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"Square is in a market where once you have a customer, you have the customer. " Square has to compete on precisely three factors - First, and by far most impor

"Square is in a market where once you have a customer, you have the customer. " Square has to compete on precisely three factors - First, and by far most importantly, cost. Next, ease of signing up, and third, Ease of use. Any company that comes up with a cheaper system will almost instantly start winning away square consumers. That, to me, pretty much defines, "commodity"

Jormundir 13y ago
This is a spot where the market Square is in contrasts with the market Box is in. Online storage has had big price drops recently. Payment processing is much more stable, and I don't think it's even possible for another company to price gouge. They'd have to cut an amazing deal with the banks, which sounds unlikely seeing as the incumbent behemoths haven't been able to negotiate better deals either. The price is pretty efficient in this industry, what's really inefficient is the experience for both the businesses and consumers.
- GregorStocks 13y ago
  On the other hand, the profit margins for Square's customers are generally razor-thin, so it seems like you wouldn't have to undercut them by all that much to steal a lot of their customers.
- ghshephard 13y ago
  "Payment processing is much more stable, and I don't think it's even possible for another company to price gouge." Another thing that makes me think "Commodity." And the square "dongle" is anything but a good experience. I travel a lot, and I dread every time I return to the Bay Area and have to deal with Taxi Drivers and their attempts at getting credit cards to swipe on the dongle - about 5-10% of the time we just have to enter the numbers in, paying usually takes 30-40 seconds all in, and I don't get a paper receipt which adds another hassle when doing expense reports. Compare to Singapore where my transaction time with comfort cabs is <5 seconds and I get a decent receipt. (Of course, I also end up paying 10% admin fee for using a credit card, so I pay for that convenience) Part of this is skill - swiping the card through the square dongle takes a lot of skill - I note when I pay at a food truck (100% square in Redwood City) - they seem to be able to do the transaction in about 10 seconds.
- ctb9 13y ago
  I think you mean undercutting, or predatory pricing. Price gouging is when you use a monopolisitic position to charge an unreasonably high amount.
dangrossman 13y ago
Square competes on only one of those factors. 1) Cost. They entered the market at an extremely high price point. Actual interchange rates on swiped cards are 0.05% (for most debit/check cards used as credit, since 2010) to 2%. Square charges 2.75%. Any business that currently takes Square can add 1-2% to its margins by talking to the nearest bank about a merchant account, which they've likely offered since the 1970s. Now, merchant accounts typically come with some other costs ($20/mo or so in fixed fees, different rates per type of card accepted, more expensive terminals/hardware, etc). But if you're not a food truck or flea market vendor, your processing volume will cover those cost in no time, which is why you don't see Square outside boutique stores. 2) Ease of use. Square's dongles and apps are much more difficult to use than a dedicated card terminal. The customer doesn't get to swipe their own card, the store doesn't get to accept debit at all (which would be MUCH cheaper for them), and they're really finicky to actually get a good swipe on. Their POS software is a toy version of real POS software; it's got maybe 10% of what you need to run a retail outlet, which is why its use is limited to vendors with a catalog that fits on one or two screens and who move little enough product to do their inventory and accounting with an Excel spreadsheet. 3) Ease of signing up. This is the only place Square actually competes (and wins with a certain audience). You pick up a free dongle, install a free app, and you're in business. If you'd like to add 1-2% to your store's margins, you take 3-5 business days to fill out an application and credit check for a merchant account, wait for approval from an underwriting department, then buy POS software and a card terminal. It costs a little more up front, it takes longer, and it's intimidating. That's where Square shines.
- jvm 13y ago
  > Square's dongles and apps are much more difficult to use than a dedicated card terminal Just FYI: https://squareup.com/stand https://squareup.com/stand
  - dangrossman 13y ago
    I have a relative that opened a natural "bath & body" store on the main street in his town. He started out with the Square hardware kit (stand, cash drawer, receipt printer, and a barcode scanner from Amazon). It was gone and replaced with real hardware within a month; not only was the POS software entirely inadequate, but checking people out was terribly inefficient and off-putting, costing them business. People don't like to hand over their card, they want to swipe it themselves. They want to be able to pay by debit. They want to see on the screen what's being charged before swiping. They don't want to sign a tablet with their finger or a squishy stylus. Nobody ever bothered to continue reading the screen after signing, so the cashier always had to spin it around, accept the signature, and skip the e-mail receipt screen. It's all terribly slow and strange compared to paying at any other store. The only thing the stand solves compared to the dongle is ease of getting a good swipe.
amorphid 13y ago
It may compete on those three things, but that doesn't mean a competitor that is cheaper and easier (in sign up & use) will win. Brand recognition, reputation, quality of support, switching costs, customer intertia, and probably other factors all matter. I'd rather try to create a new market than displace Square's customers, let alone compete w/ other "cheaper, easier" Square competitors. Relevant: http://en.m.wikipedia.org/wiki/Blue_Ocean_Strategy http://en.m.wikipedia.org/wiki/Blue_Ocean_Strategy

Jormundir 13y ago

This is a spot where the market Square is in contrasts with the market Box is in. Online storage has had big price drops recently. Payment processing is much more stable, and I don't think it's even possible for another company to price gouge. They'd have to cut an amazing deal with the banks, which sounds unlikely seeing as the incumbent behemoths haven't been able to negotiate better deals either. The price is pretty efficient in this industry, what's really inefficient is the experience for both the businesses and consumers.

