Taking the Pain Out of Point of Sale Processing
In-store sales. Ordering for delivery. Buy online, pick-up in store. With so many buying options accessible to consumers, companies are now facing many different kinds of orders to manage and get right. In the restaurant industry specifically, there has been a huge upswing in the number of people ordering online, especially through apps such as Uber Eats, Grubhub, and Doordash. And that’s nothing compared to the number of point of sale systems that are being used. Moving orders from an app or online system into a physical point of sale is a process that’s prone to human error, but for so long that’s been the only way to do it. Zhong Xu and Deliverect want to change that. On this episode of Up Next in Commerce, Zhong explains how an integrated, cloud-based platform is taking the pain out of managing multiple ordering and POS systems. Plus he discusses how the real world and virtual world will start to blend together more and more as brands invest in digital-focused capabilities. Enjoy this episode. Main Takeaways:404 Error No More: There are thousands of point of sale systems and all of them require humans to re-enter online orders perfectly into them before they can be made and delivered. This leads to errors and dissatisfied customers. Integrating the POS and ecommerce systems is one of the most effective ways to reduce those errors. The Real And Virtual World: As restaurants reopen dine-in services post pandemic, they are still keeping an eye on the ecommerce space. The rise of the digital consumer has made it so that restaurants are now looking to create virtual brands with specific functions and offerings for their virtual audience. And sometimes that means creating or investing in a physical space that is only used to fulfill online orders.Addition Without Subtraction: Even though there has been an uptick in delivery and curbside pick-up orders, restaurants are still seeing strong in-store dining numbers. This means that restaurants can invest in delivery and ecommerce tools to improve the customer experience without worrying that doing so will cannibalize in-house dining.For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.---Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce---Transcript:Stephanie:Hello, and welcome back to Up Next in Commerce. I'm your host, Stephanie Postles, co-founder and CEO at mission.org. Today on the show, we have Zhong Xu, the co-founder and CEO of Deliverect. Zhong welcome.Zhong:Hey, welcome. Thank you. Nice to be on your podcast.Stephanie:I am very excited to have you on. So before we dive into Deliverect, I was hoping we could start a little farther back in history, when you were building your first company at age 17. I think that'd be a fun starting point to hear what were you thinking back then? So, then we can see how you got to Deliverect.Zhong:Yeah, exactly. I think Deliverect today is quite a big company, as we serve customers in over 30 market. Especially the last year, we just processed over a billion dollar in sales. I think that's quite exceptional for a company that young. That being said, the reason we can so quick is due to our couple of decades almost experience in the hospitality space. So, I was pretty much born in this space, as a very young [inaudible]. I started helping restaurants to go online, right? So, making their first website and so on and that's almost, I think 20 years ago. So, I'm very early on the internet timeframe and the reason why I got in that space is actually because my father has a point of sale company for Asian restaurants. So, especially if you're Asian, a lot of people know your father will always say, "Hey, you can work, right? You're young, you should get out there, earn some money, do your part." So, that's how I enrolled into hospitality business and that was my first business.Stephanie:Very cool. So, you were building websites for restaurants and then, did you start seeing issues they were having and is that what led you to building Deliverect to where it is today?Zhong:Well, it's actually quite a funny story, because of that, I never wanted to take over my father's business. So, I said, "Hey, maybe I need to study IT." So, I went to study software engineering, right? Before I went into the restaurant space again, I said, "Hey, there's something out there for mobile applications." So, I created mobile websites and mobile apps prior to the iPhone. So, I feel [crosstalk] and so, when the iPhone and the first iPad came out, I felt it was perfect timing to disrupt that side of business, especially when point of sale was very hard to use. It was a legacy system, not cloud-based. So, actually in 2010, 11, I co-created the first iPad point of sale in Europe, one of the first 3000 apps on the app store back then.Zhong:So, you can imagine how that grew and just in a couple years I grew that company quite quickly. It was called POS iOS. That name you wouldn't know, but I merged POS iOS in 2014 with now a public company called Lightspeed, right? So, we pretty much ran the global