Square to Round Out Its Products Through Acquisition: Report

As Square's competitors pile on features to win business from the mobile payments pioneer, the company may be seeking to one-up its rivals by adding non-payment services.

Square is in talks to buy the food delivery startup Caviar for at least $100 million, according to the tech news site TechCrunch, which cites unnamed sources.  The purchase would complement the new Square Order app, which allows consumers to order food or other items ahead of a visit to a Square merchant.

Square declined to comment for this story, saying it could not make a statement about rumors or speculation. Caviar did not respond to inquiries by deadline.

Square's product pitch has long been the simplicity of setting up an account to accept payments through its mobile card reader. But many merchants have more complex needs, and Square's rivals have been racing to provide services that Square does not. For example, Groupon's Breadcrumb POS last year won the business of a bar in Colorado that needed to handle tabs instead of one-off purchases.

Square, in turn, has been rapidly adjusting its product set to appeal to the needs of more businesses. Its Order app replaced its earlier Square Wallet app, which the company said did not resonate with consumers. Square has also eliminated offerings such as a digital gift card and a monthly pricing structure based on merchant feedback.

Last year, Square purchased Evenly, a company that provides servies for person-to-person payments. That acquisition complemented the new Square Cash P2P payment service.

Square's pursuit of an online food delivery service aligns with the company's goals, says Gil Luria, an analyst with Los Angeles-based Wedbush Securities.

"Square doesn't see itself as a payments processor," Luria says. "Square sees itself as a purveyor of rich consumer/retailer relationships. What they have decided is one particular angle where they can help create those rich relationships is the ordering process, usually within a restaurant context."

Even though a pending deal with Caviar is not guaranteed at this time, speculation about such an acquisition shows Square is interested in "digging deeper" into what its Square Order app offers, Luria says.

"They would be able to offer an experience in which the customer feels they have access to a food ordering and delivery service that they previously haven't had," Luria adds.

If the deal with Caviar does not take place, Square will likely find another company that could provide a similar service, Luria adds.

Caviar has its own online ordering service, on top of which it offers fast delivery of meals from high-end restaurants.  Two weeks ago, Caviar announced it was expanding its online food order and delivery service into the Chicago market.

Caviar initially launched in its home base of San Francisco, and has moved into other areas of California, as well as New York, Boston, Seattle and Washington, D.C.