A Small Merchant's View of Square's Big Move Online

Birch Coffee has used Square's mobile card reader for its delivery service for about two years, and was one of the first to switch to the new Square Market e-commerce site ahead its launch.

On the surface, the Square Market website seems like a small perk meant to provide a few extra sales to companies that use the Square Register app in place of a cash register at the point of sale. But for Birch Coffee, Square addressed a number of pain points.

"The beauty of working so closely with Square is that they're just so incredibly receptive," says Jeremy Lyman, co-owner of Birch Coffee in New York. "We like the guys there; everyone there is a techie … and you talk to someone who can actually answer our questions and has the ability to make changes."

Lyman, who co-owns the coffee shop with Paul Schlader, tested Square Market for several weeks before Square publicly announced the website on June 26. The shop has received about half a dozen orders on the marketplace so far, says Lyman.

Before Square Market, Birch Coffee worked with Shopify, which charges monthly fees ranging from $14 a month to $179 a month depending on the merchant's volume and other factors. At the highest tier, Shopify charges no transaction fees with no limit on sales, and at the lowest tier it charges 2% per payment with a limit of 25 sales per month.

"Between the fees we had to pay for Shopify and the fees to have a website up and running and the fees to process an order…we were losing money if we weren't getting that many orders," Lyman says. Square Market charges 2.75% per online sale with no other fees; this is the same rate the company charges for swiped card payments on its mobile card reader.

Birch Coffee plans to link its own website to Square's to push people to the new marketplace. Birch Coffee's website receives between 300 and 400 hits per day, Lyman says.

"We're hoping that converts…to trim up some online business and get the Birch name out across the country," he says. "There are only so many people that can physically come into the store."

Store listings on Square Market look similar to those in Square's mobile apps, with tiled interfaces and dedicated locations for store hours, map and promotions. Market pages also let merchants embed Twitter posts.

Launching an online presence like eBay and Amazon is a good move for Square, says Richard Oglesby, senior analyst and mobile pay expert with the Aite Group.

Oglesby just finished a survey of 500 small to medium-sized businesses with local brick-and-mortar locations. "About two-thirds do zero e-commerce business," he says.

Since Square already works with these types of businesses, it has the opportunity to bring them all online and create a new sales channel for the merchants, Oglesby says.

"Ultimately a lot of people look at Square and see a payments company…but they're really offering an end-to-end in-the-box solution," Oglesby says.

Without the online marketplace, Square's product set had a gap, says Oglesby. Just as online retailers are expanding into brick-and-mortar, such as PayPal's point of sale push, physical retailers must move online as well, he says.

As the mobile card reader market gets more crowded, Square, headed by Twitter co-founder Jack Dorsey, has remained competitive by updating its products and entering new markets.

In October, Square expanded into Canada and has since then said the country is "exceeding expectations," with a reported gross payment volume over its first six months 90% higher per capita than that in the U.S.

In May, Square announced expansion into Japan alongside updates to its Register app.