hospitality division of Lightspeed, prior to their IPO. So, we were well entrenched in scaling this and one of the things there, of course we are always in contact with restaurants around the world. At the same time, the same thing happens. The first time I did this was really solving the pain of cloud-based and tablets and old hardware, but in 2016, 17, we saw that restaurants were struggling actually managing their online sales, right?Zhong:And it was quite funny, because most restaurants had said back then to me, "This is never going to happen, the offline to online transition. Yeah, yeah. You have this in retail, but that's clothing and that's shoes. We're creative people. It's about warm food, about service, never going to happen." Well, suddenly you have these companies like Uber Eats and DoorDash, GrubHub and hundreds of others popping up, where you quickly saw that transition happening. So, early on, these customers of us said, "Hey Zhong, you need to help us. This wave of offline to online is apparently unstoppable, but we need a partner that can help us to make that transition." And Deliverect.Stephanie:Got it, got it. So, essentially we have all these restaurant ordering apps, like you said, Uber Eats and all the others that exist. And they were all coming at the restaurants a mile a minute and they were trying to manage them individually and you essentially consolidated that into one point of sale system, so that the restaurants could just interact with one portal that would then talk to all of the delivery companies, did I get that right?Zhong:You nailed it. It's really a game of whack-a-mole, as you can imagine, if you're running a restaurant. It's all very dense during your service, right? Where you have hundreds of orders coming in on all these tablets. If they all start to light up, you need to accept them. You need to take the order, re-key in your point of sale, send it to the kitchen, but even when the order is done, you need to go to any of these tablets and you need to find out what order it was, to dispatch the rider.Zhong:So, the complexity of this is enormous and I think as we go, the number of online channels or restaurant need or we'll have, is only increasing. Because it's not even about these delivery companies these days. You need to have an app for curbside pickup. You need to have a QR code at the dine-in app. You need to be on Google, Facebook and so on and so on. So, it's enormous.Stephanie:What are some of the issues you're seeing with restaurants, when you're coming in there and showing them, "Here's how to come online. Here's how to make this process work"? What are some of the hurdles for them to even implement this software? Where's the hold up sometimes?Zhong:Well, most of the times they can't believe what we do, because it's almost magical. When you're used to all these systems and suddenly you removed all these tablets and it just works, right? So, it's quite magical. I think the hurdle is, one side connecting with all these online players, but as well, very seamless with every point of sale they will tap. And the reason why is, in the hospitality space, you could say, "Hey, the online channels is fragmented." So, you have a lot of delivery companies, but actually the number of point of sale is way more fragmented than online players. There's literally not thousands but 10 thousands of point of sales out there and it's still what runs the restaurant. So, we connect that seamlessly through APIs, but also it's not just getting the order in your kitchen, but as well, working with them to do menu management, having automatic stock management, controlling the flows.Zhong:For example, when it's really busy, we will be able to slow down certain online channels to cover the kitchen time and the result of this is quite astonishing and it's threefold, right? One side, we can on average... Pre-COVID, because with the pandemic, it was a accelerated. We saw that the average restaurant was increasing 25 to 30% of their top line revenue alone, implementing us. During COVID, it was double, triple and quadruple, but no one knows why. And the other two things where it's important is, we reduce the error rate for the end customers, right? Maybe you have experienced it, but if you order some food, once in a while... Actually, it's between five to 8%. So, one out of 10, we get us a mistake. Someone didn't deliver what you wanted. You wanted the vegan food and you got something with meat and so on, right? So, we can reduce these errors by 80%. So, that's massive. Finally, with all these automations, it saves a lot of labor costs as well.Stephanie:Got it and how are you reducing the errors? What does that look like? Is it something that they're keying in the wrong way? Is that something the customer is doing or the kitchen's doing? What does that look like, to reduce the amount of errors, because I've definitely I've had that happen. And then, I've just been like, "Oh, this didn't arrive." And then, Uber Eats just refunds me and I'm like, "Hmm. Did you know it didn't arrive? How do you trust