The good, the bad and the ugly in Cloud POS — Updated! 3rd September 2018
When we started AirPOS in 2009, the retail platform landscape was significantly different from today. Back then ‘the Cloud’ was a new buzz term, iPads didn’t exist just yet and ePOS was something that was sold as a package, door-to-door by folk in suits.
Not only that but setting up a Point of Sale terminal was so complicated that it was typically installed and programmed by techie people in jeans with threadbare knees. Fast-forward eight years and a lot has changed. Retailers are now buying, setting up and configuring their iPad and Android POS and payment systems all by themselves. But are some of the bad old ways starting to creep back in to the new world of POS?
Think of it, in 2009 POS and payments with no contract for less than £50 a month brought snorts of derision from traditional suppliers. Now it’s rapidly becoming the norm.
There is now a swathe of new companies arming independent retailers with powerful and affordable tools like never before from POS to payments, loyalty, analytics and beyond. It’s a new dawn, but unfortunately some of those bad old habits that were the bane of the POS industry ten years ago are creeping back in…
The Old Way
As web guys starting down the road of creating a fully integrated Point of Sale and e-commerce solution we knew very little about Point of Sale software. We didn’t know how it worked, how it was built or even how it was sold. When we started talking to small retailers about what AirPOS was going to be however, we quickly got educated!
In 2009 POS and certainly e-commerce and POS was way outside the budget of most small retailers, especially start up retailers. The first quote we saw from a traditional POS provider was nothing short of a £7800 mystery of obscure technical things and line items that may as well have been written in Klingon for all the sense they made. Next came the e-commerce quote, £15,000 with £750 monthly maintenance lumped in for good measure. This quote was given to a business that was less than three months old!
And of course the very notion of integration between the e-commerce and the POS sent everyone’s head into a spin until some enterprising (and likely not too honest) sales guy said that that would be no problem but would cost an additional £20,000. So all told we’re at the guts of £50,000 in setup and taxes before you’ve sold a sausage (or a piece of jewellery in this case.)
Next they needed to sign a five year contract. So if all of this turned out to be expensive folly then it would end up being five years of expensive folly! Duly noted.
When we got over our disgust at how all of this worked we realised the crystal clear opportunity. Most small retailers would never spend this, in fact even if they wanted to most couldn’t finance it.
Also these mythical integrations are never the magic bullet they appear to be. What happens when the integration breaks? More money for fixing it. What happens when one side of the software changes something and the other side doesn’t (which happens all of the time?) More money to fix it. We asked the consultants could we pay monthly instead of paying all of this up front and got a flat no. Again we learned.
If we could make a low cost solution that allowed small retailers to sell in their shops, sell online and control their inventory we’d not only be disrupting how an industry worked but we’d be solving a huge problem that likely could help them to survive the onslaught of the chain stores and the online giants like Amazon. Mission accepted!
Come 2010 and we were the first company in the world to do quite a few things. First off we offered a Point of Sale software solution with no contract. Secondly we allowed you to use your existing hardware rather than having to purchase hardware specific to AirPOS. Thirdly we started down the road of building a complete POS and e-commerce platform rather than a spaghetti junction of integrations and lastly, and most importantly, we priced the system at a price point that we felt any small retailer could easily afford. Oh and we were the first POS provider ever to openly advertise our pricing (the POS industry really didn’t like us for that one!)
That’s where we came from and that is the set of circumstances that led us to try to change things, with many other companies seeing the same opportunity and quickly following suit. Within a few months of each other AirPOS went live from Belfast, Shopkeep went live in New York, Vend went live in New Zealand and ERPLY went live from Estonia.
As the POS consultants openly laughed saying things such as “Retailers will never in a million years be able to install and setup their own POS” across the world startup companies got down to the work of changing the ground beneath their feet, forever.
The New Way?
Now almost a decade later in 2018 there’s a plethora of startup companies in the Point of Sale space, from those in restaurants through retail and even some specialising down into hair salons and trade counters. It’s been an explosion and small retailers have seen the benefit in a wide range of ways.
