Estimated reading time: 4 minutes
Today’s POS resellers have had some unexpected hurdles to jump in the past few years, to compete with a multitude of free POS models and peripherals have appeared. These free models have their drawbacks, but end-users are still seizing the opportunity to get their hands on free software or hardware bundles, cutting into your profits as a reseller. How to compete against this model has been a crucial discussion in the channel recently, and being armed with knowledge about these “free” models can be the first step.
Free POS Solutions Aren’t Always Free
The most important thing to realize, when responding to an end-user considering free solutions over your own is that “free” comes with more than a few strings and caveats, and assumes the buyer won’t look too hard at long term expenses.
As individual consumers, most of us are familiar with “free” or “freemium” products that we’re still paying for in some way. A wireless provider may offer the latest smartphone for free when you use their service and sign a contract. The fine print typically indicates that you are still paying for the phone by way of fees in your monthly bill, often adding up to more than the flat price of the phone itself. Financing a home or car is no different: if you can’t pay a certain amount up front, you pay more for the convenience of paying smaller amounts over time.
The potential to pay more over time may not be as obvious when looking at a “free” POS system. Rather than financing the system, users pay for it (or more) over the long term in other ways. Someone has to pay for the equipment and software, in the end.
How Consumers Actually Pay for Free Solutions
One common way that “free” system providers recoup their costs is from payment processing and credit card transaction fees. If the POS provider processes payments themselves, they may take their own cut of higher-than-average fees to do so, or charge an additional fee on top of transactions that are processed through an outside card processor.
Additionally, credit card processors may pay a commission for referring or tying their system to their company. This may also mean that the “free” POS system is married to a proprietary software or specific card processor, making upgrading or completely changing a user’s POS operation difficult in the future. Again, think about that wireless provider. What if your “free” phone has to be from a particular manufacturer and your data plan or access to music services are only those offered by the provider? How hard will it be to change to a different type of phone or give up thousands of cloud-stored music and photos to go elsewhere?
When it comes to “free” POS software, if it’s not tied to a specific POS system or processor, it may only be a limited or trial version, requiring a later charge or subscription fee to upgrade to a full version with all the features needed, functions that most retail operations will likely need.
How Resellers Can Compete
So how can value-added resellers (VARs) looking to assist customers with selecting POS systems and software react to “I can get this for free” objections? Start with a consultative, questioning position. Ask what they are considering, whether they are aware what fees might be included, and if they are required to use specific hardware/software/processors. If the customer isn’t sure what the answers are themselves (perhaps they’ve been blinded by “free”), do a little research yourself. Help them understand what they are getting (or not getting) and what long-term costs might be included. Don’t be defensive if they seem set on the freebie. Just tell them you want them to get the best system at the best overall price. You may very well get a call back the next day after their own investigation.
The role of a VAR, ISV and hardware manufacturers in the overall process can’t be dismissed either. You may manage many aspects of a new POS system, like installation, coordinating delivery, configuration, troubleshooting, returns, distribution partnerships, price negotiations, training, technical support, and more. How much will the “free” provider do?
New businesses just starting out may find the allure of the “free” system/software very appealing when every dollar counts to help them get their operations up and running. This is where an experienced VAR can be a guide as well. The free stuff can be a great way to figure out what works and what doesn’t, but if expansion and flexibility is the ultimate goal, it can get very expensive, too. Recommend that they find a credit card processor and/or POS software that meets their needs and price point first and build out from there, thinking of the process as just one more long-term investment in the business.
“Free” will always sound better, but your assistance, attention to detail and maybe a bit of a price break to get started will go a long way to establishing a relationship built on trust that you, the VALUE-added reseller, are just as interested in their success as their money.
Co-Contributor: John Martin
