Partners Are Missing an Opportunity in the Retail Vertical

Many MSPs avoid the retail, grocery and restaurant markets, considering those verticals too big of a leap from their current practice. But they might want to take a closer look. As those verticals have become more digitized and moved to the cloud, they have become more akin to more traditional MSP vertical markets.

This is something Jim Roddy, president and CEO of the Retail Solutions Providers Association (RSPA), is keen to address. In his session, “Vertical Opportunities: How Channel Partners Can Build a Successful Retail Practice,” May 2 at the Channel Partners Conference & Expo, Roddy explains why MSPs might be missing an opportunity in retail.

He gave us a preview ahead of the event.

Channel Futures: What development in the retail market should MSPs be aware of?

RSPA’s Jim Roddy

Jim Roddy: Before, point-of-sale technology operated separately from other technology in the store, and much of it needed to be programmed and updated on premises. Now, in most stores, all technology is tied into the network and much of the data is in the cloud, a setup that’s more familiar to MSPs. Also, POS hardware used to be a foreign technology MSPs would have to learn from the ground up. But, with so many POS systems now running on tablets and iPads, much of the hardware is standardized and easier to grasp.

CF: Why is retail a growth opportunity for different channel partners? Specifically, what are the recurring revenue opportunities?

JR: Retail IT solution providers used to sell systems that required a big check upfront and a smaller service contract in the months that followed. That all changed when credit card processing became integrated with the point of sale software. VARs and MSPs started getting a cut of every credit card transaction, and that one recurring revenue service alone has been very lucrative for their businesses. That sparked retail IT solution providers to seek additional recurring revenue opportunities.

Now the list of products and services they resell has grown to nearly 50 items. Among those are traditional services like BDR, remote monitoring, and firewall management as well as market-specific offerings such as digital signage as a service, gift cards, online ordering and menu management.

CF: The recently published 2023 RSPA Retail IT Channel KPI Study showed the retail IT channel is the strongest it’s been in years. Can you share some more detail?

JR: Both longtime solution providers and new startups are recording strong sales, profits and stability, according to our data.

In 2020, nearly 23% of survey respondents reported a decline in sales. That number fell to just 7.5% in 2021 and 6.5% in 2022. Also in 2020, more than one-third of respondents (36%) experienced either flat or declining sales compared with [nearly] 20% in 2021 and just [under 17%] in 2022. The industry is light years ahead of 2016, the first year of the KPI Study, when a whopping 37.3% reported flat/declining sales.

Nearly a quarter of VAR/MSP respondents (24%) achieved better than 20% growth in 2022, an all-time high in the history of the report. About a third (35%) reported growth under 5%, an all-time low for the report. VAR/MSP profit margin numbers for 2022 were the best ever, with [less than 7%] of VARs reporting a profit margin under 5%, a [nearly eight-point] improvement from 2021.