👍 The good…
It’s now possible to setup a fully functional Point of Sale with an integrated e-commerce webstore for less than a £500 investment in hardware and ongoing costs of less than £80 per month. Compared to the setup costs only a decade ago this represents a ludicrous saving of somewhere around £5000 in upfront investment.
From a return on investment perspective you’ll be a full 7–8 years into using your cloud-based POS and e-commerce before you’ve paid out as much as you would have in setup costs alone for a legacy on-premise solution and a Magento store for example. This really is great for independent retailers and allows any retailer of any size to have technologies and sales channels that would have been far beyond their reach and budget only a few years ago.
If your POS and e-commerce provider are serving you with a simple monthly cost, with no contract and especially no hidden fees or payments as we do at AirPOS then they are part of helping to change things. Many do, and are to be applauded for their honesty. And if you think that legacy providers, the guys who’ll sell you the software forever for a single fee, don’t charge monthly fees we suggest trying to get some support when things go wrong! The indignity of having the phone put down on you unless you own a support package is not something we’d wish on anyone.
Unfortunately in the new POS market there are a number of gotchas starting to emerge; mostly bad practices used in the past to gouge money from the very small retailers we collectively set out to help. If your POS provider is doing any of the following it might be a not-so-subtle nod to the fact that they’re not as on your side as they may claim. At AirPOS we’ll promise that we will NEVER adopt any of the following practices.
👎 The bad…
Annual payments are a contract by any other name! And turnover-based pricing on the smallest retailers? Really! Thought we all said we wanted to help them guys?
One of the most attractive aspects of cloud-based systems is that the providers don’t enforce a contract, especially those who are supplying to very small businesses. This is a very fair model as, while you’ll never own the software, you get all of the upgrades, bug fixes etc for the same monthly price. It’s also very good that it’s a ‘shared risk’ model in that if you don’t like the software for whatever reason you can simply unsubscribe. The software creator shares this risk with you, and they need to be good for you to hang around!
Unfortunately many Cloud Point of Sale suppliers are now offering prohibitive monthly pricing and much cheaper annual pricing. Of course this is simply a means of having a contract with you whilst promoting themselves as having no contracts! They are also mixing metaphors, billing you for element A monthly whilst insisting you pay for element B annually. A crafty way of tying you in to at least one element of their platform in the belief that you will also continue with the monthly element.
If they can provide you with the cheaper pricing on an annual deal why can’t they simply offer you that monthly? Are they under-confident in what they’re providing and so feel the need to tie you in? Beware the annual pricing, just like the old days if you don’t like the software or it fundamentally doesn’t work at all you and your business are stuck with it! Just as a day is a long time in politics so too a year is a long time in business with the wrong tools!
SEPOT 2018 UPDATE! In a bizarre twist Vend are now also pricing on turnover but only for the smallest retailers! Talk about penalising success. Dastardly!
Does free POS actually ever really mean free POS?
SEPT 2018 UPDATE! Of course Loyverse POS isn’t actually free did anyone really believe that it was? If they’d have been around a while longer Loyverse might know that we at AirPOS were the first in the world to offer a free POS in 2009 before switching to a paid model, it’s not new. What is new is a POS that’s only free if you have either no employees or no inventory!
Those of you who have been with AirPOS for a long time will know that we’ve had a change in business model and a change in pricing model. In 2009 we were the first in the world to advertise pricing for cloud POS and we had a freemium offering at the beginning where customers could use AirPOS at no cost.
In 2013 we changed this to the lowest monthly fee in the market simply because we couldn’t make freemium work as a business. Maybe someday someone will but it was beyond us.
Following this in 2017 we added £5 per month to our plans, this was the first pricing change in four years and simply reflected our growing costs as a business, especially given that the pound had become so much less valuable against the US dollar and many of the suppliers we use are based in the US.
Square on the otherhand are known as the free POS, along with PayPal Here and iZettle’s POS offerings that support their payment processing. As partners of both PayPal Here and iZettle it’s fair to say that their POS offerings are very limited, with no offline functionality and no inventory control being their major drawbacks. That said they are actually fee free aside from the payment processing fees.
