Terry H. Zeigler, President
Datacap Systems, Inc.
Editor's Note: We have published two articles on software vs. hardware this year. The second was published July 12 in issue 99:07:01. The following is a very interesting guest opinion on the July 12 story.
Profitably selling integrated electronic payment interfaces does not depend on selecting the best technology. The lines between competing sales channels are blurring. You can no longer categorize point-of-sale systems suppliers into tidy compartments. Cash register dealers sell PC-based systems. Retail stores sell cash registers. Systems developers sell proprietary cash registers integrated with their PC-based store systems. And, ISOs sell anything they can get their hands on.
Complicating things more, these channels have no product, geographic, or market differentiation. Is this channel evolution, channel expansion, or channel deterioration? I just think it's opportunityóopportunity to expand your market reach by finding a new kind of partner.
Changing Business Paradigms
A few years ago, I met with a group of traditional cash register dealers at a trade show. They were deeply concerned that the bank ISOs were competing with them by selling ECR/POS equipment as a natural extension of the credit card terminals ISOs have traditionally sold. When asked how to fight the ISOs, I suggested that the dealers view bank ISOs as potential business partners and not as competitors. Their responseó"How do I become an ISO and collect residual income?" They missed the point.
A major problem plaguing sales channels is that there are too many groups chasing the same profit objective. Manufacturer to distributor to dealer to useróall wanting and needing a percentage of the product profitówith not enough to go around. The PC industry has flattened the distribution layers and figured out how to go direct to users through mail order and the Internet. The model works by cutting the cost of sales, which has become the largest expense in product delivery. This model will certainly be replicated by other industries, including POS.
The Opportunity
Fortunately for POS resellers, retail is a fragmented market with a serious need for hands-on expertise, service, and support. And the fact that merchants are demanding that electronic payments be integrated with their POS systems means constant opportunity for resellers to provide products and billable expertise. The challenge lies in cutting the cost of sales by choosing the right kind if partner. A dream partner would be a company that:
Banks, card processors, and ISOs fill the bill. Because integrated payments are becoming standard, bank sales organizations can't deliver their transaction services without the help of resellers that install and support the total retail system. This partnering opportunity will not only bring prospects to resellers, but will also provide resellers with income for bringing business to the bank. Each partner makes money based on the products and services they provide, while expanding their market reach because of the other's activities.
The Reality
Many POS resellers sell integrated payment interfaces reluctantly. Their costs go up because they don't receive cooperation from the banks to get the merchants activated. Resellers must simply understand that they cannot successfully install any type of electronic payment product without the cooperation of the merchant's bank card provider (bank, ISO, processor). And as stated above, banks cannot get the merchant's transactions unless the reseller successfully installs the system. After the system is installed, many of the merchant's support calls have nothing to do with the system, but with the processing services provided by the bank. So a cooperative relationship between the bank and the reseller is a requirement to a successful installation. Understanding each other's needs precludes a shotgun marriage and offers the opportunity to pursue a synergistic relationship.
Many resellers are already enjoying partnering relationships with bank card providers. Resellers are being recommended to merchants by the bank sales groups and are actually receiving commissions for bringing accounts to the banks. The great part is that banks are actually embracing POS resellers as a new sales channel. Several card processors actually have VAR Relationship Managers.
Picking the Right Product Partners
There is no question that the opportunity for POS resellers and bank card providers to work together is enormous and timely. However, choosing the right product partners is part of the success formula in sales channel partnering. After all, the products and services that are offered to the merchant must be salable and supportable by both the reseller and bank card provider. Choose product suppliers that can build bridges between retail system providers and banks, and be certain that your product offerings make good business sense for both partners. Selling integrated payment interfaces profitably will depend on your partner selection, not your technology selection.
