will also work its way out for the VARs who keep their eyes open – unfortunately many don’t have the time and resources to analyze the marketplace as they’re trying to keep a reasonable margin doing “what they know”.
Will there be the proverbial “dead bodies” along the road during this future transition? Of course. There always is.
Who will “win” the low-priced and high-value tablet/handheld POS solution(s)?
My best guess is that the credit card processors see this as an opportunity to provide low-cost solutions with this new and easy-to-deploy technology to end users that allows them a short ROI.
Their future profits will be their recurring margin on processing.
This COULD be a win-win for the VAR’s – especially the smaller dealers who would also receive residual income from these systems.
What’s it mean for the “typical” 90′s era hardware and software providers – not a pleasant future for them.
I believe in the statement “Technology can/will make you a lot of money. But, if you’re not careful and VIGILANT it can KILL you too”.
The POS of “today” or the “future” is CERTAINLY not your father’s Oldsmobile!
How to meet future profitability goals for the smaller dealers?
Hang together or hang separately because together smaller dealers who can successfully work together, each leveraging their geography/expertise is a better bet than “business as usual”.
This is just one man’s opinion and I could be wrong…but any comments among the readership???
June 1, 2012 at 12:35 pm
This is a great conversation, and one the entire POS community needs to be active in. I can sometimes debate both sides of an issue — it’s interesting in this case because I AGREE with both sides.
There is definitely revenue in the larger installations the reader above is referring to. A lot of it. While the hardware costs are likely being reduced for many large retailers adopting “mobility” (in quotes as some “mobile” POS terminals are tablets bolted to a check-out counter), the services for installation, training, consultation, support and integration to third party systems most definitely are not. If anything, there is huge opportunity for players positioned to serve this market.
As Mike correctly pointed out, many in our community are simply not in that position. And they are also seeing competition all over the place. Mobile, non-mobile, tablet, stationary, free, not free, bundled with merchant services\processing, not bundled, etc. Square and now GroupOn. It’s not unreasonable to think “the sky is falling” (thanks Chicken Little) but there are definitely some major shifts happening.
In my opinion, point of sale VARs can and will remain very relevant in this world. As Mike pointed out, it won’t necessarily be all the same VARs – some experienced ones will adapt, some new ones will emerge. ISVs serving this market will be bringing solutions to market that have new competitive advantages.
In my opinion, POS VARs should keep a few key words in mind. In their own way, these words will define the future of the SMB POS market.
Mobility\tablets. Marketing. Interaction. Integration. Cloud. SAAS.
June 4, 2012 at 10:02 am
Hi Mike,
Glad to see the conversation in play here. I thought I’d take a minute to weigh in on a couple of your readers’ comments.
In reference to the column I wrote for Integrated Solutions For Retailers, your reader said:
“It also seems contrary to your editorials about VARs getting in the mobile POS game and diversifying their businesses to support retailers’ mobile initiatives.”
I don’t think there’s anything contrarian in my observations in Integrated Solutions For Retailers. Of course Business Solutions proposes to its readership that thoughtful entrance into new markets and diversification of the technologies they sell could be beneficial. I agree with your assessments of the opportunities that payment processing, loss prevention, and mobile applications present the retail systems channel. That said, I also think stories that highlight the successes that VARs are experiencing selling this stuff are exceptional. We dig hard for them and manage to publish a few every month. They’re good stories that present a lot of value to our readers and indicate where the channel is headed. But, because we do such a nice job digging them up and publishing them, perhaps we contribute a bit to the creation of a false impression that everybody’s successfully selling mobile technology. In reality, a relative few are selling it, much less selling it successfully.
My ISR column was based on observations drawn after several frank calls with VARs that can’t or won’t meet the mobile POS needs of their retail clients and several more calls with retailers that are hungry for mobile tech but unable to source it from their POS VARs.
Your reader also comments:
“This editorial seemed to negate the efforts of so many VARs & ISVs out there who are embracing mobile POS.”
The column was written to an audience of retail end users, many of them small and who work with small VARs, to shed a little light on the challenge(s) they might face getting their tech partners to show enthusiasm for mobile POS. After taking several readings of the market, I called it like I see it. I think it’s only responsible to report on challenges as well as triumphs. To imply that my commentary nullifies the effort of those who have embraced mobile POS is preposterous. That said, if the article were to incite a VAR who’s been shunning mobile to give it another look, then wonderful.
I would encourage your reader to check out next month’s Business Solutions feature story on a mid-sized POS reseller called DSD. These guys are fortunate to have deep development expertise, and they’re going all-in on mobile POS this year. I wrote the story, and I think it will serve as inspiration for the fence sitters and ostriches out there that haven’t yet gotten into the mobile game.