Square on the other hand aren’t actually free at a certain level of functionality. It’s fair to say that they have a free tier but did you know that Square actually charge monthly fees for quite a lot of functionality in their POS? And that these fees can be significantly higher than many of their competitors?
According to Merchant Maverick Square for Retail is actually billed at $60 per month despite having no offline mode (even though the free Square app does curiously!)
In addition Square’s free point of sale app is really only free for a single user, as they bill $3 per month for each additional employee added to the system. You won’t find any of this pricing on Squares website unfortunately. In fact it’s only found on a Square Knowledge Base article which is a real bugbear for us (see the ugly section later for more on this!).
Billing extra for support packages
In the old days support contracts were the norm and perhaps with good reason as many hardware and software issues would then require an engineer to visit your premises and poke at things with a screwdriver to get you up and rolling again.
In the Cloud Point of Sale era you have the advantage of being able to do so many things yourself. iPads and Android tablets have made managing software easier while simpler devices such as the Star mPOP have made self-managing hardware a doddle for the most part.
SEPT 2018 UPDATE! It seems that Vend no longer bill for support?? But will now bill you based on turnover instead. It’s hard to keep up!
Failing supporting your own setup, most Cloud Point of Sale providers will offer a multitude of options to help you from a Knowledge Base to live website chat or email support. Some (such as AirPOS) will offer telephone support as part of the monthly subscription. No-one will visit your shop to help, that’s not the business model and that helps to keep costs down on both sides. These cost savings should then be passed on to you as the retailer of course, that’s the point and the power of the cloud!
Really if you’re paying a similar amount for support as you are for the entire system you’re being had. If Cloud Point of Sale or e-commerce companies can’t provide their service to you at a price that’s clear and affordable they should be looking at their business model for answers, not at your wallet.
Plugins, modules and add-ons that they know you will most likely need to use the system successfully
Again in the old days Point of Sale was littered with plugins, modules and add-ons that were typically billed as extras. Remember those unreadable quotes we talked about earlier? They typically had a megalist of such add-ons that, while they added functionality, would also add many zeros to your bill.
In the Cloud era these modules, add-ons and plugins have manifested themselves largely as App Stores. You’ll understand the real idea behind App Stores of course in the Apple App Store or Google Play sense in that you can add apps to your system to help you to do what you need to do. Some you’ll have to pay for, and if they solve your problem you won’t have an issue with that. Software developers have to eat just like the rest of us yes?
No problem there, that’s a genuine proposition. So for example if you’re paying for a Point of Sale and the developer creates a loyalty app they may well chose to give it to you as part of the core offering, but it’s also reasonable to ask for a little extra in order to give you this great new thing right? Like Shopify do, where they allow external developers to build on their platform to give you functionality that they don’t provide.
What’s not reasonable, and was the very worst thing about how Point of Sale used to be sold, is making you pay for ‘add-ons’ that absolutely should be part of any respectable POS platform.
Take ePOS Now as a point in case. They boast about being the only UK Point of Sale provider with an App Store. On the homepage of their App Store they quite rightly proudly display a lot of the integrations they have that extend their platform (more on this a little later though.) It’s a pretty impressive list.
Scratch under the surface of this a little though and there’s a bunch of other ‘add-ons’ in the ePOS Now App Store that you will find are quite simply additional fees for functionality that they know 90% of their customers are going to need.
A prime example is the importer ‘app’. In every other cloud POS system an importer is provided as part of the core functionality. Why? It’s essential for people with large catalogues. Given that the average small retailer will sell more than 1000 items they would be limited to a choice of entering everything one at a time (error tastic and time consuming) or paying to import these items. Then paying again to import further items given that the Importer App costs an extra £15 per month. As we said above we’re not against software companies making money but making users pay extra for what you know is essential functionality in most cases is simply bad business, and an attempt to obscure your pricing to make your system look more affordable than it actually is. Of course you can expect to find this reflected in your reviews…
Shopify too are increasingly charging more via extensions and apps, even making a change to their reporting and removing it for a large amount of customers who then had to pay more to get it back! Without warning! The outcome? You’ve guessed it…
Charging for integrations that cost them nothing at all!