GregorStocks 13y ago
On the other hand, the profit margins for Square's customers are generally razor-thin, so it seems like you wouldn't have to undercut them by all that much to steal a lot of their customers.
ghshephard 13y ago
"Payment processing is much more stable, and I don't think it's even possible for another company to price gouge." Another thing that makes me think "Commodity." And the square "dongle" is anything but a good experience. I travel a lot, and I dread every time I return to the Bay Area and have to deal with Taxi Drivers and their attempts at getting credit cards to swipe on the dongle - about 5-10% of the time we just have to enter the numbers in, paying usually takes 30-40 seconds all in, and I don't get a paper receipt which adds another hassle when doing expense reports. Compare to Singapore where my transaction time with comfort cabs is <5 seconds and I get a decent receipt. (Of course, I also end up paying 10% admin fee for using a credit card, so I pay for that convenience) Part of this is skill - swiping the card through the square dongle takes a lot of skill - I note when I pay at a food truck (100% square in Redwood City) - they seem to be able to do the transaction in about 10 seconds.
ctb9 13y ago
I think you mean undercutting, or predatory pricing. Price gouging is when you use a monopolisitic position to charge an unreasonably high amount.

dangrossman 13y ago

Square competes on only one of those factors. 1) Cost. They entered the market at an extremely high price point. Actual interchange rates on swiped cards are 0.05% (for most debit/check cards used as credit, since 2010) to 2%. Square charges 2.75%. Any business that currently takes Square can add 1-2% to its margins by talking to the nearest bank about a merchant account, which they've likely offered since the 1970s. Now, merchant accounts typically come with some other costs ($20/mo or so in fixed fees, different rates per type of card accepted, more expensive terminals/hardware, etc). But if you're not a food truck or flea market vendor, your processing volume will cover those cost in no time, which is why you don't see Square outside boutique stores. 2) Ease of use. Square's dongles and apps are much more difficult to use than a dedicated card terminal. The customer doesn't get to swipe their own card, the store doesn't get to accept debit at all (which would be MUCH cheaper for them), and they're really finicky to actually get a good swipe on. Their POS software is a toy version of real POS software; it's got maybe 10% of what you need to run a retail outlet, which is why its use is limited to vendors with a catalog that fits on one or two screens and who move little enough product to do their inventory and accounting with an Excel spreadsheet. 3) Ease of signing up. This is the only place Square actually competes (and wins with a certain audience). You pick up a free dongle, install a free app, and you're in business. If you'd like to add 1-2% to your store's margins, you take 3-5 business days to fill out an application and credit check for a merchant account, wait for approval from an underwriting department, then buy POS software and a card terminal. It costs a little more up front, it takes longer, and it's intimidating. That's where Square shines.

jvm 13y ago
> Square's dongles and apps are much more difficult to use than a dedicated card terminal Just FYI: https://squareup.com/stand https://squareup.com/stand
- dangrossman 13y ago
  I have a relative that opened a natural "bath & body" store on the main street in his town. He started out with the Square hardware kit (stand, cash drawer, receipt printer, and a barcode scanner from Amazon). It was gone and replaced with real hardware within a month; not only was the POS software entirely inadequate, but checking people out was terribly inefficient and off-putting, costing them business. People don't like to hand over their card, they want to swipe it themselves. They want to be able to pay by debit. They want to see on the screen what's being charged before swiping. They don't want to sign a tablet with their finger or a squishy stylus. Nobody ever bothered to continue reading the screen after signing, so the cashier always had to spin it around, accept the signature, and skip the e-mail receipt screen. It's all terribly slow and strange compared to paying at any other store. The only thing the stand solves compared to the dongle is ease of getting a good swipe.

amorphid 13y ago

It may compete on those three things, but that doesn't mean a competitor that is cheaper and easier (in sign up & use) will win. Brand recognition, reputation, quality of support, switching costs, customer intertia, and probably other factors all matter. I'd rather try to create a new market than displace Square's customers, let alone compete w/ other "cheaper, easier" Square competitors. Relevant: http://en.m.wikipedia.org/wiki/Blue_Ocean_Strategy http://en.m.wikipedia.org/wiki/Blue_Ocean_Strategy