Starbucks teams up with Square, will accept Pay with Square

6 thoughts on “Starbucks teams up with Square, will accept Pay with Square”

  1. Yeah “Swipe” by Appninjas is still a far superior solution for anyone. And no I’m not associated with them at all, just someone who did research before committing to a stupidly high transaction fee.

  2. The initial advantage Square had was “green fields” Most of their customers didn’t accept Credit Cards so they did not have incumbency issues. That’s what makes this win impressive. However, it also highlights just what Square has to go through to win a very large account. SB’s had to agree to tear out and replace their existing POS system. That’s a big risk, headache and cost and customers will use that leverage (and genuine pain) to drive hard bargains.

    Also worth noting is that SB’s mentions processing costs will be cheaper. It’s hard for me to imagine that SB was overpaying by very with their last vendor so I worry about the economics on this deal. Maybe it’s the anchor tenant though that allows for additional enterprise deals to follow so is worth it.

    1. Justin
      +1 to everything you said. And I would check in on the actual dynamics of the rollout and keep you posted. I bet you they (Square) are for now eating all those costs. However, this deal can provide Square’s “Pay with Square” momentum in the market.

  3. This is a marketing deal. The other “benefits” listed in the press release bullet points are red herrings, and I agree with Om and Justin that there is no way that adding another layer between the retailer and the merchant account provider can somehow make things cheaper.

    But as a marketing deal, it’s brilliant. Obviously small business owners shop at Starbucks; everybody shops at Starbucks. A traditional marketer working at Square would therefore see Starbucks as a distribution channel for Square’s *information* — features, benefits, perhaps a discount offer or even the little reader dongles themselves. Put ’em at the POS; done!

    This deal turns that approach on its head: SBUX isn’t a distribution channel for Square’s marketing information; it’s is a distribution channel for the technology itself. Small business owners don’t get exposed to Square’s marcomm when they buy that vente pumpkin latte — they get exposed to the user-side experience of the Square reader or Pay With Square, and can extrapolate from there what their own business would gain from adopting Square.

  4. Starbucks investment in Square perhaps looks like a marketing deal at first glance. However, If you want to call it a marketing strategy or a brilliant business strategy it would be less easy to prove its value to the street. It’s both of those as well as a way to significantly reduce the cost per customer to serve without losing any customer experience points (and maybe even gaining customer satisfaction) and operational efficiency driver at the store level where retailers have less control over the process.

    The economics make sense on several levels – to reduce the overhead associated with a high-volume, low average cost per transaction “last-mile” local business. And the demographic is such that consumers likely use their bank debit card or credit card to pay for their latte. Take that cost and I’m guessing here – but add 5% to the total revenues received across those thousands of stores in the US alone and… you can do the math.

    My opinion is that Starbucks will use it’s newly formed payment alliance with Square to monetize the last-mile network of very small businesses, which are comprised of of sole proprietors and mom-and-pop shops and their potential local customer base. Starbucks customers likely wouldn’t know all of the people within a mile to two radius around their local Starbucks – where so many opportunities for commerce live and work. If they can do it, and if anyone can they have the best distribution model to make it happen – then the Starbucks Digital Network and the forthcoming application for mobile payments becomes a very good “local Square business” through the “Square Directory.”

    The very small and small business market opportunity which still makes up a huge amount of the US business revenues is one huge opportunity code that’s not been cracked yet – although PayPal comes remarkably close. It would appear that Starbucks and Square have done just that. Now they just have to market and position it properly.

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