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Mobile-payments processor Square Inc. on Wednesday moved to fill a gap in its product lineup by introducing Square Market, an e-commerce service for small U.S. merchants.
Square Market publishes a merchant’s Web pages at no charge, doesn’t charge for listings, and charges a straight 2.75% of the sale for a card payment, the same basic price as its Square Register mobile-payments service. That pricing package is likely to attract merchants and put pressure on competitors, but whether Square can continue offering such pricing for the long term is unclear.
Launched in 2009, San Francisco-based Square reportedly has about 3 million merchants, mostly small businesses and part-time sellers, and it also processes for Starbucks Corp. Merchants already using Square Register can easily add the e-commerce service and view all sales data through a single dashboard, Square says.
“Sellers no longer need to waste money on expensive Web-site development, complicated fees, or complex inventory management,” Square said in a release. “Square Market enables anyone to open a store for free with items, photos, and a profile for their business.” The new service also enables merchants to post items on the Twitter social network. Square did not respond to a Digital Transactions News request for further comment.
“I’ve been wondering how long it was going to take them to get into e-commerce, because clearly that’s been a gap for some time,” says payments consultant Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group. “This is clearly a big step forward for Square in being a small-business enabler.”
Rick Oglesby, a senior analyst at Boston-based Aite Group LLC, predicts many Square Register merchants will add the Square Market service quickly. ”It makes it easy to throw a switch and have another channel to sell through,” he says. “There’s virtually no downside for a merchant.”
While not a surprise, Square’s move immediately raised the question of how many toes it will step on in the e-commerce service and payments world, a world that includes startups all the way up to such heavyweights as eBay Inc. with its PayPal payments subsidiary and Amazon.com Inc. Like many others, Amazon and eBay host Web sites for small merchants and charge fees for such services in addition to fees for payment transactions.
Oglesby predicts Square will raise Square Market’s pricing, but not before enough merchants are using the service and attracting sufficient “consumer eyeballs” that they would tolerate a price increase.
“At their current pricing, I don’t see how they can make any money over the long term,” he says. “My expectation is that in the long term they’re going to be charging more than they’re charging today.”
A spokesperson for San Jose, Calif.-based PayPal, the leading e-commerce payment specialist, declined comment.
Oglesby notes, however, that Square may not be stealing business from competitors as much as it is expanding the e-commerce payments market. Recent Aite research of 491 small to mid-size businesses, the types of companies that might be attracted to Square, found that 67% “don’t do any online selling at all,” Oglesby says.
Square on its Web site is displaying links to the sites of more than 20 merchants already using Square Market, an indication that it had been quietly testing the service before today’s announcement.
