Whole Foods’ new deal with Square shows how mobile point-of-sale technology is increasingly moving forward for retailers, but the grocer still has a number of obstacles to overcome, including wide integration and educating consumers on mobile payments.

Whole Foods is the second major retailer to partner with Square in rolling out in-store mobile payments, after Starbucks’ deal in 2012. However, as Square looks to partner more with bigger retailers, the company will also need to develop more comprehensive, full-scale offerings to attract more retailers and brands going forward.

“Square and Whole Foods have a number of brand synergies, so the deal certainly makes sense from that standpoint,” said Jordan McKee, analyst for Yankee Group, Boston.

“However, from a pure solution standpoint I am surprised Whole Foods chose Square as their partner,” he said.

“Square certainly has an elegant solution, but it is not nearly as robust as those offered by vendors like Revel Systems and ShopKeep. It’s also interesting to note that while Starbucks partnered with Square in 2012, they have yet to deploy Square Stand terminals. I have a feeling Starbucks realized early on that Square Stand is not an enterprise-grade solution.”

Mr. McKee is not affiliated with Whole Foods. He commented based on his expertise on the subject.

Whole Foods declined to comment for this article.

Mobile groceries
Whole Foods’ new Square partnership fits into a bigger mobile payment and wallet strategy that the grocery chain has quietly been building up.

In addition to Square, Whole Foods has also tested Google Wallet and Isis for mobile payments.

The high-end grocery chain has also rolled out some mobile coupon initiatives.

In May 2012, the retailer rolled out a couponing app called Make Change, Not Waste that let consumers virtually clip coupons from brands including Organic Valley, Stonyfield and Nature’s Path. The app was part of Whole Foods’ Whole Planet Foundation nonprofit organization (see story).

Whole Foods stores are typically broken up into different sections that specialize in specific types of cuisine including pizza, coffee and sandwich stations.

The grocery store has rolled out Square’s technology around these areas so that consumers have more checkout options and do not have to wait in a long, singular line.

Seven locations in four cities — Austin, New York, Florida and San Francisco — are using Square Stand, which is an iPad that lets employees swipe credit cards through.

The grocer is also leveraging the consumer-facing application Square Wallet.

Square Wallet is an iOS app that consumers can use to check-in at a store. To use the app, consumers must enter credit card information to pay for in-store purchases.

Once a consumer verifies that they are in a particular store, their name and picture is pulled into Square Stand for employees to recognize shoppers.

Square Wallet users then simply tell an employee at the point-of-sale their name, and their bill is automatically deducted from the account that is tied to the app.

Additionally, several Whole Foods stores will test other types of Square’s technology as a lab.

Mobile POS tries to scale
As Square looks to build up its business, the company is looking to shift some of its initial focus on smaller mom-and-pop merchants to bigger retailers, who are steadily becoming more interested in rolling out mobile point-of-sale technology to improve the in-store experience.

Most notably, Starbucks was the first retailer to strike a deal with Square in 2012 that lets consumers pay for items through the Square Wallet app.

However, Starbucks also already had a successful mobile payment app that employees knew how to work by the time that the Square rolled out.

It has also been reported by several news organizations that the experience using Square Wallet is not as smooth as the payment process through Starbucks’ mobile app.

Whole Foods does not have its own branded payment app and attracts a different group of shoppers than Starbucks’ daily shoppers.

At least initially, Whole Foods is focusing more on speeding up the in-store checkout versus integrating loyalty and rewards into mobile payments.

Similar to Starbucks though, the retailer also has the opportunity to take mobile payments a step further with loyalty tie-ins for a segment of shoppers who are willing to pay slightly more than other grocery stores because of the quality of the brand’s products.

However, integration is likely to be one of Whole Foods’ biggest challenges going forward.

“Whole Foods has lots of software assets and they all need to work together,” said Rick Oglesby, senior analyst at Aite Group, Boston.

“It helps build Square’s brand at the same time by giving it more exposure, which enhances Square’s competitive position,” he said.