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Table of Contents

Lead Story

Pop-ups for the holidays - and beyond

News

Industry Update

Is Clover the POS of the future?

Tyfone confronts data security 'cross over'

BIPS adds to bitcoin news

Views

It's an ever changing world - predictions for 2014

Michael Gavin
Merchant Warehouse

An open letter to the electronic payments industry: Let's put a stop to criminal practices in our industry – now!

Robert O. Carr
Heartland Payment Systems Inc.

Benefit by adopting an as-a-service business model

Sean Berg
Harbortouch

Education

Street SmartsSM:
Nothing succeeds like failure

Dale S. Laszig
Castles Technology Co. Ltd.

Money2020 and the fast-changing payments world

Peggy Bekavac Olson
Strategic Marketing

Sell with the right tools

Tom Waters and Ben Abel
Bank Associates Merchant Services

Company Profile

Planet Group Inc.

New Products

The next storefront

Inspiration

What motivates your business partners?

Departments

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

November 11, 2013  •  Issue 13:11:01

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Pop-ups for the holidays - and beyond

According to a white paper from mobile technology firm CradlePoint Technology, the pop-up store phenomenon began around 2003, when large merchants expanded their operations for short periods of time by renting vacant mall spaces and abandoned storefronts. When the real estate bubble burst in 2008, and cheap square footage was in even greater supply, the pop-up movement, well, ballooned.

It is now the 2013 holiday shopping season, another intense time many merchants rely on to make the majority of their annual income. In a sluggish economy, with margins still stubbornly tight and merchants determined to squeeze every dollar out of each sale, new opportunities beckon beyond the limits of brick-and-mortar retail locations.

With novel mobile payment solutions now at their fingertips, ISOs and merchant level salespeople (MLSs) have the tools to extend small and midsize merchants (SMBs) into adjacent communities, or just out to the sidewalk. Sellers even have the opportunity to make pop-ups a niche with good residual income by timing implementations to fall around holidays and special occasions, such as Mother's Day and graduation.

Security, variety and personalization

Two basic types of pop-up merchants exist: the ones that use Square Inc.'s dongle-based service and apparently everyone else. Square merchants are what AnywhereCommerce co-founder and Chief Executive Officer Mitchell Cobrin calls "social entrepreneurs." They are artists selling homemade jewelry at craft fairs and self-starters hawking football jerseys outside stadiums - not a lot of volume there.

It is the other kind of merchant, the ones with brick-and-mortar retail locations, inventories and employees, that service providers can enrich via the pop-up paradigm. And once you get beyond Square, the permutations for pop-up implementations are many. First Data Corp. furnished The Green Sheet with three bedrock considerations:

  1. Security: Security and privacy comprise a big issue within payments, especially in pop-up businesses. The number of temporary payment solutions and short-term employees associated with pop-ups creates additional concern surrounding security. Fraud costs both merchants and individuals billions of dollars each year. Payment processors should be able to encrypt card data at the point of swipe, protecting customers from fraud during and after transactions.
  2. Variety: Payment options can be a key factor in customer shopping decisions. During gift-giving seasons, shoppers have a number of items to search for on their to-do lists; offering more convenient ways to pay can make life much easier. Merchants can consider implementing a smartphone or tablet equipped with a mobile card reader and app to instantly encrypt card data, accept credit and debit cards, and provide email or text receipts.

    For even more options, merchants should consider a wireless POS terminal that supports paperless offers and loyalty information via a consumer's smartphonefor valuable marketing purposes, while accepting credit and debit cards, general purpose prepaid cards, e-checks and alternative payments like Google Wallet. By providing more options, pop-up merchants are better positioned to satisfy customer needs and ultimately drive growth.
  3. Personalization: Technology advancements at the POS will enable pop-up businesses to track data and understand their customers' preferences and habits. This allows merchants to keep shoppers apprised of changes in location or to deliver personalized promotions. By delivering this information through the desired channels, merchants can stay connected and maintain loyalty.

Mobile this

The revolution in mobile connectivity is breathtaking. It seems every coffee shop and public space offers free Wi-Fi access today. So it may seem like the easiest pop-up solution is to equip businesses with a mobile POS that leverages free public networks. But the downside is that public networks are inherently insecure and can be plagued with performance issues based on the amount of user traffic.

"It may not be a problem or it may be a huge problem," said Bob Daughton, Executive Vice Chairman of the Board at Conductiv Software Inc. "But if you are sitting there on a Saturday afternoon in December and all of a sudden your system goes down, you've got a major, major problem."

New York-based mobile app developer Conductiv addressed this problem with the August 2013 release of its Interact Mobile POS Solution. The app takes advantage of the more secure cell signal connections between mobile devices and cell towers. But that does not mean that a pop-up business with a tablet POS would connect to the nearest tower.

"On a typical cell phone signal, you get the tower you're closest to," Daughton said. "And if that is a busy tower, you might have a degraded performance. But our system automatically finds areas where the signal integrity, and thus the data integrity, is virtually perfect."

At AnywhereCommerce, the debate over Wi-Fi or cell is rendered moot, according to Cobrin. The Montreal-based firm resells its mobile hardware, software and payment gateway packages via merchant service providers. Its solutions - with rugged, individualistic names like Nomad, Rambler and Walker - incorporate what Cobrin termed end-to-end security encryption.

