Lightspeed Ahead

By Joshua Barzola

Having worked in the retail industry myself, outdated point of sale (POS) systems that give wrong inventory data or scan items incorrectly are just the beginning of nightmares. Old systems can give small and large retail businesses headaches as cashier tills and debit machines continue to crash. This is why it’s a pleasure to introduce Lightspeed, a company with Canadian roots and a fresh take on POS software.

The Montreal based tech company Lightspeed POS, founded in 2005 finally went public on the TSX market back in March. Lightspeed POS Inc provides POS software for small and medium-sized businesses (SMBs) in the retail and restaurant industry. Since 2005, CEO Dax Dasilva and Lightspeed have provided this omni channel platform to over 47,000 customers in over 100 different countries. The company sees major growth, as stated in their prospectus, from the over 47 million businesses around the world in its target market.

Management within Lightspeed’s prospectus describes the software as an easy to use service platform. This service platform can create an effective and efficient structure of the many crucial functionalities that every SMBs needs to manage. The ability to empower the SMBs owners with this omni channel platform allows the business to grow and expand alongside the software, providing it essential data to operate smoothly. Some of the many key functionalities include product and menu management, reporting and analytics, inventory management and POS. The major competitive advantage that Lightspeed provides is the ability to run your business in an all-in-one business solution that allows the business to grow with relative ease. Recently launched, Lightspeed Payments, a payment processing solution, allows SMBs to seamlessly integrate themselves further into the software’s ecosystem. Alongside the easy to use reporting and analytics data, and the up to date inventory management, this integrated software platform has the potential to grow beyond tailoring to the needs of SMBs and grow to larger retail stores seamlessly.

Investors are hoping that more SMBs continue to sign up for the company’s retail and restaurant software platform, which Lightspeed states the market is worth over US$ 113 billion. Seeing that the company has only 0.1% of the market using their platform, injecting more capital into marketing and possibly small acquisitions will help grow the business further. As previously mentioned, Lightspeed payments can generate new revenue not only with new customers, but with existing clientele once the service is available outside of the US. Since the end of last quarter, Lightspeed has roughly US $190 million to deploy to further establish their brand in time for busiest quarter of the year for both the retail and restaurant industries.

Since going public starting at $16 per share, the stock peaked at just under $50 per share back in August, then dropping to just over $30 per share as recently as late September. A reason behind the sudden drop had been due to CEO DaSilva and other pre-IPO investors “trimming their stakes” of Lightspeed after IPO related restrictions were lifted. In analyzing their financials and statements by DaSilva, company net losses will be seen for the foreseeable future, as the company pushes to grow further. Popularity in new technology companies is not uncommon, as investors try to find start-ups with large potential growth and try to invest early before they begin to grow exponentially. Large institutional investors, believing they missed out on Shopify, another multinational e-commerce company, have reasons to believe that Lightspeed can quickly become a prominent entrant in the Canadian technology industry. As many in the retail industry begin to shift away from traditional POS systems, the greater the market share could become for Lightspeed POS Inc as well as for their competitors.

Although the stock has grown tremendously since going public, there are key points to watch out for before running looking to invest. To reiterate, the company only holds a 0.1% of the potential market share of the POS industry. As the POS software industry continues to show growth, more small and larger competitors will continue to battle for a larger size of market share. Larger competitors such as Square Inc (NYSE:SQ) or Shopify (TSE:SHOP) continue to expand and dominate the POS market, making it harder for Lightspeed to compete with more reputable brands. Square and Shopify have much larger resources to compete against Lightspeed and can limit their growth prospects. The company will need to vastly improve their new payment systems to close the gap between Square’s popular payment services.

To differentiate themselves from similar multi-channel commerce brands such as Shopify, they will need to market the effective and efficient sales management and analytic systems their POS provides. As the Canadian POS system continues to grow, expect bigger losses to be reported and higher debt to be announced so that Lightspeed Inc can expand within the market. 

Featured photo by Blake Wisz.

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