Another well funded new entrant joins a very crowded market

 

Orderbird, a Berlin based EPOS start-up that targets the SME’s in the hospitality industry has just raised $10m taking its total fundraising to $18m. The cash will be used to expand outside its core German-speaking markets where it now claims over 2.000 customers. The UK is first on the list.

Orderbird primarily provides EPOS software that runs on iPads. It’s not cheap. Prices start from around £50/month for the software plus an upfront £599 for installation and some hardware. Over the five to ten year life of an EPOS system this is much dearer than a traditional Window-based till system which would retail at around £1200 with ongoing fees of around £50/year.

The largest investor is Concardis, a leading Germany merchant acquirer, and integrated payments are key selling point. Card processing fees – 1.7% for debit and 2.7% for credit – are rather high but a rather novel integrated card reader is free of charge.

 

A novel idea
A novel idea

SME commerce platforms of all kinds are very attractive to investors at the moment; partly because the payment industry is flush with cash and struggling for new ideas. However, this is a very tough market to make real money in.

SME EPOS is highly competitive and many of the new entrants struggled to differentiate themselves. Moreover, the market size frequently over-estimated. For example, Cybertill has been selling successfully selling cloud-based EPOS for over 10 years, operates in over 5.000 sites but has revenue of just £6m.

Some of the more ambitious investment cases are driven by the prospect of using an iPad EPOS system as a means of generating additional profit from signing SME’s to loyalty schemes, footfall generators, customer insight reports and payment processing.

Even well financed new entrants such as Orderbird will face three major challenges:

  • SME customers remains highly conservative in their buying behaviour. They are deeply suspicious by nature and most are not attracted by whizzy dashboards and digital loyalty schemes. They need to see a sales rep making a demonstration before buying.
  • Selling new ideas to SME’s is expensive and it’s really difficult to make the economics work with a direct approach. Businesses like Orderbird will need channel partners. This is where Vend is being smart but (of course) channel partners need paying and this eats into margins.
  • The existing EPOS industry (which has deep customer and channel relationships) will up its game. Many longstanding vendors have already begun moving to the cloud and from Windows to iOS.

The market for SME retail technology is competitive and expensive to reach. My recommendation to Orderbird and others is to target larger customers. Enterprises are less satisfied with existing suppliers (eg Micros) and and more interested in new ideas around loyalty and footfall.

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