NEW YORK (TheStreet) – More and more small retailers are turning their Apple (AAPL – Get Report) iPads into cash registers through cloud-based software, which in turn is feeding into higher store sales.

According to the latest data from ShopKeep’s Small Business Insights Center, bricks-and-mortar businesses that use the company’s point-of-sale (POS) software, experienced 20% growth in same-store sales in the third quarter over the same quarter in 2012. Transaction numbers were up 13.6% year over year.

ShopKeep POS provides cloud-based point-of-sale software for retail shops and restaurants. The software allows retailers to set up registers in just a few minutes with the ability to accept cash or credit cards with their choice of processor, view real-time sales from their phone or Web browser and track inventory and staff.

The results are based on data from 556 customers that were using the ShopKeep software during both time periods.

As owners become more comfortable with cloud-based business management software, sales are benefiting. Mobile software allows for quicker and easier transactions for both customers and salespeople. Shop owners, through the use of data analytics, can better predict sales trends and make adjustments to inventory, for example.

Mobile payment companies, including Square and Intuit’s (INTU) GoPayment are also helping businesses accept credit card transactions quicker through card readers that attach to a mobile device. Last year, Square partnered with Starbucks (SBUX) to bring its services to 7,000 of the coffee chain’s locations.

ShopKeep says its customers are also typically younger, tech-savvy business owners.

“Our customers are typically new stores; a younger demographic and early adopters of technology,” says ShopKeep Founder and CEO Jason Richelson. “They are not afraid to try new things and embrace change, and you can see that reflected in their business performance. Retail technology is evolving incredibly quickly and those stores that are evolving with it are clearly seeing great results.”

The data also indicates a more positive outlook for fall retail sales and into the all-important holiday season, Richelson notes.

However, Richelson states small retailers “need to be smart about the promotions and products they push in order to make the most of the shorter retail holiday season this year.”

Large retailers for the most part have been slow to adapt mobile technology as part of their operations, but a few forward-thinking companies like Starbucks, Apple, Urban Outfitters(URBN) and Home Depot (HD) were early adopters of mobile payments technology.

More and more retailers are getting on board with technology. Traditional department stores such as J.C. Penney  (JCP) and Nordstrom (JWN) have joined the ranks to equip sales employees with devices to shorten the checkout time. Retailers are also realizing further benefits such as “increased savings, sales and customer satisfaction,” according to an August 2013 article by Mobile Payments Today, citing a report by Yankee Group Technology Roadmap.

The survey data also highlighted markets including Portland, Chicago and Seattle emerging as rapid adopters of cloud-based POS. The three cities had the top sales growth percentages by city over 2012, while more established markets like Los Angeles and New York City experienced the highest overall sales by city, but lower growth rates, according to ShopKeep.

Brooklyn, N.Y., in particular, a city that had large early adoption rates of mobile POS systems, saw higher total revenues than Manhattan and Los Angeles, the data found.

By industry, quick-service restaurants had the highest overall sales via mobile technology, with mobile food trucks having the highest revenue increase during the third quarter.

Originally published on pointofsale.com. 

ShopKeep POS, a cloud based iPad point of sale solution,  today announced the hiring of two executives: Drew Schwartz as Vice President of Product Management and David Herzog as Director of Business Development for the Channel Business.

I spoke with Jason Richelson, Co-Founder and CEO of ShopKeep POS yesterday about the growth of his company.   ShopKeep now boasts over 8,000 active users, up from 3,000 one year ago,  an impressive growth rate.  The company has 81 employees, Richelson told me, and is actively acquiring customers all over the United States and is beginning to get traction in Canada as well, although it supports only one tax rate in the system at the present time. The system is sold directly to end-users, also through the VAR (value added reseller) channel, and credit card processing vendors can make referrals as well.

I asked first what factors Richelson felt contributed to the success of the product; “having been a merchant”  he replied,  he could offer business owners a system that was totally engineered around their needs.  Prior to starting ShopKeep, Richelson and a partner owned wine and grocery stores and other businesses that ran on server based POS systems.   There he experienced numerous frustrations with that form of technology, which led him to design a system that could solve the problems he’d experienced.   Development on the system began in 2008.

ShopKeep raised $2.2 million in 2011 from a group of NY venture capitalists, and another 10 million dolllars from Canaan Partners in New York City in 2012.

Richelson said that the company was planning to expand in a number of niches (vertical markets).  He cited Hospitality as one of those segments, including full service restaurants and bars.  There are fewer (cloud based iPad POS) players in those niches he felt, and it offers significant opportunities.  Any segment where people “pay for something and then leave”, is a potential niche.  ShopKeep claims to be the first cloud based iPad POS system, and mentioned a YouTube video of him demonstrating the system back in 2011.

There’s no question that this is an emerging year for cloud based iPad POS systems.   As this niche begins to mature it shows all the signs of a platform gaining widespread acceptance among early mainstream buyers.   Contributing to the growing sales of iPad systems, and something that poses a threat to traditional POS systems is the low cost of entry.   When equipped with a cash drawer and receipt printer,  iPad based POS systems are right around $1,000 per station to get up and running – about a third the cost of an average PC based system.  When we compare the cost of a multi-user system which includes a server, then iPad based POS is even more cost effective.

Adding support to the concept that point of sale can be run on an iPad is the presence of a major company, NCR, who has its own solution known as NCR Silver.

For those buyers who want the leading edge, but not the bleeding edge of technology, all these factors maybe giving them the security they need to get in the water with iPad cloud based POS.