me? I don't know if I would even want to trust me saying that." And it's definitely very vague behind the scenes, of how they even view that?Zhong:Yeah. There's a lot of details, but it actually started with the beginning. Often, once a restaurant are not using us, the online menu that they have, they have one called Uber and other players they have inputted. It's not up-to-date right. So, imagine they don't have certain products or ingredients. Though they can snooze, but they cannot change the menu, the content of it. So, the menu on its own is [inaudible]. Second, when it's busy, they can't follow the flow of that stock. So, if it's not automated, you probably are ordering stuff that they are already sold out in restaurants, right? Because online, you have a lot more people ordering and then, with the in restaurant sales, they are always going to provide the customers in front of them the food that you online. So, that's the second thing.Zhong:A third thing that affect massively these error rate is, once you don't have it integrated, it comes on these tablets. You accept. There's an extra ticket printed by Uber Eats, DoorDash, GrubHub. They need to take that and re-key that in their point of sale perfectly, right? And that's where a lot of error happens. Sometimes the top line items, but even worse, when you put a note in there where you say, "Hey, I'm allergic to this and that. I want this and that," it causes a lot of trouble to re-key that correctly. So, if you take only these three things, it's quite massive, right? Imagine hundreds of orders. Even if you would do it, you would make a lot of mistakes.Stephanie:I can definitely see how human interaction always causes mistakes, of course. And I'm assuming it also integrates with the point of sale system to also run the restaurant, right? The one that the servers can use outside of the delivery, or are those two separate?Zhong:No. So, it integrates them directly with our current system, right? Because if you have a restaurant, you have kitchens, there's a lot of printers, kitchen screens. You want to make sure the workflow is seamless, because actually what's funny is, the throughput of a restaurant it's never boggled down by the kitchen. The kitchen can make a lot of food most of the time. It's really the front of house where, if you have customers standing in front of you and in the meantime, you have seven tablets pinging all the way, it's impossible to manage. So, we reduce all of that hassle.Stephanie:That's great. Yeah, I used to work in a restaurant. Starting in 14, I was working at Outback Steakhouse and worked in restaurants the entire time and can definitely say that's very true. The front of the house can get crazy, when the back's waiting on you to put in the order, help the customer, bring it out and get it out of their window, whatever it may be. So, I'm sure you see a lot of trends behind the scenes with working with so many restaurants and I've heard quite a few things. COVID hits, of course less people going in restaurants, more people ordering, but then also more people cooking at home. So, a lot of things kind of shifting. What are you seeing today, now that we obviously went through the big spike of everyone who wants to order online and order from restaurants probably has tried it by now and some of them are falling off. Maybe some new people are entering, but what are you seeing are general trends in the industry?Zhong:Well, I see it's actually picking up. One of the things you mentioned, everyone has tried. For example, during COVID a food status pre COVID, if you look at age group of 55 years and above, less than 10% has ever tried delivery, right? And now, that number is over 35%. So, it shows you that my father, grandfather, grandparents, everyone is using it.Zhong:So, the adoption rate is quite high and what you see is that, during pandemic, a lot of restaurants focus only on delivery, but now with the reopening, you see some restaurant doubling down, because they want to handle their in-dine customers. But at the same time, you see a lot of more restaurants opening multi-brands, right? One physical restaurant saying, "Hey, why don't I create virtual brand, that I only sell on these online platforms, but it's cooked in my kitchen? As well, the exponential growth of dark kitchens, these kitchens with multi-brands everywhere. Especially, as if I look at our numbers, I think the delivery space is only accelerating and what's good for this space is, it's on top of the dine-in. So, it's one is not cannibalizing anymore, the other sales, right? So, it's really on top of it.Stephanie:Got it. How do you view these dark kitchens, because we talked about this in a previous episode with Shake Shack, I believe and she kind of mentioned that she thought this was... I think she said a quick trend that might work for a little bit, but then people are going to want to stick with brand love of a certain company. They know it's cooked a certain way. You're only going to be able to use that model for so long. How are you viewing that right