CSP — May 2013
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Angel Abcede

Mobile opportunities top retailer interest, with loyalty, social media close behind

The more high-tech goes mainstream, the more retailers see themselves “phoning it in.” Not in the sense of putting their businesses on autopilot, but literally picking up a smartphone and dialing up computer- generated reports, changing price signs or sending electronic coupons to passing motorists.

Knowledge may be power (if you know how to use it), but for a workforce increasingly used to instant information, the focus is as much about when as it is about what. In an outreach to more than a dozen retailers and suppliers, CSP magazine identified five “themes” that bubbled up as top technology concerns:

1. Mobility—internal uses, marketing and customer payment

2. Loyalty

3. Social media

4. Business intelligence

5. Connectivity

A review of these themes is only part of this year’s annual technology wrapup.Equally engaging are perspectives on mobile payment and industry standards from two top industry tech names, as well as updated original research on cash-handling behavior among c-store operators.

1. Mobility

The concept of mobility as it applies to c-store technology can mean many things.Certainly, the hub of the idea is the smartphone or tablet device, which gives the user the ability to do a number of online actions. Of these activities, retailers seem focused on three: marketing, customer payment and internal communications.

While all three have yet to mature in terms of specific standards and widespread acceptance, retailers are tracking technological advancements and positioning themselves to act—with some already pulling the trigger.

Mobile Marketing

Issuing smartphone apps to build relationships directly with consumers is probably the No. 1 technology priority among retailers. Just ask 7-Eleven. It released an app in February, launching it on Apple and Android operating systems and offering it for free at the Apple App Store and Google Play for Android.

The app started with a store-location finder, mobile coupons, select products and news on store events and specials.The Dallas-based c-store giant selected the initial capabilities based on comments received from 7-Eleven Facebook fans, with mobile couponing the top request.

An update subsequently added the ability to “check in” to stores with the Foursquare social-media app. Frequent 7-Eleven visitors can earn a Foursquare “mayorship” of their favorite store.

In developing its app, 7-Eleven solicited feedback from the public, most recently traveling to the 2013 South by Southwest (SXSW) festival and conferences. In a coordinated competition held there, the winning idea allowed regular cellphone users to interact with the app via text messaging. Other top ideas included adding mobile payment capabilities, more coupons, individual store reviews, a membership loyalty program, nutritional information and local gas prices.

“We looked at how people shop our stores and patterned the app to improve their 7-Eleven experience,” said Jesus Delgado-Jenkins, 7-Eleven executive vice president of merchandising, marketing, logistics and innovation, in a news release.“It’s all about building convenience on convenience, and we continue to want to hear what capabilities customers would like to see in the future.”

Another new feature identifies stores that meet specified convenience needs. Filters for key products and services work in conjunction with the 7-Eleven app’s store locator, so users can tailor store results by selecting filters, such as chicken, pizza, egg rolls, beer, wine, Redbox, lottery, ATM, fuel, diesel, propane and whether the store accepts specific food stamps.

But 7-Eleven is relatively new to the game. Rutter’s president and CEO Scott Hartman, known as an early adopter, was one of the first to jump into dynamic websites and mobile apps about four years ago, having partnered with Brooklyn Park, Minn.-based Gas- Buddy and its OpenStore program.Customers can use the app or visit the website to find locations, review products or find promotions.

Hartman says his 57-site, York, Pa.- based company is reaching “a demographic that every c-store chain covets” and describes the feedback tools as “amazing.” The interaction and engagement that results has become part of the chain’s brand identity, Hartman says.

Ultimately, retailers and suppliers say the greater treasure trove would be giving motorists tempting offers as they drive by. “Don’t expect all success stories as the industry goes down this path,” Hartman says. “But those who understand it will begin to separate from the pack in just one more way with the customers we all want.”

The idea of mobility interweaves with other hot technology topics. In the case of mobile marketing, the thread leads to themes of loyalty and business intelligence.The logic extends to developing relevant, enticing offers to customers based on individual buying history.

“That’s when we get into much more personal, customer-specific intelligence,” says Carson Kuehne, chief innovations officer for Verge Retail, Henderson, N.C. “It leads … to having an understanding of each person and the coupons and offers [that may turn] a Saturday customer … into a weekday customer.”

Albemarle Oil Co. (ALCO), Albemarle,N. C., recently launched an app through Verge for its 23-store chain.“We’re excited about the ALCO smartphone app and the opportunities Verge’s technology presents for enhancing our customer experience and supporting the growth of our brand,” said Ron Lattimer, the company’s operations manager, in a release.

Mobile Payment

The second mobility concept that retailers seem focused on is payment. While no one disagrees that paying for goods with a smartphone could be convenient for many customers, the central issue is financial. How will retailers benefit?

