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Though Square is often known for its square-shaped card readers and digital cash registers at stores, it had actually been laying the groundwork for shifts to online and omnichannel retail for years.

Photo: Square
How businesses can use tech to punch above their weight — even in the middle of a pandemic
The Small Business Recovery

How businesses can use tech to punch above their weight — even in the middle of a pandemic

With no choice but to move online, Square's Alyssa Henry talks about how tech stepped in to support small businesses.

When the pandemic hit, how consumers shopped and how businesses operated changed overnight. With in-person selling no longer an option, stores and small businesses had to figure out how they were going to make things work.

At Square, a lot of that problem-solving fell to Alyssa Henry, the head of the company's seller ecosystem. Henry oversees everything from marketing to engineering for Square's seller products, including its point-of-sale software and online stores. "Everything was shut down initially and so all of a sudden, these sellers had had no revenue coming in, so they had no cash flow," Henry said.

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And though Square is often known for its square-shaped card readers and digital cash registers at stores, it had actually been laying the groundwork for a lot of these shifts to online and omnichannel retail for years.

"When what you're seeing is really just an acceleration of trends that were already occurring, you can have confidence that doubling down on that trend and investing on the more rapid acceleration of that trend is worth doing and is not going to be this temporary sort of thing," Henry said.

Protocol talked with Henry about what's changed for Square since the pandemic began, what it's like trying to get businesses to move online, and how it's helping the small-business community without being seen as profiteering from the pandemic.

The interview has been edited for length and clarity.

How we do business changed overnight, and how we work also changed overnight. What was that like for you, and what was your first realization to come out of it?

We want to give [small business] the same access to software, hardware and financial services that previously only really large companies can have. I worked at Amazon before I came here. I wanted small businesses to have to be able to have technology as robust as Amazon uses because that's, frankly, how they're going to compete and win.

These businesses need to leverage technology if they want to stay in business. Even prior to the pandemic, buyer expectations were changing. Once upon a time, businesses would say, "Hey I'm the only butcher on Main Street, and so if you want meat, you're going to come during my hours" or "Hey, I'm the only bank." But all that's been shifting, right? As consumers now, we do business with businesses that do business the way we want to. If we want to buy online in our pajamas at 2 a.m., we're going to do that, and if your business doesn't support that, well, then you're not earning my business. We've seen all of these things shifting, so we've been building the tech and financial services stack to support all these changing trends.

When COVID-19 hit, in many ways, we'd already been working on the roadmap for all this stuff. And even though there's a set of things that we shipped post-COVID, pretty much all of them were already things that we already planned to ship this year, so we really saw this as an acceleration of trends that were already underway.

Some things that were not on the roadmap that we did was Give and Get Local, which is our local directory of gift cards. We already had an e-gift card program that was free to sellers, but we created a directory of them and then we actually worked with Facebook, Verizon, Nextdoor and others to promote this to help sellers get cash flow immediately because that was the biggest thing. We saw that the government wasn't moving fast enough, and so we're like, how can we help sellers get cash flow now? With e-gifting, the buyers in their community who wanted to support their local businesses now had a way to discover them and buy them and essentially get the sellers cash flow. That was something that we hadn't planned to do, but we're able to leverage our existing tools and platform to help them.

Was that realization that businesses needed cash flow the first problem out of the pandemic you realized you needed to solve?

Number one was really cash flow because everything just stopped. All of a sudden, these sellers had no revenue coming in, so they had no cash flow. Many of these small businesses don't have a rainy day fund, or at least not one of any size. And this was before the government stepped in with not only loans, but also with no-eviction or things around rent. So these businesses were just freaking out, going like, "I've got these bills, I got to pay my employees, pay my rent, and I don't have the cash coming in." So that was really number one. And so that's why we started Give and Get Local.

Once we got that going, the next thing was all of a sudden these sellers are going to have to shift online. We had the tools built for selling online. We actually already had been working on support, although it hadn't yet shipped, for seller-powered delivery. We had an integration with Caviar as well that we launched last year. We accelerated a bunch more work partnering with Postmates. We launched curbside pickup so buyers could order online and then go pick it up themselves. So there are a bunch of these tools where many were in progress and we got over the finish line and launched relatively quickly because we knew this was what sellers were going to have to do to have some level of reopening.

And then as PPP started to happen we said "OK, gosh, what can we do?" We're used to facilitating loans. We had, through our payroll product, already integrated with the IRS for tax payments previously. We had a lot of the underlying rails and infrastructure, so we went and started lobbying so we could get approved to facilitate loans because we know how to do it at scale and at low cost.

Most big banks won't actually lend to small businesses because it has to be like [a] $100,000 or more loan in order for the economics of underwriting and processing the loan to work out. But for many sellers, $100,000 is way too much money for them. They don't need that much, they can't repay back that much. And so, with our capital program we'd already built the ability to underwrite and cost effectively process loans for as little as [$300]. We were able to repackage a bunch of this stuff in order to facilitate PPP loans for a whole range of sellers — sellers that weren't using Square previously, sellers that had never taken a loan, and as well as sellers that had.

Square's Alyssa HenryImage: Square

I think when a lot of people think about Square, they're actually thinking of the physical sale, swiping my card at the farmers market or the POS at a restaurant. You were already working on convincing people that Square is not just the register that you can't touch right now, but also an online business facilitator. How was managing that and handling that transition been during this time?