now?Zhong:I think that's still going on quite strong, right? There is a difference of... I would stay pure tech want to be thinking, "Hey, this is a fun idea. Me as a startup mindset, I'm going to implement a kitchen." It's just pure number game. That, I'm a lesser believer of, because what you see as the successful dark kitchens, are ones that are really restaurant operators that create amazing brand, amazing experience and at the end of the day great food, right? Sometimes people in that space forget it. It's like, "Hey, it's numbers.Zhong:I can make it work." So, people that do that well can expand quite rapidly, right? Because the cost of setting up or reaching these customers are way lower. If you want to do a restaurant that's maybe [inaudible] a half a million dollars, if you started a dark kitchen, it's one fifth of that. So, what you would see is that even established restaurants are having a dual model, where they say, "Hey, in the cities, I'm going to have my flagship restaurants, right? A couple of them, where you have the full experience. In the meantime, around that restaurant itself, I'm going to open a lot of these dark kitchens, so that you are at home wherever you are, can still order food." So, that hybrid model is really working well.Stephanie:Mm-hmm (affirmative). I wonder if they can eventually share kitchens in space and then, turn it on when you need it. And then in the meantime, let another brand have it. I'm even thinking about two brands, fast food chain. It's like Popeye's and MacDonald's in the same building. And in one way, I'm a little suspicious of that, because I'm like, "How do you all know how to make the same thing in the same building?" But it's also an interesting model. I think about it, like why rent an entire space if you only need it when you have peak order times. And then, anytime outside of that, it's just a commercial kitchen that anyone else can enter into.Zhong:Well, you actually have that. There's quite some of these concepts, almost a we-work of kitchens, right?Stephanie:Okay.Zhong:I think in these cases it would be, you rent the space because you don't want to open and set up your own kitchens, but then you would still put your own chefs in these places, right? I think there's also models where these kitchens provide you A to Z. I think that works well, if you're established brands, with real procedures about how to cook food. If you're experimenting, that's a bit harder. But that being said, we see a lot of success in the US. For example, in New York, we run Mealco. That's a very dark kitchen brand. They have a lot of brands. In LA, you have [inaudible] brands. Established restaurant chains like SPIN right, where you play normally ping-pong, but they run it at the same time in these kitchens, 8, 9, 10 brands, right? Because it's really complimentary and allows them when it's even not busy, to sell their food.Stephanie:Yeah. What kind of trends do you see overseas that are different than in the US, or vice versa?Zhong:I think it's quite a global trend. Even in Europe, Asia, Latin, as well US, you see the same trend popping up. What I do see it's interesting is, there's a lot of models, especially in the dark kitchen. People are trying. So, renting kitchens seems to be hard. Franchising their brand seems to sometimes work, where you say, "Hey, I have my brand. Any unutilized kitchen space or restaurant can take my brands and just sell." That seems to work. But as well, people that own the full stack, right? I think it's a bit too early to see what of the multiple models really will win, but that being said, I think each of them has massive traction. And that's why, if you look at market sizing, the size of dark kitchens is a trillion dollar business, depending on who you ask, right? So, it's a massive opportunity.Zhong:I think a second trend what's very interesting is the growth. As well, you see in the US, as well in Europe, of groceries, FNCG and CPG. So, for example, wherever in the world, you can order a Ben & Jerry's ice cream, right? You take your phone, you order Ben & Jerry's ice cream at 11:00 PM when you come back from a date and you just need ice cream and it gets delivered within 10 minutes. And you can do that in every city in the world. That being said, you will never find a Ben & Jerry's store so close by. So, even the rise of dark pop-up locations or delivery locations or dark fridges exists, right? For example, we power all the [inaudible]. So, as you go, you're going to see that perishable foods in general, is going to be very available and it's all about the convenience of it. Whatever you want, you click and you're going to get it.Stephanie:Yeah. I do see, it probably depends on where you're at in the country in the world, but there are definitely a lot more consumers now, who do care about the brand, the ingredients, where is it being sourced from? How are you going about growing those materials? It seems like a new trend. That's what sometimes makes me wonder about the dark kitchen trend, because I think a lot of people want convenience and