Most cloud POS providers are offering additional functionality, and in particular integrations with accountancy systems such as Xero and Quickbooks. Of course this is great for the small retailers, offering them a joined up system that not only helps them to sell in their shops but also saves them time and money on the drudgery of accounting.
At AirPOS we currently offer an integration with Xero. As the world’s largest and arguably by far the best online accountancy platform we believe this is essential. We’ve also used Xero ourselves for seven years and are huge fans of what it has done for us as a business!
Offering this integration costs us exactly nothing at all, there are no costs whatsoever to pass on to the end customer. However, and they are unique in this regard once again, ePOS Now are charging a reported £25 per month to allow their customers to use their Xero integration. Why? Absolutely no clue but we would very much like to see Xero stop partners from what is a very dubious practice in our opinion. Again the outcome is the same…
Shopify again are not excelling in this area. At AirPOS we’ve found our merchants to be super, super sensitive to credit card and debit card fees. Which makes sense of course as they are paying out a percentage of each sale by allowing their customers to pay via card with thin margins and big competition it makes sense to make sure you’re minimising these costs as much as possible.
If Shopify know this like we do (and you would assume with the merchant base that they have that they must know this) it beggars belief that they are adding an additional ‘transaction fee’ to each purchase if you wish to use any payment processing aside from Shopify’s own gateway. This ‘transaction fee’ applies even if Shopify payments are not available in your region and you have simply no choice but to use another gateway. So in addition to the average 2% processing fee that most processors will charge for card acceptance, Shopify are adding up to a further 2%! Meaning the merchant could lose up to 4% (or maybe even more) per transaction.
We can imagine the riot we would have with our users if we even considered adding a transaction fee to their sales! We promise never ever to adopt this practice. We’d rather sleep at night!
The soft noose. Not allowing customers to download data
In the software industry there are a number of methods of retaining customers. And in case you’re wondering, the business models of most software companies are built on the idea of low cost fees for a lengthy period of time rather than high up front costs. This is a good thing as it can allow customers who would be priced out of more costly solutions to adopt technologies that they normally could not afford.
Also it’s a ‘shared risk’ business model. If we don’t support you well and provide a good service we won’t keep you subscribing to our service for long enough to make you what’s somewhat coldly called a ‘profitable unit’ i.e. a customer who has paid us for long enough to negate our costs in acquiring you as a customer.
Of course the best method of keeping subscribers is to provide a good service and great support, that’s a must. However some companies will use other tactics to make up for shortfalls in these areas such as not providing a means to download your data if you wish to leave the service. This is known as the ‘soft noose’ as you’re bound to the organisation as they have made it so much harder to switch. The customer of course might not realise this until they’ve actually decided to leave. Leading to? You’ve guessed it! Damning reviews!
The hard noose. Hardware that only works with their system
At AirPOS we’re a software company. We resell hardware but there is not one piece of the hardware we resell that is not absolutely standard and can be used with a lot of other systems. As a software company we will never, ever produce our own hardware or use hardware that can only be used with AirPOS, it’s simply not our business model.
In your decision making regarding a POS solution you should absolutely ask this question regarding hardware: “If I choose to cancel your software will I be able to use your hardware with other providers?”
If the answer is no proceed with extreme caution. You are a few steps from the hard noose! Consider the position that if the software isn’t suitable to your needs or is simply very poor, you‘ve likely lost the up front investment in the hardware, which may be thousands, or worse still you’ve blown your budget and have to use a system that is hindering your business rather than helping it.
In addition take a good long look at the Terms and Conditions of online sellers, some such as ePOS Now offer no refunds under any circumstances claiming that it is a business to business sale. This isn’t the case with many other providers who manufacture their own hardware such as Square or Clover for example.
Software updates that mean you have to buy new hardware
We all know the irritation when Apple end of life an iPad or an Android device can’t get the latest version of the operating system and falls behind on apps. And we doubly know the irritation when Apple admit to slowing down older devices deliberately in order to help sell their latest model. This model is as old as the hills in computing, but no less prevalent.
