Worldpay KPI Study: More than 90% of the POS Channel Embraces the as a Service Model

POS solutions providers report that they’re making progress in their transition to the as a Service model as well as navigating changes in the industry by focusing on niches and looking for new opportunities.

as a Service model, Worldpay KPI Study: More than 90% of the POS Channel Embraces the as a Service Model

Are you still undecided about selling point of sale (POS) as a Service? According to the 2019 Worldpay POS Channel KPI Study, most of your competitors have made up their minds. The survey found 93.6 percent of POS value-added resellers (VARs)/managed services providers (MSPs) are partially to completely transitioned to this business model. Moreover, when asked where they plan to be in the transition to the as a Service/recurring business model a year from now, only 1.1 percent said they had no plans to transition to the model.

Worldpay polled 162 VAR/MSP and ISV/software developer partners, including partners of distributor BlueStar that provide POS solutions to the hospitality, retail, and grocery verticals. Of the VARs/MSPs responding to the survey:

  • 8 percent are partially transitioned to the as a Service model
  • 0 percent are halfway transitioned
  • 2 percent are mostly transitioned
  • 9 percent are completely transitioned

Since this is Worldpay’s fourth study, you can also see how the number of VARs/MSPs providing solutions via the as a Service model has grown, following a progression of adoption and then transitioning more of their businesses to as a Service over time:

  • Partially transitioned
    • 2016: 22.5 percent
    • 2017: 14.1 percent
    • 2018: 31.2 percent
  • Halfway transitioned
    • 2016: 22.5 percent
    • 2017: 28.2 percent
    • 2018: 21.3 percent
  • Mostly transitioned
    • 2016: 15.0 percent
    • 2017: 21.2 percent
    • 2018: 19.2 percent
  • Completely transitioned
    • 2016: 5 percent
    • 2017: 14.1 percent
    • 2018: 10.6 percent

Recurring Revenue Growth

In addition to gauging adoption of the as a Service model, Worldpay asked a new question in this year’s survey: “In 2018, what was your average monthly recurring revenue per merchant location?” Responses from both VARs/MSPs and ISVs in the POS channel are:

  • $1-$50: 15.3 percent
  • $51-$100: 15.3 percent
  • $101-$150: 8.7 percent
  • $151-$200: 15.3 percent
  • $201-$300: 8.7 percent
  • $301-$400: 8.7 percent
  • $401-$600: 6.5 percent
  • $601-$800: 4.4 percent
  • $801-$1,000: 0 percent
  • $1,000+: 6.5 percent

No respondents reported that they have $0 recurring revenue; however, 10.9 percent said they were unable to answer because they don’t track recurring revenue.

Citing a 2018 RetailNOW presentation that included a recommendation to build recurring revenue to at least $800 per location per month, the Worldpay survey report noted that the majority of VARs and MSPs are still building recurring revenue to that level. The survey report also points out, however, that POS solution providers are growing recurring revenue by adding complementary products and services such as managed IT, cellular failover, digital signage, gift cards, loyalty programs, security, web hosting, website services, online ordering and Wi-Fi.

Overall Business Growth

Worldpay also asked POS resellers and managed services providers about the sales growth they experienced in 2018:

  • Decline in sales:  13.1 percent
  • Flat: 11.5 percent
  • 1-4 percent sales growth: 19.7 percent
  • 5-9 percent sales growth : 16.4 percent
  • 10-14 percent sales growth: 16.4 percent
  • 15-19 percent sales growth: 8.2 percent
  • 20-29 percent sales growth: 6.6 percent
  • 30-39 percent sales growth 8: 8.2 percent
  • 40+ percent sales growth: 0 percent

The Worldpay survey report calls 2018 a “year of stagnation” with 44.3% of VARs/MSPs reporting growth less than 5 percent, compared to last year when only 22.6 percent reported growth at that rate.

It was also a year of change, however. Worldpay reports that this year there was a sharp increase in the number of POS solution providers focusing on niche verticals as their primary markets, such as beer distributors, car washes, dry cleaning, hardware and lumber, pet grooming, retail pharmacy and salons. There was also a significant decline among respondents from shops with one to four employees (31.3 percent in 2018 vs. 18.8 percent in 2019).

Looking Ahead: Opportunities and Threats

Worldpay also asked POS VARs/MSPs to describe the opportunities and challenges they see ahead for their businesses. Some of the biggest challenges are:

  • Consolidation within the channel
  • Vendors selling direct
  • New competition from banks and merchant service companies
  • Technology disruption
  • Customers dissatisfied with POS solutions
  • Vendor relationship concerns

They also cited macro-economic issues, such as:

  • Independent retailers failing due to competition from e-commerce and big box stores
  • Fewer traditional grocery stores
  • Security risks and compliance issues
  • A slowing economy in 2019

Respondents also see opportunities such as:

  • Providing education/training as a way to compete with companies looking for “easy business”
  • Providing tech support and security along with POS solutions

The Value of Benchmarks

You will find more data in the Worldpay survey report, including POS channel recruiting, hiring and compensation practices, revenue per employee, R&D spend, and marketing expenses as a percentage of annual revenue.

The report concludes with advice to use the survey’s findings as “industry average metrics” that can help you evaluate your business — showing whether you’re a channel leader or that your business falls somewhere on the lower end of the curve.

Use the insights in the report to establish specific objectives, and then, using the key performance indicators (KPIs) that the survey references, track your progress as you work toward your goals.  as a Service model