Changing the Face of Downtowns

Hip to Be Square

Hip to Be Square

Sep 28, 2012

Technology can help downtown businesses bridge the economies of scale gap.

A lot of time is spent talking about the plight of small business owners. Main Street organizations strategize about ways to recruit and retain businesses in their districts. They throw festivals, run retail promotions, and market – all in the name of helping the small business owner not just make ends meet, but thrive in the downtown environment. Interestingly,  the SBA defines a small retail business as having fewer than 500 employees and less than $7 million in annual receipts. If downtowns were littered with small businesses, there would surely be a very different discussion about how to help.

The owner and staff of Five Little Monkeys, an educational toy store, in Albany, California

In reality, we are talking about micro businesses – those with five or fewer employees, run mainly by the owner. These are the businesses being run in our downtowns every day – artists, coffee shops, small boutiques, pet groomers, photography studios, and bakeries. They are the lifeblood of our communities – the parts of the puzzle that make our places truly unique.

Micro businesses, unlike small businesses, have limited access to credit, limited buying power, and limited time and resources. This is due, in part, because of their size but also because the owner is also the employee, employer, buyer, planner, cleaner, customer service representative, marketer, strategy maker, gossip control, and often is also a parent, spouse, downtown volunteer, and countless other things to their homes and communities.

Consumers too are very busy. As the internet and smart phones have figured out how to do everything but brush our teeth, people are less and less interested in anything but convenience – and that includes payment options. Currently, according to Aite Group, LLC, a Boston-based consulting firm, 87.4 percent of all retail transactions are done with credit, debit, or electronic payments and that number is expected to increase to 90.2 percent over the next five years. Without going all cash-less-society-conspiracy-theory, the reality is in the numbers – consumers prefer frictionless and convenient payment options.

Already stretched thin, the idea of navigating the waters of accepting credit cards as payment is just too much for many micro business owners. Large, clunky point-of-sale equipment, lengthy application processes, expensive card readers, fees that are ambiguous and automatically deducted from the business’ bank account, make the payoff seem less than worth the trouble. Couple this frustrating cash-only mentality with only being open from 10am to 5pm, and the downtown business district is catering to 85-year-old grandmothers and the unemployed.

Square stepped out of the box and created an innovative and streamlined solution for businesses and individuals everywhere.

Born out of the loss of a $2,000 sale because he couldn’t accept credit cards, Jack Dorsey teamed up with the ‘lost sale’ artist/engineer Jim McKelvey and developed Square, the game-changing billion dollar idea revolutionizing the way we interact with money. Three years later, Square is now infamous for taking the financial services industry head on, and developing the tiny square (pun intended) credit card reader that simply plugs into the audio jack of your iphone or android. Take three minutes and register for a Square account and you’re up and running. A flat 2.75% fee is deducted before your balance is deposited the next day. Gone are the days of monthly fee billing, unknown fee totals, two weeks of waiting for your credit application to process and $500 card reading equipment to come in the mail. Square is also an unbelievably portable option – businesses and individuals alike can accept credit cards anywhere you and your iPhone or iPad go –  festivals, events, farmers markets, private consultations, mobile art sales – the options are endless.

After launching the Square Card Reader in 2010, Square has gone on to develop Square Register, a more advanced app for the iPad, giving business owners the ability to use an iPad as a full-blown point-of-sale system. Less than three years ago, a business owner had to consider a minimum of a $3,500 investment in equipment and software to track inventory and sales. Now, in 2012, that same business owner can purchase an iPad, starting at $400, download the Square Register for iPad and begin doing sales in minutes. Square Register offers all the functionality of a traditional POS system, including customized inventory tracking, sales tax, tipping, promotions, rewards programs, multiple employee log-ins with individual sales tracking, and in-depth analysis of  overall business sales. Like the iPhone version, receipts can be text messaged or emailed to the customer. The delight in the novelty of receiving a receipt via text message is too much for most customers to contain. Additionally, the email receipt offers an invaluable opportunity to reconnect with the customer after the sale. The receipt can contain links to the store website, Facebook page, Twitter, or offer information about future promotions, and of course, a thank you note.  However, if the business owner prefers a more traditional approach, Square Register offers compatibility with two receipt printers and a cash drawer.

Starbucks and Square have forged a unique partnership that will change modern retail.

The future is big and bright. Square is already processing over $5 billion in payments annually with no sign of slowing. Now valued at $3.25 billion, with investors such as Visa, Citi Ventures and a cool $25 million from Starbucks. Additionally, Starbucks will begin using Square for all its card processing this year. On the horizon, Square will soon have the ability to use a phone’s GPS technology to enable a consumer to pay for things without ever taking their wallet out of their purse or pocket. Starbucks will be the first to launch this new technology, that will go something like this, according to Claire Cain Miller, reporting for The New York Times.

“At first, Starbucks customers will need to show the merchant a bar code on their phones. But when Starbucks uses Square’s full GPS technology, the customer’s phone will automatically notify the store that the customer has entered, and the customer’s name and photo will pop up on the cashier’s screen. The customer will give the merchant his or her name, Starbucks will match the photo and the payment will be complete.”

Although no one expects downtown Mom and Pop businesses to start implementing GPS payment technology tomorrow, or even this year or next, no one can deny the game-changing opportunities our small retail stores, coffee shops, restaurants, and artists now have, at an accessible price point. Coffee shop owners – using what amounts to large calculators with receipt tape and a drawer that dings, can now track exactly what they sell, what time of day they sell it, and who they sell it to – for nearly the same cost as that clunky cash register. Retail store owners have never before been able to add inventory without staying late into the night painstakingly keying in every new item. Taking the huge POS system home was not possible, but now, they can sit back and listen to their favorite TLC reality show while adding the day’s new inventory into the iPad, long after the store is closed and the house is quiet. This technology is about more than capturing new sales. It brings a new face – a nicer face, to the world of exchanging money and running businesses – and who can argue with something so nice?

 

To hear the story of Square from Jack Dorsey himself, check out his talk – The Power of Curiosity and Inspiration.

 

 

*Miller, Claire C., (2012, August 18) Starbucks and Square To Team Up, New York Times, retrieved September 28, 2012, www.NYTimes.com

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