To Grow Sales, Merchants Are Diversifying Into New Lines of Business, Square Finds

As consumers seek greater value from what they purchase, merchants are responding by diversifying their products and services to know their consumers better and grow sales, research from Square, Block Inc.’s merchant-processing unit, says.  

One way merchants are engaging consumers on a deeper level is through subscription services, which generate recurring payments. In the second quarter of 2023, subscriptions totaled 22% of revenues for all Square merchants that sold subscriptions.

Examples of subscription services include wine stores selling quarterly shipments or beauty salons offering a set number of services each month. Overall, 74% of Square merchants now offer subscriptions, and more than half of all subscriptions remain active after 6 months.

Merchant segments featuring high subscription rates include accounting, consulting, law, and architecture firms, along with interior and web-design businesses, according to Square.

“While customer spending has remained resilient, in an uncertain economy, consumers are also looking for higher value from what they purchase,” a Square spokesperson says by email. “Many subscription services offer member-only pricing, special discounts, and other perks that are attractive to spend-conscious consumers. Subscriptions provide customers with convenience, allowing them to seamlessly and consistently restock on frequently used items, as well as flexibility in terms of selecting custom subscription plans to best suit their needs.”

Another diversification play for merchants involves offering events and classes to which consumers can purchase tickets. During the second quarter, sales for tickets, events, and classes among Square merchants increased 10% compared to the same period a year ago.

In addition, Square saw a 16% increase during the same period in the number of merchants using its Square Appointments app. It also notched a 12% increase in the number of merchants adding rental items, or renting out their space, during the second quarter compared to a year ago.

Selling their own branded merchandise is another way Square merchants are generating new revenue streams, Square says. Beauty and personal-care salons selling products such as shampoo and conditioner in addition to their core services saw a 14% increase in ticket size during the first half of 2023, compared to a year ago. Consumers typically purchase one to two retail items when checking out. Overall, beauty and personal-care businesses that sell services and products generated 56% more in annualized sales.  

Catering services are proving to be an alternative revenue stream for restaurants, using Square, with 10% more of them offering catering during the second quarter compared to a year ago. At the same time, catering sales increased 5% during the period. Events, cooking classes, and wine tastings are another way restaurants are boosting sales. In the second quarter, the number of restaurants offering events and classes increased 13% compared to a year ago, while sales from those events and classes also increased 13%.