Consumer-Targeted Tech Grows

C-store operators are investing in loyalty programs, social media, mobile apps and more

As consumer interest and adoption of technology continues to explode at a rapid pace, today’s retailers are investing time and money to keep up with and capitalize on this growth. For the convenience store industry, technology concerns run the gamut from consumer-facing technology such as mobile payments, mobile apps and text marketing, to the corporate and store systems running behind the scenes to keep the business operating every day.

The growth in consumer-targeted technology is evident in the number of c-store chains investing in mobile apps, mobile payments, loyalty programs, social media and text marketing. The Convenience Store News 2013 Technology Study shows that among convenience chains (operating two or more units), more than 90 percent of chains with 51 or more stores utilize some form of social media and more than half offer a mobile app to customers.

Marketing via text messaging grew from 17.2 percent in 2012 to 23.4 percent this year, with more than 20 percent of the study’s participants reporting plans to introduce the technology this year. Meanwhile, 60 percent of all respondents currently offer a loyalty program at their locations, and the technology to watch appears to be mobile wallets, as more than 30 percent of chains plan to roll out this option in 2013.

BREAKING DOWN BUDGETS

A total of 88.2 percent of chains budgeted for technology and automation in 2012, spending an average of $1.9 million and a median of $100,000, according to the study’s findings. For companies with 51 stores or more, 100 percent invested in technology, averaging $7.7 million in spending. In comparison, 79.5 percent of chains with two to 50 stores invested an average of $226,541 per company last year.

Of those investing, nearly half of the budget (47.3 percent) went to capital expenditures such as equipment, and just under two-thirds spent this to replace older equipment. For larger chains, this number jumped to 82.6 percent, compared to those with between two and 50 stores (53.5 percent). The majority of the money went to store-level technology (65 percent) vs. headquarters technology (35 percent).

For 2013, 30 percent of the chains participating in the study said they will spend less on technology this year compared to 2012, but this figure is driven almost entirely by smaller chains of between two and 50 stores. The majority of those with 51 or more locations plan to either spend the same amount or more this year.

Additionally, spending on PCI (payment card industry) compliance continues, although the majority of respondents are far along in the process. Chains with 51 or more stores all report beginning the compliance process, with 93.3 percent meeting all the specifications. For those with between two and 50 stores, 83.3 percent report compliance.

POINT-OF-SALE SYSTEMS

Most respondents to this year’s survey are scanning at their store locations and offering credit and debit payment options, despite still-rising interchange fees. A total of 94 percent of chains are using a point-of-sale (POS) system, and more than 85 percent have these systems integrated with office and store personal computers (PCs).

Among those chains with 51 or more stores, all are scanning and 98 percent offer credit and debit authorization. Also, half (54.5 percent) utilize money order terminals, with approximately one-third integrating them with the POS.

Almost all of the larger chains also report having tank monitors (94.2 percent), and two-thirds (62.7 percent) integrate them with the POS. Nearly three-quarters offer car wash and fleet service system technology (70.6 percent), and 50 percent report integration.

For smaller chains (two to 50 stores), the majority are keeping up with their larger competitors, as more than 80 percent scan at their locations and 85.4 percent offer credit and debit authorization. Less than half (42.1 percent) have money order terminals and of those with the technology, 37.5 percent have it POS-integrated.

BUSINESS INTELLIGENCE GROWTH

As chains collect scanning data at the POS and automate inventory and receiving, the use of business intelligence (BI) software continues to grow in importance. This year, 60 percent report using some type of BI technology. When broken down by chain size, 75 percent of the larger chains are using it vs. just over half of smaller chains.

The majority use proprietary BI systems (65 percent) rather than opting for vendor-based packages. This figure has shifted dramatically over the years from companies relying on vendors to now taking the technology in-house. The CSNews 2010 Technology Study showed 70 percent utilizing vendor-based business intelligence systems.

The top two categories for BI remain the same as in recent years, starting with sales and category performance (69.4 percent). When broken down by chain size, this number rises to 80 percent for larger chains. The No. 2 use is loss prevention and detection (67.3 percent). This is the only area more prevalent among smaller chains at 70.6 percent compared to 60 percent of those with 51 or more stores.

The third most popular way to analyze collected data is store performance management (65.3 percent), followed by vendor management (55.1 percent), which saw a large increase in use from only 40.7 percent in last year’s study. Rounding out the top five is measuring the effectiveness of marketing and promotions (53.1 percent).

Other areas seeing large increases in adoption year over year are store layout optimization and market basket analysis, with store layout jumping from 29.8 percent in 2012 to 40.8 percent in 2013, and market basket analysis up from 23.4 percent to 36.7 percent this year.

The use of BI systems for different applications is similar among smaller and larger chains for the majority of areas, except for market basket analysis, assortment planning and customer segmentation. The majority of respondents performing market basket analysis are larger chains at 73.3 percent vs. 20.6 percent of smaller chains. For assortment planning and customer segmentation — which both rank last on the list of BI uses across the board — only 8.8 percent of smaller companies use either option, compared to 53.5 percent and 46.7 percent of larger chains, respectively.