"For us, the data connectivity aspect is kind of secondary because every one of our transactions is fully encrypted at the card head reader," he said. "So, essentially, it's encrypted into an impregnable data packet, and that only can be decrypted at the payment gateway or the processing platform, depending on the architecture.

Thus, it doesn't matter to AnywhereCommerce which connection method is employed. 'They're equally secure in our world," Cobrin said.

Nevertheless, depending upon the pop-up environment, standard POS terminals might still be the best option. CPN, an ISO in Phoenix, has been serving pop-up businesses since its founding in 2006. If a pop-up sets up shop for two months in a mall location and standard phone lines are available, CPN would recommend traditional mag-stripe machines, because they are reliable and cheap.

"The mobile terminals are great but since they're running off of mobile phone networks and technology, they just cost more," said Patrick Hare, Digital Marketing Manager at CPN. "We'd much rather get people the most affordable solution."

On the move

The pop-up movement attracts creative merchants willing to try new things. In Trends in Pop-up Retail: Innovative Merchandising Driven by Flexible, Dependable Mobile Connectivity, CradlePoint outlined how the Gap Inc. outfitted a school bus with 1960's themed apparel and accessories, while Nike Inc. opened the Nike Runner's Lounge for a time in Vancouver, British Columbia, Canada, to attract joggers with free massages, snacks and beverages and, of course, the latest in running shoes.

But even SMBs can get in on the fun, and the profits, by reaching customers where they live. "If you're in L.A. or San Francisco, you're going to be able to find everything you want within driving distance," Daughton said. "But if you go into Northern California or you go into Central California, you've got lots of people with plenty of disposable income that would love to buy products that just aren't available in their area." Daughton gave the example of a local shoe retailer who could use the pop-up model to sponsor events in adjacent towns or ZIP codes. "You can come in to a town in Northern California in the Wine Country and put on a Jimmy Choo Weekend Shoe Event and invite your customers that are shopping with you online. And you can go up there with a trailer load of shoes to a selected audience that loves your product. As long as you can keep that information flow going, you can have a heckuva little profitable business."

Another type of pop-up installation revolves around seasons or events. Hare said CPN enjoys a roster of pop-up merchants that are stable in that, though they don't process with CPN year-round, they use the ISO year after year. In the summertime, for example, people rent scooters, plan travel excursions or lead river rafting parties. "You don't necessarily need a business location with that," Hare said. "You just need to show up with your raft."

Other organizations "pop up" for charity events, such as art auctions and golf tournaments that raise money for special causes, for which CPN offers specialized contracts. Hare has found that processing for these short-term events leads to other opportunities. "Pop-up owners tend to belong to clubs and associations of like-minded businesspeople, so an endorsement from one can bring in business from a whole group," he said.

Bursting the Square balloon

Square has been a balloon many professionals in the payments industry have wanted to pop for some time. Evidence is accumulating that a little luster has left the love affair between Square and its pop-up and micro merchant customers, which may signal an opportunity for ISOs and MLSs to grab more business from the pop-up sector.

In July 2013, CardPaymentOptions.com, an Austin, Texas-based coalition of merchants and payment professionals dedicated to reforming the industry, reviewed the business practices of Square. While the site praised the mobile payment pioneer for offering an easy-to-understand and accessible card processing solution, it gave the business barely a passing grade on contract terms, and it flunked the company when it came to customer service.

To limit fraud, Square places holds on funds for 30 days if more than $2,002 is charged within any rolling seven-day period, the site reported. Additionally, Square apparently utilizes a balky fraud model that has angered many pop-ups.

"The system appears to flag a high number of legitimate transactions and can cause serious problems for some merchants," the site said. "Numerous complaints have surfaced that Square has randomly and without explanation, or notification, placed lengthy holds (exceeding 30 days) on their funds - even with swiped transactions."

Square's policies can have a particularly negative impact on organizations that host events. If event planners have to wait 30 days until the Square-processed funds clear and settle, vendors might have to be paid out-of-pocket, putting organizers in quite a bind.

This situation is not restricted to events, of course. Few small businesses can wait that long. "My clients can't really afford from a cash flow perspective if 50 to 80 percent cash flow is tied up through credit card payments and then not be settled for 30 days," said Cobrin. "There's some fundamental incongruities with a business that requires cash flow to buy new merchandise and pay employees."

CPN, for one, employs next-day funding of merchant accounts through American Express Co.'s OnePoint program. "That's the one thing that consumers don't really understand overall is the incredible power of a credit card terminal and the fact that you've got banks backing all that money somewhere," Hare said. "When a merchant gets next-day funding, which we offer for a lot of people, that money didn't get there magically; it's a loan against the money that's going to show up."

It's a pop-up world

The pop-up phenomenon has every sign of being more than a passing fad; it appears to be an evolutionary touchpoint as the entire payments ecosystem transitions to a wireless marketplace. "It really bypasses legacy infrastructure entirely," Cobrin said. "You don't need hardwired connections of terminals and processing platforms. There's a flexibility. And we're seeing a lot of it in the MENA [Middle East and North Africa] region, where they don't even have that option of the legacy telco infrastructure."

Indeed, it may be that the pop-up movement in the United States is playing catch-up to how merchants and consumers connect in the developing world. It seems that outside the so-called first world, the rest of the planet is already a complex matrix of pop-ups. "The model really has logic for merchants," Cobrin said. "People are moving around. People are in the field. They're remote and they are where the transaction occurs."

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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