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Square's Shift in Its Seller Platform Is Driving Pandemic Growth

By Brian Withers - Mar 13, 2021 at 7:12AM

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Omnichannel is the name of the game for sellers.

Square (SQ 8.52%) started out as a way for merchants to capture in-person credit card payments, which has been a foundational growth engine as the company has built out its ecosystem. But since the coronavirus pandemic, in-person selling has plummeted and its sellers have had to adapt. On this Motley Fool Live episode, recorded on March 3, Fool contributor Brian Withers talks about the transformational shift Square's customers are making, enabled by its ecosystem of software tools, and how that's made a difference for its merchants during the pandemic. 

Brian Withers: I'm up with Square. Square, they released a couple of new reports which are really interesting. Part of their original business was all around the seller platform, and allowing entrepreneurs, small businesses, restaurants, to be able to take credit card payments. They surveyed 500 restaurants and retailers along with thousands of consumers, and really came up with some really interesting statistics.

Sixty-two percent of revenue of restaurants is expected to come through online channels in the future, 42 percent of restaurants plan to invest in customer loyalty programs. Sixty-seven percent of consumers prefer to use the restaurant's own website or app for food delivery. Here's another one. Eighty-eight percent of retailers are now selling online.

These reports are a little bit self-serving. They're done by a third-party, but Square shapes the survey to get the information that they're looking for. But to me, it's very clear that the tools that Square's providing and allowing these businesses to do omnichannel business is really the future, and Square has pivoted really well to support its small businesses.

The last earnings report, even though the stock went down after the earnings report, I loved it. It was fantastic. The Cash App continues to grab members. Revenue was down sequentially, 4 percent, but that's a transaction business. I think that's going to fluctuate a bit over time, but it's still up 137 percent year over year with 36 million Cash App monthly users [laughs].

They mostly do peer-to-peer transactions. The gross payment volume from omnichannel and online sellers represented more than half the seller gross payment volume, up from one-third two years ago. That's a transformational shift of how the businesses, the customers of Square are using their platform. That's just the power, to me, again, of software and how quickly it is for them to pivot.

Seller gross profit is starting to look good. It's up 4 percent quarter over quarter and 13 percent year over year, and the company had positive net income three in the last five quarters. What to watch? The seller segment as small business gets back on its feet.

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