Square Piles On New Features for Online, In-Store Sales

Square has launched an order-ahead feature and other services to boost its appeal to brick-and-mortar merchants, but history has shown that merchants can be fickle about which features they'll pay more to use.

Square is adding an offline mode and inventory tracking for free, but the new order-ahead feature comes at an 8% fee. The order-ahead feature is meant to drive new traffic into stores.

"In the beta program we have business owners that have really come to rely on the feature," says Semonti Stephens, a spokeswoman at Square. Souvla, a sandwich shop and wine bar in San Francisco, opened three weeks ago and "the pickup offering is helping them turn new customers into regulars," she says.

Other companies have tried adding features to increase traffic in stores, but with mixed results. SCVNGR's LevelUp, for example, introduced its Interchange Zero program in 2012, charging no fee for transactions for a 40% fee for redeemed offers. Merchants said they were more interested in paying a steady transaction fee than for a service that promised to attract new business, so LevelUp reinstated its regular transaction fee last year.

The pickup feature might appeal more to already loyal customers, says Jordan McKee, an analyst at Boston-based Yankee Group.

Square "positions the pickup feature as a customer acquisition tool…but I see it as a good way to enhance relationships with already loyal customers," McKee says. "[I] don’t see it increasing business in any measurable fashion."

While the 8% fee seems high compared to Square's standard 2.75% transaction fee, the average merchant fee for food ordering services is about 13.5%, McKee says.  Square is offering a promotional rate of 2.75% per order through July 1.

Square says the integration with Square Register is a key selling point for merchants, who can see online pickup orders and in-person orders tracked on the same screen.

Square also introduced inventory tracking and an offline mode to Square Register. The offline mode, a feature that is increasingly available from Square's rivals, allows merchants to temporarily accept card payments without Internet connection.

Groupon introduced an offline mode to its Breadcrumb POS app in July. Shae Whitney, a former Square customer, switched to Groupon the previous month and said the offline mode "saved the day" during the grand opening of her retail store, Dram Apothecary.

Revel Systems added an offline mode after the Super Bowl blackout in 2013. Alabama State University's football stadium, a Revel client, has already put this feature to the test – the stadium lost power during an Aug. 31 game last year.

The inventory tracking feature is accessible from a Web dashboard. The company said this was one of its most requested features.

Square has been testing the order-ahead concept since the beginning of the year to allow customers to order and pay before picking up their items in-store.  Square seemed to be testing a separate pickup mobile app, but the newly launched feature is available only within Square Market, Square's online marketplace.

The order-ahead feature could be more successful if integrated more closely into Square Wallet with an aggregation and search functionality, says McKee. In this way, Square could make the experience more like the food-ordering site Seamless, he says.

Square seems to be targeting the pickup feature to coffee shops and cafes.

"Research shows that food and beverage is the second most popular category among purchases made on smartphones," says Square in an April 29 blog post. "And studies show that more people are preferring to use their smartphones to pay for their purchases. Square is helping local business owners match these trends and connect with customers."