“How do you incorporate mobile payment in a way, [for instance], that you’re saving on credit-card fees?” says Jenny Bullard, CIO of Flash Foods, Waycross Ga. “[And] we don’t want to add cost.”

The 172-store Flash Foods chain is in the process of implementing a mobile app, one that’s tied to its loyalty program.The connection will process transactions via its ACH-debit system, which bypasses credit-card processors and, in turn, avoids high transaction fees.

“One of the challenges is solutions tied to the major credit-card brands [that] in the end aren’t offering savings to the retailer,” says Drew Mize, COO of The Pinnacle Corp., Arlington, Texas.

“There’s no incentive for retailers to adopt it beyond it being a defensive measure. They don’t want to lose customers.”

Multiple players—PayPal, Google, ISIS—have a stake in the so-called “mobile wallet” game, with retailers such as Bullard eager to see how things play out. Standards in technology also need to firm up, with the chip-in-phone technology of near-field communications (NFC) along with bar codes on smartphone screens getting buzz.

“There are many solutions emerging, each using completely different technical approaches,” Mize says. “It’s difficult to go all in when no one knows who’s going to win.”

Yet despite the uncertainty, the goal is compelling. Jason Groff, director of petroleum and convenience, global solution marketing, for NCR Corp., Duluth, Ga., says such a transaction can start with a quick response (QR) code on the pump. Customers can scan the postagestamp- size bar code, download the app and initiate the purchase. At the same time, retailers can communicate promotions that customers can buy. Groff says it gives customers control over the fueling experience.

Mobile—Internal Uses

Customers aren’t the only ones who want more control. Employees demand it, too, says Mize of Pinnacle. Though his company has provided the option of remote access for several years, demand for the option has spiked.

“The market is really starting to embrace it and demand that ability to access data in a more immediate fashion from wherever they are,” he says. “It used to be a trend focused on the [top]-level executives, but it’s gone down to the entire organization, whether it’s operations, district managers or marketing.The entire organization is trying to gain real-time access to their systems.”

To access data remotely, solutions typically need to be browser-based or easily accessed via a mobile device. That’s the first requirement, Mize says. Second, a secure pathway must exist from the public world into those private systems.

Today, the proliferation of smartphones, iPads and tablets, as well as the security options available, has created an entire ecosystem of possibilities. “Think back five years ago,” Mize says. “Unless you had a BlackBerry—which was the go-to cellphone for businesses wanting to give employees secure access to company emails—there was no way to effectively get mobile reporting unless you were chained to a PC.”

The importance of remote access is what drove officials at Tedeschi Food Shops, Rockland, Mass., to overhaul the company’s communications network.Doug New, vice president and CIO for the 194-store chain, says, “One of our big drives is, through technology, to do what we can to make the lives of our store operators better, make their jobs easier and remove hassles.”

Such drivers raise the goal of real- time information. Greg Gilkerson, president of PDI, Temple, Texas, says simply, “People want to know.”

Tank-monitoring systems, pointof- sale (POS) and the communication networks that exist for the most part are capable of providing real-time data. In the field, such information can identify inequities in supply and demand. While a store on one side of town may be running out of a product, a store on the other may have an abundance of it. So a quick transfer may mean added profit.

Most inventory systems, Gilkerson says, are two to three days behind, and “people are hungry to get closer to their businesses.”

2. Loyalty

Just as the smartphone may be the mailbox in this new day of accessibility, loyalty programs are the mail and, in the near future, the personal assistant who sifts through the mail.

Retailers undoubtedly have loyalty on the brain, with the range of programs going from pilot to fully embedded.

John Winter, vice president of planning and development for the 18-store chain Quality State Oil, Sheboygan, Wis., speaks to the latter. In place for seven years, the company’s Q-Mart Rewards program is arranged around a “club” concept, wherein customers buy a certain number of the same item, such as cups of coffee, and eventually get one free. The program now tops 70 clubs and speaks to the power of loyalty:

▶ $7 million in new sales since the program began.

▶ 80% of all gallons of milk purchased go through the Q-Mart program.

▶ Its new craft-beer club boosted category sales by 300%.

▶ Targeted offers and cross-promotions can drive up sales of specific products, making the chain the area’s biggest retailer of items such as cases of bottled water, family-size bags of chips and frozen pizza.

▶ Its loyalty customers spend $2.50 more than non-loyalty.

▶ When a competing store opened up next door to a Q-Mart, the Q-Mart retained all its loyalty business but lost 15% of its non-loyalty customers.

▶ Vendor partnerships flourish, fueled by concrete throughput data.Through its partnership with Houstonbased CITGO, the program has given away $100,000 in random rewards.

