What Becomes of POS Dealers?

2 Jul

The Pareto Rule holds truer in no place better than the POS industry. By that we mean that 80% of a POS company’s installs is represented by a meager 20% of dealers, with even the top 5% likely holding 90% of all installs.

We liken this observation to the general demographic of POS dealers. In most cases, a POS dealer is a service technician who enjoys being called when a merchant has an issue. Traditionally this has worked well for the dealer, who would earn $200/hour for service calls. Most dealers, then, never developed much of a sales skill set, and in fact hate to be thought of as salesmen. Instead they prefer to be viewed as (relatively) technically-savvy people and serve in a quasi consulting capacity when their accounts have issues.

The misfortune for POS dealers is that times are quickly changing. What used to be a multi-hour POS setup is now an out-of-the-box download, maybe with some remote login help. Because these new POS systems are on cloud, a remote login can solve 99.9% of a machine’s problems, obviating the need for much handholding, and many $200/hour service sessions. In the event something does break down, companies like Boomtown are building on-demand support that’s very responsive and cheaper than conventional service models. Instead of worrying about operating system versioning issues – which was a real issue in the first few decades of POS – a POS company can quickly read the version of the OS on one of their installs and point them to a patch or OS update.

All of this is a long way of saying that dealer revenues have been and will continue to dwindle under the conventional business model. In our view the only way a dealer will stay relevant is to develop sales skill sets. By having a footprint of merchants, POS dealers should understand what products will and won’t jive with their merchants, and sell products accordingly. If they are unable to produce meaningful additional revenues for themselves they will be starved out of business. And further, with cloud consolidation, POS corporate will have access to each merchant account. At some point it is simply cheaper for the ISV to employ an inside sales representative to sell additional products to the install base. If dealers are unable to outsell what an inside sales rep can, they will be made obsolete.