So there are circumstances where software providers, like us at AirPOS and others, have to follow along as a device is sunsetted such as iPads or when Microsoft ended support for Windows XP. There, we have no choice.
However there should never be a circumstance where a software update that we produce forces our customers to have to buy new hardware such as printers, scanners etc. We’ve seen this a few times and it’s absolutely deliberate and plain wrong.
😳 The ugly…
And now for the doldrums, the things that are really objectionable and get the whole cloud POS space a bad name. To say that we won’t adopt any of the following practices is a given, as they really are so so bad that we’d rather not be in business than have to live with some these on our conscience!
Support staff with sales targets!
Have you ever heard the like of it! Support staff are there to make sure that things work correctly and to help customers to solve problems. They should absolutely never ever be trying to sell you things to reach a target. That’s a salesman’s job for Christ’s sake!
When we found out that ePOS Now had adopted this approach (and they openly admit to it) we honestly couldn’t believe what we were seeing. Their support staff have a reported sales target of £2500 per month. That’s a lot of receipt printers folks! Does this mean that they can actually only start to offer support when they’ve reached their target? How does this work? Does it encourage honest practice towards support? Honestly jaw dropping.
ePOS Now say that their ‘service roles do have a element of revenue generation…’. At AirPOS ours absolutely don’t and never will have. However our support staff absolutely do contribute to revenue: through happy, well supported customers and customer retention as a result!
No knowledge base or support documentation
If a company is not providing you with information through which you can solve your own problems, but is charging for support contracts then it’s pretty obvious what they’re at. You can either blindly flail around or pay the fee to get the help you need. Strong arming of the worst and most objectionable kind.
Software companies should know the value of customer retention and recurring revenue. The essential element in this is great support. If they don’t know this they’re likely to burn out. Be warned.
Lastly but not leastly…
Unfortunately this is a widespread practice and is particularly prevalent on Trustpilot. This is the process whereby companies report bad reviews for spurious reasons in an attempt to have them changed or removed. It’s a numbers game.
Let’s say a company has 100 bad reviews which they then report, normally because the reviewer has not provided a proof of purchase such as an order number or PayPal receipt perhaps. The onus is then on the reviewer to provide proof that they were a customer. An estimated 60% of these reviews never reappear.
Another practice is in mixing metaphors. This is whereby companies ask their customers to review the help they’ve gotten from a support person, which is fine, however when this type of review is mixed with actual product reviews the results are heavily weighed. Most people who review a support interaction will have had a positive experience and so a 4–5 star review would be the norm. Whereas someone coming to a review site to review a product will normally do so when they have had a negative experience. Look out for the split of general product and service reviews as opposed to reviews of when someone helped a customer well. And always, always take a look at the 1 and two star reviews.
Lastly it takes a lot of bad reviews to really affect a companies rating, if 7% of your reviews are 1 or 2 star (and you’re actively engaged in policing reviews and having spurious ones removed) that’s a bad sign, it shows that there is most certainly something amiss; normally mis-selling of products or poor after sales support. However even with 7 in 100 people people sufficiently dis-satisfied with your product or service to write a scathing 1 star or 2 star review Trustpilot will still rate you as excellent! If 7% of our reviews were that poor we’d be seriously concerned.
Guardian Money have produced a helpful checklist for how to spot fake reviews.
Why have we written this? The reason is simple really. We were abhorred by the selling techniques, unclear pricing, dishonesty and sheer disdain for customers we encountered when we entered the POS space in 2009. Now almost a decade later we’re dismayed to see the same abysmal practices (and some far worse ones) emerge in the new industry.
The old way saw retailers seeing POS as a necessary pain to bear, an expensive must have. In the new way we have an opportunity to change this, to show retailers that we really are on their side in the fight for survival and growth and that the tools we produce can be instrumental in their success.
We hope that this article forms the basis of a useful guide and checklist when you are deciding on a POS solution, and that it will help you to avoid some of the pitfalls we’ve seen far too many customers fall fowl of in recent times.