Jack Dorsey's Square is evolving once again. This time, it's on-demand alcohol delivery.

Jack Dorsey's Square is evolving once again. This time, it's on-demand alcohol delivery.

May 19, 2021
  • Square started out as an easy-to-use payment-processing solution for small businesses.
  • The company has expanded its e-commerce offerings for restaurants and retailers.
  • Now Square has entered the crowded alcohol-delivery space.
  • See more stories on Insider’s business page.

When Square launched in 2009, it revolutionized payment processing for small businesses like food trucks and mom-and-pop retailers by creating a mobile credit-card reader that could easily be attached to cellphones and iPads.

“We’ve built one of the fairest and most efficient payments businesses in the world,” CEO Jack Dorsey, who is also a cofounder of Twitter, wrote when the company went public in 2015.

But it always had grander ambitions. 

The POS, or point-of-sale, provider has expanded its services over the years by adding e-commerce, including online ordering for pickup and delivery. Last week, the company added alcohol delivery into the mix. 

Square’s move to offer alcohol delivery comes as on-demand delivery of food continues to grow a year after the onset of the coronavirus pandemic. Alcohol to go has been a particular lifeline for restaurants, but the space is increasingly competitive and crowded.

Digital orders through third-party aggregators like DoorDash or Uber Eats grew by 207% for the year that ended in March, according to a recent report by the NPD Group.

Why alcohol is part of Square’s strategy

David Rusenko, the head of e-commerce at Square, came to Square in 2018 after it bought the web-building platform Weebly, where he was the CEO. The purchase was a critical step in Square’s strategy. Weebly made it easy for businesses to launch e-commerce sites on their websites, the same way Square democratized credit-card payments for restaurants and retailers.

Diversifying its business offerings has helped Square’s bottom line.

Chris Kuiper, an analyst and vice president at CFRA Research, called Square’s new strategy for on-demand alcohol delivery more of an “integration” move. It allows Square to offer a new service for its wheelhouse customers — restaurants, small breweries, and wineries. Drizly tends to work more with local liquor retailers. 

Peter Hobson, an analyst and vice president at Third Bridge in New York, agreed. 

“The announcement to start facilitating alcohol delivery seems to be more of an effort to enhance the seller segment offering for existing restaurant and hospitality customers who want to offer alcohol and not a full-fledged entrance into food and alcohol delivery,” Hobson told Insider.

Hobson noted Square was jumping into alcohol delivery through a partnership with DoorDash less than two years after getting out of the delivery business. In November 2019, Square sold the delivery operator Caviar to DoorDash in a cash and stock deal valued at $410 million. 

Rusenko said Square did not want to be “directly involved in building out a courier network.” 

Instead, Square strives to develop solutions that allow restaurants and retailers to form strong relationships with consumers through their own channels. Square merchants can also drive repeat purchases using various delivery aggregators, as the company sees itself as “partner-agnostic” when it comes to dealing with delivery operators such as Grubhub, DoorDash, and Uber Eats, Rusenko said.

“Typically, the majority of sellers will use our best available option, which means that we can help them choose on an order by order basis,” he said in regard to delivery. 

Kuiper sees Square’s latest move into alcohol delivery as a way for Square to compete with more robust digital-ordering platforms like Olo and its POS rival Toast. Both offer more sophisticated online ordering solutions for restaurants, Kuiper said. 

“Square’s advantage is that it is very quick and easy to get started as companies can onboard themselves and be up and running in minutes,” Kuiper said.

Square tends to have lower processing fees geared toward various types of small businesses. Toast and Olo, on the other hand, are much more specialized in going after restaurants and offer more advanced features, he said.

“It is not uncommon to see small restaurants start with Square but then move to Toast as they want more features and scale,” Kuiper added.

Rusenko said Square would always be a platform that helps small businesses “get off the ground” with its legacy payment-processing solutions. 

But with its addition of alcohol delivery and other e-commerce solutions for restaurants, he said, Square is trying to send one more big message to merchants: “We can grow with you.”

Axel Springer, Insider Inc.’s parent company, is an investor in Uber.

Source: Read Full Article