Groupon Supplements Its New Payment Service With the iPad-based Breadcrumb System

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Online daily-deal leader Groupon Inc. followed up on its big payments announcement of last month with Wednesday’s national rollout of its Breadcrumb service, a point-of-sale system for restaurants, cafes, and bars centered on Apple Inc.’s iPad tablet computer.

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Breadcrumb itself is not a payments service, but is instead a multifaceted, cloud-based business-management software application that handles everything from menus and ordering to table arrangements to sales and employee time tracking, among other functions. Groupon acquired Breadcrumb in May when it bought a New York City-based hospitality technology startup by the same name. About 100 merchants have been testing Breadcrumb.

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Combine Breadcrumb with the new Groupon Payments service, however, and the company once known exclusively for sending e-mails offering 50% discounts at local eateries, spas, and entertainment venues suddenly is competing with independent sales organizations, value-added resellers, and other firms selling business-management and payment services to hospitality merchants. Groupon’s stock has suffered as the market for easily copied daily deals has matured and attracted many competitors. In fact, financial publications reported Wednesday that eBay Inc., owner of online payments provider PayPal, is testing deal offers with local merchants.

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“I think that [Breadcrumb] fits in with Groupon’s strategy of branching out from the daily deals,” says Mary Monahan, executive vice president and research director for mobile at Pleasanton, Calif.-based Javelin Strategy & Research. “They’ve got to branch out, but it is branching out at the low end of the market.”

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Breadcrumb’s four-tiered pricing plan starts at $99 per month for servicing one iPad and an unlimited number of users and goes up to $399 per month for up to 10 iPads and unlimited users. Merchants must provide all of their own hardware, but Chicago-based Groupon will sell them whatever they need, including the iPad, in so-called “Breadboxes.” Groupon will sell any iPads ordered through it at Apple’s retail prices; the iPad 2 starts at $399.

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In addition to the many features of the Breadcrumb software, the system provides one-stop shopping to restaurants for service and materials, a Groupon spokesperson tells Digital Transactions News. “They can buy that through us so they don’t have to go through multiple vendors,” he says. “They can put a new terminal online almost instantly, whereas it’s difficult to do that on the legacy POS systems.”

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Besides the hot payments processor Square Inc., some ISOs are now offering business-management software systems to small merchants. Long-time POS systems providers in the hospitality niche include Micros Systems Inc. and Radiant Systems, which is now owned by ATM and kiosk maker NCR Corp. NCR recently rolled out is NCR Silver point-of-sale service for small merchants that runs on iPads or Apple’s iPhone.

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While restaurants have many new choices, plenty of small establishments still get by on older business-management platforms. “Obviously there’s a number of antiquated POS systems out there,” the Groupon spokesperson says. “Breadcrumb costs thousands of dollars less than these systems. The best thing about it is it’s run on an iPad; it’s easy to pick up and use.”

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Groupon says it has about 250,000 merchant relationships worldwide. It won’t break out its number of U.S. merchants or how many restaurants and bars have offered its daily deals. But the spokesperson says the food and beverage sector “makes up one of the most important categories within our merchant base.”

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Groupon clearly is hoping that many Breadcrumb restaurants and bars will use the new Groupon Payments service, which offers a discount rate for swiped transactions of 1.8% of the sale plus 15 cents for Visa, MasterCard, and Discover transactions, and 3.0% plus 15 cents for American Express sales. Any merchant that has ever offered a Groupon deal or has committed to doing one is eligible for that pricing.

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Breadcrumb restaurants that don’t want to use Groupon Payments, however, can still use Breadcrumb with the platforms of such major merchant processors as First Data Corp., Chase Paymentech, Global Payments Inc., Total System Services Inc. (TSYS), and Heartland Payment Systems Inc., according to the spokesperson.

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Javelin’s Monahan says that based on what she’s seen of Breadcrumb so far, the service is likely to attract a good number of users. “I think it’s a competitive offer, especially because it’s so specific for that industry,” she says.

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All the recent attention on small merchants, she adds, can be traced back to Square’s debut about two years ago, along with the fast adaptation of tablet computers to many different markets. Square first aimed at part-time sellers and very small new businesses, but is now moving up-market and even is processing for Starbucks Corp.