Square Enlists Staples to Showcase Its Mobile-Pay System

Square Inc.'s new partnership with Staples treats the office supply seller as both a distribution channel and a showroom for its Square Stand point of sale system.

Many Staples stores will allow merchants to handle test payments using Square Register, the software that operates with the Square Stand reader, according to a Nov. 4 press release.

The partnership is a "counter-intuitive" departure from Square's typical strategy, says Gil Luria, analyst with Los Angeles-based Wedbush Securities.

"Square has been all about anti-hardware and more about software and online, so this is a move to more conventional payment terminals and hardware components," Luria says.

The company has much more emphasis on hardware than it did before, possibly signaling that Square is not getting as many micro-merchants using its card reader as in the past, Luria says. "This is a way to attract some new customers," he adds.

During a November promotion, merchants who buy a Square Stand at Staples in store or online will receive a $200 Staples gift card. The deal with Staples follows earlier Square partnerships with Best Buy and Apple retail stores. Customers can test Square Stand at 1,000 Best Buy and Apple locations, says Square spokesperson Faryl Ury in an e-mail.

"Traditionally, merchants have been forced to make major point of sale hardware investments without the ability to test out products in advance," Ury adds.

Square introduced Square Stand in May, providing a hardware option designed to be used as a stationary point of sale terminal. The Stand has a built-in card reader and is meant to house a merchant's iPad.

However, because the Square Stand is not EMV certified and does not support Near Field Communication for contactless payments, the iPad-based terminal represents only "a temporary solution" to many U.S. merchants, Luria says.

Luria speculates that Square may need more of a push than it got from last year's pact with Starbucks, which invested $25 million in the mobile-payments startup and agreed to use Square to process its payments. Starbucks sells Square's portable card readers, but the coffee chain does not use Square's hardware at its point of sale.

Concurrent with the Starbucks investment, Starbucks CEO Howard Schultz joined Square's board of directors. Last week, Square announced Schultz is stepping down from that role.

"That's pretty soon after Starbucks and Square entered a deal, for him to be stepping down," Luria says. "It also doesn't seem like everything Square had talked about being available at Starbucks [POS] is in place yet."

Square has been steadily diversifying its product offering. In the past six months, Square has added an online storefront, Square Market, as well as a person-to-person payment app called Square Cash.