Shopify Turns Any Phone into a POS

Stripe Tap-to-Pay

As the world returns to IRL activity, so is Shopify. The eCommerce enabler continues to expand into functions that empower physical retailers –  including online merchants that also have storefronts. The latest move turns their smartphones into POS terminals… no additional hardware required.

Known as POS Go, the mobile point-of-sale system lets sellers transact at their stores or on the go. Specifically, they can accept various payment modalities including tap, swipe, and chip. They can also monitor CRM data, purchase history, and other business vitals such as sales and inventory.

Zeroing in on the “on the go” use case, this caters to very small businesses (VSBs). This segment aligns with Shopify’s core customers. However, it could expand that base beyond eCommerce merchants. We’re talking food trucks and farmers’ market merchants, which grow Shopify’s addressable market.

In addition to broadening that base, this move could deepen Shopify’s relationship with eCommerce-heavy merchants. As noted, some Shopify customers have both online and IRL touchpoints (especially following the Covid era). By offering both, Shopify plants deeper tentacles into merchant operations.

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Operational Command Center

Speaking of expansion, this move also broadens the smartphone’s utility as an SMB operational command center. Busy proprietors have relied on the smartphone over the past 15 years to conduct business and key communications. Elevating the device’s role to POS amplifies that effect.

But Shopify isn’t the first player to make this move. As we reported in February, Apple issued an over-the-air update that activated POS functionality for massive swaths of iPhones. That pre-empts Shopify’s move, although its latest play is still valuable in its direct integrations with merchants’ store data.

Moreover, Shopify’s mobile POS move differentiates it from a crowded market by lowering barriers – especially in ways that resonate with its target VSB segment. That competition includes Square, Clover and Lightspeed. It’s becoming clear that the next standard in this sector will be “zero-cost hardware.”

But transitioning to software-only – piggybacking on the devices SMBs already own – will be difficult for players that rely on hardware margins. Meanwhile, non-POS players in the SMB SaaS realm that don’t control the hardware are finding clever workarounds. GoDaddy recently did this via QR codes.

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Fish Where the Fish Are

Strategically, this does several things to help Shopify hit growth targets. It broadens its addressable market, as noted, and deepens relationships with existing merchants. The latter is a key retention move as Shopify – like all SaaS businesses – lives and dies on lowering churn and boosting MRR metrics.

In a more immediate and surface-level sense, Shopify is simply fishing where the fish are. As the Covid Era recedes, shoppers are flocking back to physical stores. Shopify has reported aggregate offline sales growth this year while Mastercard says IRL sales are up 10 percent over pre-Covid levels in 2019.

But the real play is in the space between. SMBs developed new muscles in the Covid era, including the ability to dynamically offer eCommerce and in-person transactions. So shopify is doing all it can to meet that new demand signal. Expect more of the same from Shopify and other SMB Saas leaders.

On a more sober note, this move comes amidst headwinds for Shopify. Not only does it face the same devaluations seen throughout the Saas world, but there’s a market correction for “covid-advantaged” businesses. It reported losses in Q1 and Q2 but will continue to look for ways to turn it around.

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