We've been working on changing that perception. The good news-bad news is those original products were so iconic. There's such a strong brand association with those products, and so one of the things that we've been working on for the last couple of years is transitioning our brand and transitioning awareness to encompass the full [scope] of what we do. And I would say it's still a work in progress.

One of the great things where we saw a lot was some savvy seller who figured out what was happening early on [in the] pandemic and said "OK I'm going to go do this," they found us. They got themselves set up, and then what we've seen is that they went and told three others.

Because all these small businesses, they're communities. The small businesses that line a street, they all know each other. They don't see themselves as competitors, they see themselves there to help each other. So as we saw businesses starting to figure this out, they would go actually help onboard, in many cases, the guy down the street. We've had this kind of army of sellers helping sellers, and then helping us get the word out about what we're capable of doing.

The stat that we shared in our Q2 earnings was that with our Square online store, two out of three sellers adopting [the] store during the quarter were existing Square sellers that were now going from in-person into online. But also a third had never used Square at all before, and were coming to us because of our capabilities of bridging both online and in-person.

Sometimes people look to tech as this panacea when things do go wrong. I've been thinking a lot about all of these contact-tracing apps. Everyone's like, "We need a contact-tracing app," but really, we just needed to wear face masks. So when do you see tech as being a solution to help small businesses, and have there been times during this where you realized tech might actually be the best fit?

The way we develop products, we start with understanding the struggles. We start with understanding what are the problems, what's broken or not working for the business owner. And then we go, "Well what do we need to do to design a solution to that problem?" I've worked at other places where that's not the approach.

In tech, there's a couple of different ways that you can approach how you build products. One is what I just described, and another one which is, well what cool technologies do I have and what could I do with these cool technologies. I call one customer-driven development and one technology-driven development. Both of them end up with you building technology, but the point you start from is different. With technology-driven development, you can get cool things, but sometimes the applicability of them isn't great. Whereas if you start with just deeply understanding the pain point, building towards that, you end up not so much in the situation that you described. It's just a cultural thing.

When I worked at Microsoft, [it] was more technology-driven, like, what cool things can we go do? What advances do we have that could then unlock in the next set of advances? Both Amazon and now Square are more about let's start with understanding the customer problem, and then we'll go figure out what technology we have to either reuse or invent in order to solve it.

One of the problems with building during this time is that the situation is still so in flux. My problems today are very different than they were three weeks ago or three months ago. So when you're building from that place of what's broken, how do you account for how fast this is all changing?

We have a sneeze guard now that we now sell on our shop. That one feels like a short-term thing. But when what you're seeing is really just an acceleration of trends that were already occurring, you can have confidence that doubling down on that trend and investing on the more rapid acceleration of that trend is worth doing and is not going to be this temporary sort of thing. So the trend towards omnichannel and mixing "buy online pick up in store," and "buy in store, return through the mail" and more delivery — all those things were happening so we already understood the struggle there, we'd actually already been trying to get sellers to adopt a lot of these technologies, because we knew it will make your better business better. We knew that there were forward-looking sellers who understood the problem, but there was a large swath of people that were like, "if it ain't broke don't fix it." And then all of a sudden it broke, and they're like, help me fix it.

Small-business owners run the full gamut of humanity, just like on Reddit. There's definitely the optimist camp and the pessimist camp. And the early adopter camp and the later camp. But we definitely saw in the optimist camp businesses going, "OK, I don't know how long it's going to last, but I'm going to get through this, I'm going to come out stronger on the other side, and I'm going to take the time right now to do all the things that were on my to do list, in terms of upgrading my business, but I was just so busy with the treadmill [of] the day to day, I couldn't get it done."

We're seeing that with sellers of all sizes, with much larger sellers as well, like stadiums that are shut down, they're like, "We're going to retool now," and they're coming to us. And then you have kind of the pessimist side where they're kind of like, "I don't know what to do. I don't know if I'm gonna make it." And for that crew, it's how can we help encourage them — can we help connect them to things that help fuel their optimism? We have our seller community, it's an online community, but we also have been doing roundtables and things like that where we curate the optimists and have them share their wisdom and their outlook with others and provide encouragement and support to help people that are afraid or discouraged.

Square is a business. How do you find that balance of supporting the community, but not being seen as a company that has "benefited" from the pandemic?

I think that our philosophy — and the way we build our business and our business model — our incentives are well-aligned with our sellers; when they grow, we grow. We are [a] business and we need to make money, but we price in a way that we think is a fair exchange for value. We don't believe we have a long-term business if we're doing business at the expense of sellers. The industry has seen several rounds of this. Groupon in the last go round, their business model looked like the business model of some of these other companies, and they faced a lot of backlash.

For us, during the pandemic, we actually waived our software subscription fees for two months. Because, back to that cash flow issue, we couldn't make payments free because we have to pay COGS to the whole supply chain around that, but we made our software free to help with that immediate cash flow in those first two months. And while it was free, we accelerated work to then add [the] ability to pause a subscription and not lose any of your data and your configuration. Businesses that were temporarily closed could just pause their subscription, which meant they wouldn't pay anything. And at the point where they reopened, they could come back and light it back all up. We want these businesses to be successful. We want alignment around how we make money and the success of sellers.

Correction: This article was updated on Oct. 1 at 3 p.m. PT to correct the size of the loans Square can underwrite. They are $300, not $10,000.

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