ShopKeep offers merchants a package that includes an APG cash drawer, Star Micronics receipt printer, credit card reader and iPad stand (choice of colors) for just $699.   The company has other hardware bundles for Quick Service restaurants that includes a kitchen printer, and also a Retail bundle with bar code reader and printer.  (click on the image for more info).

More about ShopKeep:

The system will work with any credit card processor according to Richelson, and cites that as being important to merchants – they are never locked into any one processor.

The monthly fee for a single user system is just $49 and that includes 7 day a week technical support, and product upgrades.

The system was recently in use at the Telluride Film Festival ;  all payments at the festival in Colorado this year ran on ShopKeep, iPads and the cloud. 100 volunteer cashiers rang up 12,000 sales in four days, with 30 mins of training.

There is the capability for users to import and export their data.

A merchant can use his iPhone or Android phone to view sales data in real time no matter how many stores he has.

I asked Richelson about competition, and the fact that there were “low barriers to entry” for this industry, in that apps are relatively easy to create.  His response was that any potential buyer should try calling the customer care desk of the POS provider they are considering and see how quickly their calls and issues get handled.    ShopKeep is a service company he stressed, and that sets them apart.

In the world of next-gen point-of-sale (POS) systems, Square might have the brand name and billionaire founder, but ShopKeep is making moves of its own. And the company’s chief executive, Jason Richelson, says that while Square dominates the dongle-touting mobile food truck crowd, there are as many, or more, small, brick-and-mortar businesses using the Shopkeep’s tablet point-of-sale system than its widely known competitor’s.

Shopkeep grew out of Richelson’s need as a small business owner. Five years ago, he owned a high-end grocery store, and an accompanying wine shop in Brooklyn, serving the borough’s growing professional class. The store was a success, but the back office was a mess, he says, and he wanted to create a better way. So, in 2009, Richelson hired a developer and began to build his own POS system. Two years and an iPad later, the app started selling in Apple’s AppStore.

Street Fight recently caught up with Richelson to discuss the impact of the cloud behind the counter, how the existing model is inefficient by design, and the challenge Square might have in moving upstream.

When cloud computing enters a market, it often has a disastrous impact on the incumbent players. Are there aspects of the POS market that will make it exceptionally difficult for a legacy companies to adapt?
Micros, which dominates the market today, has come out with [a cloud computing product] recently but they’re not cloud. They still think cloud is putting a server in a data center, but it’s not the same. Cloud is running everyone in on the same servers and the same platform.

But the big problem is the sales structure. They rely on this value-added reseller network of people who are used to selling a whole bunch of equipment, and then they make all the money from the installation.  That’s part of the reason I assume they haven’t gone to the cloud. The cloud has destroyed so many different industries, which were out there selling equipment — sales force is a primary disruptor — mainly because there’s so much less equipment to install so it’s much cheaper.

So traditionally there was an incentive for the POS companies to create products which were inefficient by design?
Yes. The legacy companies had to build the software in such a way so that the independent consultants, who set up the software, could make enough extra money charging to install the systems. They had to build these inefficiencies so that these small guys made just enough money to survive but then they can’t afford to support their customers and their customers don’t want to pay a monthly service fee to have support.

So, we’re saving the retailer on the installation cost, configuration and all that stuff. And then if you go straight to the cloud model they don’t have to buy a server. They don’t have to have a database. They don’t have to have a system. They don’t have to have tech people really at all. So we’re removing all of that. However, that said, we still work through the channel — but the channel is changing and will need to change .

Okay, so if a big part of the model is eliminating the installation costs and you still plan to sell through channels, how do you make it valuable for the resellers?
The reality is that a value-added reseller is not going to make enough money on ShopKeep, so we’re trying to educate them to think of all the other products they can sell on top of it. You’re not going to be able to make all your money selling ShopKeep, so you need to bundle it with all these other products that you could offer the small retailer — loyalty, payments, etc. Essentially, we want [the sales organization] to become value-added reseller of cloud products across the board. You make enough money off of all of them, but alone on ShopKeep you’re not going to make the money because of our software.

More and more local companies are bagging their push for small businesses and heading to wealthier pastures upstream. When you think about the cloud POS business, how easy of a step is it from small to medium to large businesses.
There are two million small brick-and-mortar retailers out there, and we’re firmly focused on those with our current product. As we build our platform though and give people access through an API, we’re going to have to expand from just single locations. A lot of our customers are growing, and they want to see sales across all three locations and that’s where we’re going to be able to start giving them that ability, whether it’s through us or through a third party who wants to roll up your sales.

That’s how I see us moving into middle-market retailers. We won’t be in Walmarts or any large, large retailers — but I definitely see us moving more into enterprise over the next year with a platform. But currently right now the actual product here is with the registers. It’s for small retailers and eventually restaurants and eventually deeper into retail — clothing stores, shoe stores and specialty retailers.

During the summer, Square moved into the brick-and-mortar market with the launch of Square Register. Where does Shopkeep stand in relation to them today?
We obviously haven’t raised the kind of money which Square and others have put together — but I’ll bet we have more brick-and-mortar installs than Square. It’s hard to say, but I don’t think they have as many actual stores. Now granted, they have millions of mobile people using the dongle, but businesses actually open seven days a week with employees and overhead, I would bet that we have at least the same if not more customers.

We’ve been out there longer and that’s all we focus on. We don’t do mobile. We don’t do flea markets. We don’t do anything like that. But it’s also because we’re 100% merchant-focused and we’re just trying to help merchants. We’re not trying to do anything else like come out with wallets or do anything like that.

ShopKeep CEO: I’ll Bet We Have More Brick-and-Mortar Installs Than Square

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