being able to get it quick and easy and cheaper, then it seems like a larger proportion of people now are like, "I want to actually understand who's behind this food and how was it grown?" And all the details that maybe a lot of people didn't think about a decade ago.Zhong:Exactly and that's why one of the things I mentioned is, I think if you want to be successful, you need to be that restaurant operator. You need to be able to convey the complete story and say, "Hey, that's where we source the food. That's how we cook it. That's how we define quality." So, that side of it will work. If you're just there to produce mass produced food and want to have a quick buck and to earn, I think that's quite hard, right? Especially, because it's a very low margin business restaurant, so you better do it well.Stephanie:Yeah, yeah. So, when it comes to point of sale systems in general, it seems like this is great obviously for restaurants, but there's a lot of other applications, because I can even think about a lot of delivery apps being like, "Oh, you need this for maybe Home Depot and you need this from Costco," and offering to pick up from many places. How are you viewing the general landscape of point of sale systems and where it's headed?Zhong:Well, so that's why we are a bridge above the point of sales, because that's really fragmented. So, for a point of sale, especially a lot of these older point of sale that are not cloud-based, it's very hard for them to process online orders. And that's where we come in. But on the other end as well, we have a dispatching product that allows any restaurant or any business actually to deliver their food or drinks or whatever perishable thing they have, within 10 minutes, because we connect with all kinds of third-party delivery companies like DoorDash Drive, Uber Direct as well, all the local ones.Zhong:So, the convenience side of it is going to be crucial for these restaurant, right? It's going to be the future is going to be really decoupling ordering from delivery. You will not per se care how you ordered it and you don't care who is bringing it, as long as you get it right? So, you can imagine you have a Google Home or Alexa and you say, "Hey, bring me some salad from that restaurant." And it gets processed and 10 minutes later, someone rings you up at the door and gives you that salad. So, we can really power that transmission of that world.Stephanie:Yeah. So, essentially it doesn't matter if it's restaurants or anyone else, first step is everyone needs to be cloud-based, so that then you can plug into them and help control the top level experience. So, then the consumer doesn't even know and doesn't have to know what's going on behind the scenes? That's usually how most technology evolves anyways, but you can essentially go anywhere, that's what you're saying?Zhong:Yeah. What we are doing is really creating that backbone of on-demand foods, right? So, creating that [inaudible] restaurant and the reason why I was adamant to start Deliverect, is to my personal experience, right? My father's system, the old point of sale still exists, right? Even after I created one of the most advanced iPad point of sale, I think I converted the three of his customers to that system. So, what that tells me especially in the point of sale space, there's a lot of servicing fragmentation and people have a low tendency of changing systems. That's why in enterprise restaurants, all of them you still see these Microsoft RES 3700 of 30 year old, right? So, that's why we are building that layer, so that any online player can have access to a physical restaurant. In the benefits, it's really benefiting the restaurants, because they don't need to change the system, but still process and grow online.Stephanie:Mm-hmm (affirmative). What did the switching costs look like for some of these restaurants, if they go through and upgrade everything, I'm guessing there's employee training? What does the cost look like and then, I'm sure you know the ROI numbers too of employee efficiency and helping out with inventory and all that, what did some of those numbers look like?Zhong:For example, utilizing Deliverect, there's no switching cost, right? So whatever point of sale you have... So, we are integrated over 150 point of sales at the moment and we're adding a lot per month. [Crosstalk]-Stephanie:What if its an old one, that's cloud-based? I'm thinking of some of the restaurants I worked in, I know they weren't cloud-based they were from the nineties.Zhong:So, that makes us unique. We actually, you know, for example, Microsoft RES 3,700. We create tunneling. We set up the software to make that cloud-based, right? So, making [crosstalk] online, is something that we also do. So, that allows you to save really that investment. If you are a small, medium business, one or two restaurants, you probably can switch because you want to have ease of use and the investment buying an iPad is not too hard. But honestly, if you're a restaurant chain, that's a massive move. You're talking about millions to replace and there's