Square opens first brick-and-mortar store to lure more sellers

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Jack Dorsey’s latest bet is positively old-school.

Square Inc., the mobile payments processor run by Dorsey, unveiled its first physical store on Thursday to offer hands-on support for merchants using its technology and showcase some of their wares.

To most passersby, the cozy space looks like any other boutique store in Manhattan’s Nolita neighborhood, with eclectic merchandise for sale like handmade jewelry, candles and bags. The difference is the iconic white Square design outside the store and the point-of-sale hardware products on display inside.

"We’re walking distance from hundreds of Square sellers," said Jesse Dorogusker, the company’s hardware lead. "We want to develop the idea that you can merge sales, support, merchant showcase, and a retail store. That scales with more brick-and-mortar locations, or pop-ups, or something more mobile over time."

There’s a support desk where sellers can make appointments with Square employees to get help with its software -- akin to an Apple Genius Bar for retailers and other merchants. Dorogusker isn’t expecting the store to be a big driver of hardware products, which are already on sale at numerous national retailers like Best Buy. Rather, the goal is to improve the customer experience, boost sales for Square’s merchants, and introduce shoppers to the Square brand.

Square started by selling smartphone plug-ins that let food truck vendors and other small businesses accept credit cards. The company has since attracted larger merchants by offering a suite of services and software that make running a business easier. Those more profitable services, including loans, food delivery and inventory management software, have boosted the company’s financial performance and its stock.

Less than 5 percent of Square’s revenue comes from hardware, which includes a variety of credit card readers and a stand that turns an iPad into a point-of-sale terminal. Square sells its hardware cheaply, or gives it away, to attract merchants onto its platform, where it profits from selling software services.

Square’s venture into physical stores comes as the line between e-commerce and brick-and-mortar retail blurs. Amazon.com Inc. is buying grocery store chain operator Whole Foods Market Inc. and has opened traditional bookstores. Menswear maker Bonobos, which Wal-Mart Stores Inc. is acquiring, runs showrooms where customers try on clothes but buy them online.

By opening a physical store, Square is trying a new marketing strategy while distinguishing itself from competitors like ShopKeep, First Data Corp.’s Clover and PayPal Here.

"Every time you put up a store it’s a like a giant billboard," said Brendan Witcher, an analyst at Forrester Research. "It’s very hard to differentiate online. The physical space is where you can create a unique experience."

Bloomberg News