PAYMENT SYSTEMS

The top in-store payment systems remain credit and debit, with all chains reporting this offering, followed by prepaid or stored value cards, which increased to more than half of respondents (55.3 percent) this year, compared to 48.4 percent last year.

The biggest growth is seen in electronic check verification, with more than half reporting its use, compared to only one-third last year. For larger chains, 60 percent report using electronic check verification vs. 46.9 percent of smaller companies. Larger chains are also leading the way for electronic benefits transfer (EBT), with 93.3 percent using this technology, compared to only 28.1 percent of those with two to 50 stores.

Radio-frequency identification (RFID) is declining in use, and those with the technology are primarily larger chains. Self-checkout, mobile wallets and biometric payment technology are the least adopted among in-store payment systems. As mobile wallet technology matures, though, this number is expected to grow. This is evidenced by the 31.9 percent of respondents who plan to add mobile wallets to their locations this year.

Moving outside the store, all motor fuels payment options increased in adoption for 2013. Credit and debit remains at the top of the list, with 95.3 percent of respondents reporting use at their stores. At the same time, partial debit authorization rose from 42.1 percent in 2012 to 53.5 percent this year. Prepaid/stored value cards also increased to 41.9-percent adoption, compared to 31.8 percent last year.

While only 2.3 percent report currently using mobile wallets for motor fuels payment, it is the top technology planned for rollout in 2013, with 32.6 percent of respondents planning to implement the option. RFID, cash acceptors, prepaid/stored value and partial debit authorization are also top of mind for retailers at the pump.

INVENTORY AUTOMATION

C-store chains are focused on automation for inventory and ordering, as all categories saw an increase year over year with the exception of automated fuel ordering. Larger chains drove the majority of this growth, and the biggest increase seen was in computer-assisted ordering, which rose from 27 percent to 44.7 percent.

Topping the list of plans for 2013 are automatic replenishment (17 percent), automated fuel ordering (14 percent) and computer-assisted ordering (12.8 percent). Smaller chains make up the majority of those reporting these plans, as many of the larger companies already utilize these technologies.

Automated vendor receiving also saw a rise across the board, led by those chains with 51 or more stores. Scanning items received, manual data entry by item, and manual data entry by category or invoice all saw increased adoption, and more than half of the respondents are currently scanning items received (55.3 percent).

For those operators using electronic data interchange (EDI), 46.8 percent have proprietary systems, while 21.1 percent use package translators. The most popular use is for electronic funds transfer, currently in use by 48.9 percent of respondents, followed by EDI between banks and headquarters (38.3 percent) and between vendors and stores (34 percent).

PROMOTIONS & SALES

This year, the CSNews Technology Study shows moderate growth in companies using technology in-store to promote sales — especially video monitors, automated shopper loyalty programs and text messaging programs. The total number of respondents using in-store marketing technology jumped from 58.2 percent last year to 78.7 percent this year. Video monitors top the list with 41 percent reporting in-store use.

Sending text messages to customers, which is an inexpensive and effective marketing tool, grew from 17.2 percent in 2012 to 23.4 percent this year. And before the end of 2013, 21.3 percent of operators plan to introduce this technology.

At the pump — where marketing is often used to attract customers into the store — the use of video monitors grew to 34.9 percent, compared to 20.3 percent last year. Advertising and couponing saw a large increase to almost one-third of respondents, compared to only 17.5 percent in 2012.

Reported plans for this year include almost one-quarter of chains adding merchandise ordering at the pump — 40 percent of larger chains and 14.3 percent of smaller chains. In addition, 20.9 percent plan to implement some form of advertising and couponing at the pump, while 16.3 percent have plans to add video monitors.

LOYALTY, MOBILE & MORE

Over the past few years, the use of social media has exploded for all industries, and the c-store industry has not been left behind. More than 90 percent of chains with 51 or more stores currently use social networking as part of their marketing plans, and more than half (53.8 percent) of smaller chains report doing the same.

The majority (97.1 percent) are on Facebook, half have an account on Twitter, and nearly one-quarter utilize foursquare, allowing customers to “check in” at their stores. The most popular content provided on these social networks are company or store promotions and events. Half of the respondents also use social networking to promote and run contests, and almost half engage members with questions.

Another consumer-facing technology that continues to grow is loyalty programs. Almost 60 percent of chains offer some type of loyalty program — nearly three-quarters of larger chains and more than half of those with between two and 50 stores. Most of these programs are proprietary or branded to the retailer and are points-based reward programs. However, larger chains with more than 51 stores are mostly offering a combination of both points-based and credit card programs (54.5 percent).

Moving into the mobile world, almost one-third of c-store chains now offer a mobile app to customers — more than half of larger chains and 20.5 percent of smaller chains. Of the mobile apps available, the most popular feature is a store locator (93.8 percent), while more than half offer coupons to customers via their app. Customer feedback mechanisms and loyalty program tie-ins are also utilized by half of the respondents. Other options include limited-time specials (43.8 percent) and fuel prices (37.5 percent).

Looking ahead, the top planned tech investments for this year are better management of store-level inventory and revenue; reducing theft and shrink; social media; and better management of store labor expenses. Among larger chains, reducing theft ranks No. 1 on the list. For smaller chains, though, social media is the top priority.