also a lot of risk involved, right? So, instead of doing that, if you just deploy Deliverect, you have a full system that allows you to sell online or offline channels and you're fully cloud-based.Zhong:And like I mentioned, the ROI is huge, right? So, whatever top line revenue, we grow at 25, 30%. That's a minimum, right? All of our customers are doing more than that. Second, like I said wastage, but to quantify it, an app or a restaurant that does normal delivery are doing a month, a thousand orders. If you have 8% error rates and per order that's 80 orders, right? If the average is $50 that's a lot of money that you could save so that's one side. And then, finally labor costs. We can reduce that significantly. You can almost save one out of four of your staff, right? So, they can do something else, right? So, that's important.Stephanie:Very cool. Are there any technologies right now that you're watching to integrate into Deliverect? The one thing that comes to mind is crypto and I know even back in 2018, a lot of people were talking about crypto and point of sale systems and how to think about that. Not only accepting payments, but also the back of how it even functions. Is there anything that you guys have on your radar that you're kind of watching right now?Zhong:Well, crypto is interesting, right? I think de-centralization of payments would be interesting. Especially, I think in restaurants, it's a quite high processing fee they pay, especially if they're selling online, right? There's transaction fees. Honestly, I do not think today the technology... The technology is there, but maybe the solution is not there yet to do mass payments, as it's quite heavy to mine these coins. If you want to do like us, where it's millions and millions of transactions on a month, I think that's quite a heavy to do, but we're watching that space.Zhong:I think more interesting for us is, as we have a lot of info about a lot of sales channels is providing or a CRM or a really a customer relation management tool for our restaurants, so that they can manage wherever you're ordering, right? So, maybe you ordered today on Uber Eats and tomorrow on DoorDash and the next day on their own websites. Well, they can say, "Hey Stephanie, thanks for ordering on our website. We're going to give you a promotion or a extra dish." Right? So, these are the things I think, where it's going to really help these restaurants to increase their margins.Stephanie:Yeah. It's like going into an omnichannel world with these delivery systems, so they actually understand where you're coming from and where you've been? And it also seems like there's a lot that they can do around sensors, around inventory and stock. You mentioned that you can connect that with your company product, but also just thinking, how do you do automatically where instead of someone saying, "Oh, we're out of this item or we don't have this product today," it's automatic, because it sees the ingredients getting low. And it's like, "There's nothing coming on the trucks today, so we just have to say green beans aren't on the menu today. So, sorry." And then, it just updates automatically. That's the world I think is coming.Zhong:Well, in the ice cream example, we actually do that. So, once that shop is running low on strawberry. So, first of all, we ask the local vendor to ship more strawberry ice creams, but second of all, we can automatically snooze that product for an hour. We're saying, "Hey, it's out of stock." Right? So, providing all these restaurants operation tools is something that we also care about, because that's how we're going to help these restaurant owners as well.Stephanie:Yeah, I love it. All right. And then the last thing, where do you see Deliverect heading? What are you excited about over the next couple of years?Zhong:Although Deliverect only exists for a two to three years, I think we are only on day one of this offline to online transition. The motto of Deliverect is not even conquer the world, it is conquer the galaxy, right? So, one day we'll be the first that delivers a burger to the moon. That's our motto.Stephanie:You're going to be on Mars [crosstalk]-Zhong:To speed up his colonies. But all jokes aside, I think that's where our ambition is. I think you really need a player like us that stands with the restaurants, power them and allows them to really be successful and thriving online without a different agenda. So, as we go, we want to expand regionally in all sorts of countries and continents and add as many channels as we can, as well point of sale for these restaurants, so that they can thrive online.Stephanie:Very cool. All right. Well Zhong, thanks so much for coming on the show and giving us a little behind the scenes about what Deliverect is all about. Where can people find out more about you and your company?Zhong:Well, you can find a lot of info on website deliverect.com or a link me up on LinkedIn. I'm [inaudible] users. So, no worries if you want to send me a message there.Stephanie:Amazing. Thanks so much.Zhong:Thank you for your time.