[UPDATED with comment from Fivestars]
A year and a half after launch, and Logan LaHive, chief executive of Belly, has a clear message for the competition: we’re winning. LaHive says the Andreessen Horowitz-backed company, which sells an iPad-based loyalty program to merchants, is running in over 6,000 location in 15 markets, making it three times larger than its closest competitor and the “indisputable market leader.”
Once packed to the brim with angel and seed-funded entrants, the loyalty space has thinned out, leaving a handful of well-funded players. That includes FiveStars which has raised $16 million; LevelUp, which raised 21 million last fall; Marqeta, which has raised $19 million so far; Swipely, which has amassed $20.5 million, and other more tangential, but still-imminent, competitors like Square, and its $340 million war chest.
Meanwhile, Belly raised $10 million in a series A a year ago, and has expanded rapidly, selling and scaling at a blistering pace. The Chicago-based company has rolled out new integrations with Yelp and Facebook this morning, marking the beginning of Belly’s push to move beyond loyalty toward an open, social CRM.
From a technology perspective, the two products are fairly simple. With the Yelp integration, the company allows merchants to ping high-value customers with prompts to write a review immediately after a visit. And the Facebook feature allows customers to like a business directly from the iPad terminal.
“Loyalty is our core. and it’s a key driver of value for our merchants,” LaHive told Street Fight. “But we want to take our businesses from loyalty to be the entry point to have a better digital connection [with consumers] by being the best input for their customer data.”
LaHive is not alone in that sentiment. Most companies in the space aspire to create a cloud-based CRM system of sorts — in which, payments, inventory, social chatter, customer emails, and the lot of a merchant’s data are brought together in one operating system. However, the question is which approach — the second screen (Belly), payments (Swipely, Marqeta, and LevelUp), or point-of-sale integration (FiveStars) — best positions a company to aggregate the spectrum of merchant data.
Today, the point-of-sale system is the closest touchpoint for most business owners. However, the POS landscape is dominated by hundreds of expensive legacy solutions that find no real impetus to open their systems, making integration difficult. And LaHive says that the companies which claim to have done so work in a grey area largely outside the purview of the terms of service.
“A lot of folks in our space talk about integrations, but frankly they’re just hacking into established POS systems,” said LaHive in a veiled reference to companies like FiveStars. “They’re plugging into printer ports, or installing software in these systems that is in expressed violation of the terms of service of these providers.”
We’ve reached out to FiveStars to comment on the claim, and have update the story with a comment below.
The other approach has been to tie into the payment stream, either by building a payments network or by just processing transactions on behalf of merchants. LaHive agrees that payments data is important, but does not believe it’s the end all, be all for consumer value in loyalty.
“The simple fact is that loyalty to a small business has nothing to do with the transaction. Loyalty is not transactional,” said LaHive. “It’s certainly important, but I think the most valuable metric in terms of overall success of a [loyalty] program is how much you can achieve distance and scale, how you cans sell and get your program installed, and then overall consumer engagement.”
LaHive’s emphasis on scalability is at the core of Belly’s product and sales strategy. By building around a tablet, Belly avoids the complex competitive landscapes that mark the point of sale and payment processing industries. There’s no product cycle to fight against, and no legacy firms to dethrone.
However, the iPad is a temporary fix. It’s a work-around for a small business market that still lacks the unified in-store platform to coordinate the hundreds of different services available to business owners. The question for Belly is whether the company can adapt its software as other technologies develop, and avoid finding itself on the wrong side of the counter.
UPDATE: In an email to Street Fight, Victor Ho, chief executive at Fivestars, explained the company’s relationship with the point-of-sale vendors:
“It’s not so cut and dry. There are 350 systems in the US alone, all with different [terms of service]. We’ve come across some that say if you install 3rd party software, they’ll evaluate whether you are covered for a software malfunction on a case by case basis. However, these terms are generally in place to protect them from viruses or accidentally installing software not designed for the POS. The bottom line is that across our thousands of locations, we’ve been embraced by the POS companies we work with, and the Belly quote is a fundamental misunderstanding of what those TOS mean.”
UPDATE 2: In a separate email, Ho also contested LaHive’s claim that Belly was the largest player in the loyalty market:
“[LaHive] seems a bit misinformed, which is understandable given that Belly doesn’t have much experience working with [point-of-sale] providers. [Fivestars] operates on thousands of POS systems across nearly 100 brands in 20 states. In fact, the picture here is quite the opposite. The POS ecosystem is one of our biggest advantages as a company, and part of the incredible growth we’ve experienced can be attributed to POS resellers and OEMs that advocate for our product when their merchants are looking for a loyalty system, or that we even have direct reseller agreements with.
“The result is that [Fivestars] is now 2.5 times larger than Belly. The ultimate measure of ‘distance and scale,’ for customer engagement is very simply how many rewards customers have redeemed on your platform: in April Belly announced they were at 200,000 rewards, and at the same point in time we were just over 500,000.”
Steven Jacobs is Street Fight’s deputy editor.