Order Ahead, Confusion at Counter: Square’s New App, and the Problem of Leading From Behind

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800px-Mobile_payment_03“So you already paid? I’m pretty sure we didn’t sign up for this.”

That was the response from a barista at a cafe in Brooklyn a few weeks ago, when I told him I already ordered ahead using Square’s new Order app. We quibbled for a moment, and then he apologized and passed along an iced coffee as he flung a few frustrated insults at the payments company.

The experience — albeit, anecdotal — pointed to a deeper challenge facing the tech industry as it takes aim at the way we buy and sell goods in the real-world: technology companies, in all their glory, can only lead from behind. As companies like Square look to not only automate existing behaviors, but introduce new ones, the gatekeepers to the future of retail — and the public markets — aren’t in Silicon Valley. They’re on the main streets and in the malls across America.

Moving beyond the efficiency argument
Unlike proximity payments, ordering ahead isn’t a consumer problem. In the restaurant industry, for instance, more than 40% of adults in the U.S. said they have ordered-in using a food delivery site like Grubhub or Seamless, according to the National Restaurant Association 2014 annual forecast released earlier this year. When you narrow the responses to adults aged 18-34, the number of respondents who said they were likely to order through a mobile app jumps to nearly 75%.

Undoubtedly, restaurants owners see the writing on the wall. A large number of restaurants already allow for delivery or takeout, but the National Restaurant Association report suggests that the number is on the rise — even in areas where takeout was less prevalent. Among fine dining restaurants which have traditionally not offered takeout or delivery, nearly 48% of restaurants said they anticipated a jump in online takeout.

Beneath these numbers, there are two processes at work that may indicate challenges for Square’s app. On the one hand, there’s a large constituency of restaurants that already offer takeout and delivery. For these businesses, the calculus centers around balancing the benefits of happier consumer and the efficiency of automation with the transactional commissions charged by Grubhub and others. But for a high-end restaurant or a coffee shop that traditionally has not offered take away, the growth of online ordering represents a more paradigmatic shift in the way they do business.

Consider the experience of my neighborhood barista. The ability to buy remotely and pick up in store requires a basic infrastructure which the businesses simply do not have in place. The cafe would not only need to educate its employees about accepting and processing orders placed ahead, and it would need to clear off counter space to create a second “pick up only” line at the counter.

The problem extends well beyond the internal workings of Square. The technology industry has reached a tipping point with the retail trade industry where the technology created is no longer intended to make existing processes more efficient. Instead, its meant to replace the half-century old infrastructure on which brick-and-mortar businesses operate. Building a platform technology is hard, and these companies face many new challenges — namely, a constant pressure to expand their role beyond a technology provider into a full-service brand.

A deeper change in the way we shop
Noah Glass has spent the better part of the past decade working to bring online ordering into the mainstream. In 2005, Glass founded GoMobo, a consumer-facing online ordering service in the vein of Seamless. By 2010, Glass rebranded the company as Olo, bagging the consumer play and focusing exclusively on helping big brands accept orders online.

I met Glass at a Jack’s Stir Brew near Olo’s office in New York last Friday. The gourmet coffee shop has a handful of locations in the city, but it’s still too small for the types of businesses that use Olo’s software, says Glass.

Today, Olo builds software that helps some of the largest restaurant chains to manage and implement digital ordering capabilities through the brands existing website or mobile application. Order a Five Guys burger or a Baskin Robbins cake online, and you’re using Olo’s software.

Like most entrepreneurs, Glass is optimistic about the future of this kind of tech. He believes that eventually the very concept of waiting in line to place an order with a cashier is on its way out. The supply side point-of-sale system — where an employee enters a customer order — will soon become a relic, he says. Instead, the point-of-sale will be on our phone. Think self-service terminals at grocery stores, but as an application on our smartphone.

It’s something that Apple has done extraordinarily well. The company’s EasyPay app allows customers to pay for lower-priced items by using the Apple app to scan the barcode. In the foodservice industry, Glass believes that the introduction of order ahead capabilities will favor larger brands who have the capital to implement new processes — in-store signage, employee training, store layout etc. — needed to support the technology.

For smaller businesses, the impact of some of these more innovative retail models is less clear. Square, Shopkeep and the host of other point-of-sale startups, which have focused on small business, have largely used the remote storage approach (i.e. the cloud) as a pricing weapon by introducing a software-as-a-service model to the traditionally capital intensive point-of-sale market. What’s less clear is whether they will succeed in convincing smaller, and more resource-constrained business owners to change their ways and embrace a new way of selling.

Steven Jacobs is Street Fight’s deputy editor.