Square Snags Seven Whole Foods Stores in Another Move Up Market, Updates Square Cash

Consumers shopping at seven Whole Foods Market locations in Austin, Texas, New York City, Florida, and the San Francisco Bay area now can use their Square Wallet apps to pay for merchandise inside the stores.

Whole Foods and Square Inc. are installing Square Register-equipped iPads on Square Stands inside these stores to accept Square Wallet and credit and debit card payments at sandwich counters, juice and coffee bars, pizzerias, and beer and wine bars. Square Stand is base with a built-in card reader to hold an iPad. Whole Foods would not comment about the program.

Square is processing all payments that go through Square Register, including Square Wallet, payment cards, and cash. Square is not disclosing the pricing, but its standard rates are 2.75% for swiped or online transactions and 3.5% plus 15 cents per keyed transaction.

The Whole Foods deal lets Square show that its products work as-is for merchants of all sizes, a Square spokeswoman says. The Square Register, the company’s POS app, and the Square Stand Whole Foods is using are no different from those offered small merchants, she says.

Square is keen to showcase that flexibility. “When we launched Square Stand we knew it would enable large merchants to use Square,” she says. “We continue to build our products so large merchants and micro-merchants can use Square.”

Square says some of the Whole Foods locations will serves as “lab” stores where the two companies can try different payment and customer-service options.

Square’s origins are in serving the smallest of merchants, those typically too small to warrant a traditional merchant account with monthly fees and contracts. Square went after the occasional and low-volume merchant, such as dog walkers and flea market vendors.

This is Square’s second major foray beyond micro-merchants, having collaborated in 2012 with Starbucks Corp. to integrate Pay With Square acceptance and process all of the coffee giant’s U.S. credit and debit card transactions.

Square’s deal with Whole Foods also may signal larger developments for the overall mobile point-of-sale market, says Jordan McKee, analyst at Boston-based consulting firm Yankee Group.

“This announcement is indicative of a larger, emerging trend we have been seeing for several months now,” McKee says. “Mobile point-of-sale solutions are rapidly moving upmarket.” He expects more large retailers to use mobile POS systems in their stores.

“If Square Stand turns out to be a success at Whole Foods, it will be a sizable win for Square, paving the way for larger caliber relationships down the road,” he says. “Big merchants will be closely tracking the success of this initiative, meaning the Whole Foods partnership has enormous implications for Square’s future as an upmarket player.”

With that said, McKee is somewhat surprised that Whole Foods chose Square. “Square and Whole Foods have a number of brand synergies, so the deal certainly makes sense from that standpoint,” he says. “However, from a pure solution standpoint, I am surprised Whole Foods chose Square as their partner. Square has an elegant solution, but it is not nearly as robust as those offered by vendors like Revel Systems and ShopKeep.” Square declined to comment on this statement, other than to let the fact that Whole Foods chose Square “speak for itself.”

The lack of Square Stand installations in Starbucks stores may support his assertion. “I have a feeling that Starbucks realized early on that Square Stand is not an enterprise-grade solution,” McKee says. “To be a contender upmarket, Square really needs a solution that caters to the unique needs of large merchants.”

Another group to win over is consumers. “Consumer education will certainly be an issue with the rollout,” McKee says. “Not only are customers not used to paying at Whole Foods’ in-store venues, many are also not familiar with using a tablet-based POS system.”

Overall, the deal should benefit both companies, says Rick Oglesby, senior analyst at Boston-based consulting firm Aite Group LLC. This will help spur Wallet enrollments, get consumers used to paying without removing their cards from pockets and get consumers used to preordering and other retail services, Oglesby says. “As Square enhances its consumer services, it simultaneously enhances its merchant value proposition.”

And Whole Foods may benefit if the placement of Square Stands makes it easier for consumers to make in-store café purchases, he says.

Square made other announcements this week. One is that apparel retailer Uniqlo will offer on-demand gifts that enables in-person pickups at five San Francisco area locations for purchases made within Square Market. Chocolatier Godiva is using Square Register during peak times, such as in the run-up to Valentine’s Day.

Square also announced that its Square Cash person-to-person payment scheme has been updated so users can request cash via e-mail or from within a Square Cash app. Users also can check on the status of a requested payment.