With its loyalty provider, Outsite Networks, Norfolk, Va., Quality State recently started rolling out its rewards program to its 60-store dealer network, calling this version Badger Rewards. The biggest hurdle is educating store staff, says Scott Stangel, wholesale marketing manager for Quality State. Employees are the front lines of communication to customers.

“Building the program requires you to be connected through your sales associates,” he says, pointing out how mystery-shop bonus programs can reward employees for talking up loyalty.

It’s an ongoing battle, Winter says.“You have to differentiate yourself and give the consumer the advantage,” he says.

“Over the years we’ve identified winning clubs … and play off those. [For others] we go in different directions, keeping it interesting for our customers.”

3. Social Media

Though interest still exists around social media and sites such as Facebook and Twitter, questions remain. For Bullard of Flash Foods, the bottom line is brand awareness.

“It’s a presence you’ve got to have,” she says. “As time goes by, that presence gets more important, but whether there’s financial gain outside of promotion, we don’t know yet.”

For Stangel of Quality State, social media will eventually play into how retailers can reach consumers based on location. “We’re gearing up for the new consumer who goes everywhere with a phone,” he says.

Along with location-driven applications in cars, retailers can use “social media to track individuals, find them wherever they are and [connect us to] their purchase habits,” Stangel says.

4. Business Intelligence

For New of Tedeschi, social media is part of the larger picture of collecting and analyzing data. The age of “big data” and understanding what sells and why people buy will be significant for retailers.

“We have the ability now that we did not have before to collect more data from stores, pull back all transaction data and take advantage of that in ways we weren’t able to in the past,” New says.“We have goals of knowing what’s being sold in conjunction with what, what true market baskets are and how it changes by time of day.”

New hopes to develop a loyalty program that can ultimately tailor mobile coupons and discounts to specific individuals. “The accessibility of data— more appropriately, the accessibility of data presentation and mining tools— will make it easier to get information and draw correlations,” he says.

Analytical tools have evolved in recent years, helping c-store retailers tackle industry-specific questions. Mark Hawtin, senior vice president of business development for KSS Fuels, Florham Park, N.J., says retailers make many decisions in “blissful ignorance” of the ramifications.

For instance, retailers often change fuel prices without consideration of how they’ll affect in-store sales. Lowering fuel prices will increase pump traffic, but what if it inadvertently starts a run on a related in-store product? “If I increase demand [in fuel], do I have enough product [in the store]?” he says.

“And what about labor scheduling and labor workload?” asks Adrian Preston, chief technology officer for KSS Fuels. “People want to use big data to solve business problems: How do I maximize efficiency?”

5. Connectivity

Developing the logistical connections to transmit data is the backbone of all of these technology trends, says New of Tedeschi. That’s why his chain recently completed an overhaul of its internal communications network, broadening its ability to transmit data and preparing the chain for future data demands.

Its biggest motivation was eliminating paper, New says. “We had incredible amounts of paper produced routinely—financial statements and marketing information intended for district managers or store operators,” he says. “We needed greater bandwidth to grab the information electronically.”

Now Tedeschi can use business applications to handle processes such as reordering. With the company’s heavy emphasis on fresh foods, the ability for stores to order directly from the commissary was a huge benefit, New says.

Connectivity today is “more pervasive, more available and, most importantly, more secure,” says Dan Foster, president of business markets for MegaPath Corp., Pleasanton, Calif. As Tedeschi’s network provider, Foster says compliance to Visa and other credit-card standards for data security (commonly known as payment card industry, or PCI, standards) is critical to daily operations and reducing exposure to data theft.

That said, Foster says retailers have to make a commitment to their communication choices. Top decision makers need to be involved and thoughtful conversations with business partners need to happen. “You have to ask yourself what you see over time, so you can future-proof your business with technology,” Foster says.

Communications becomes even more important as chains opt for “hosted” solutions, putting many of their basic business processes into cloud servers.

“Retailers are very excited about the potential value that [hosted] products can give them,” says Groff of NCR. “It lowers the barrier of entry while leveraging the same ‘brain’ ” that a larger competitor may use.

The Big Vision

Though the top themes identified here are an informal collection, what’s clear is the difference between the tech climate today vs. just two or three years ago. Ubiquitous technologies such as smartphones and tracking systems in people’s cars are inspiring retailers to dram big.

“As you and I are driving around, our mobile device or a satellite system will tell us when we get near to a preferred retailer,” says Hawtin of KSS Fuels. “I’ll get an offer that pops up that says, ‘Pull in—you’ll get a great deal.’ ”

Ultimately, that vision unifies the various themes mentioned by those interviewed, defining the many parts needed to reach that goal.

“If you’re in a market that’s at best flat or declining,” Hawtin says, “your future is built on the ability to [persuade] your customer to buy more.”
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