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Retailers weigh in on EMV, loyalty programs and more at CSNews CIO/Tech Summit

Despite inclement weather, neither rain nor wind could dampen the spirit and passion for technology displayed at the Convenience Store News 2013 CIO/Tech Summit.

After an opening night dinner, during which the CSNews Top Tech Executive Award was presented (see page 118), a 25-member panel of convenience store industry retailers and suppliers got to work bright and early the following morning to discuss the challenges and opportunities facing their individual organizations and the industry as a whole.

CSNews Editor-in-Chief Don Longo kicked off the event, held at Rosemont, Ill.’s Hyatt Regency O’Hare hotel, by presenting the findings of the CSNews 2013 Technology Study, which will be presented in the October issue of Convenience Store News.

Longo also got the roundtable discussion rolling by asking those in attendance to describe their greatest technology accomplishment in the past year. The answers varied dramatically.

“We made it easier for our operations team and store maintenance team by deploying iPads,” said Maria Fidelibus, vice president of information technology (IT) at Whitehouse Station, N.J.-based QuickChek Corp. “The operations group is using it to review key reports, as well as conducting field audits. Our maintenance group is using it for work order processing.”

Another retailer added that his company also joined the iPad revolution. Twenty-five of Apple’s tablet devices were added in stores for employee use, along with the addition of Wi-Fi.

Avsha Klachuk, director of marketing technology for Dallas-based Alon USA, touted the c-store chain’s merchandise promotion that will give away 13 new cars this year. In the past year, Alon also successfully completed RFID (radio frequency identification) systems for fleets. “We’re seeing huge benefits,” he said. “Fleet sales are increasing, which in turn increases in-store sales.”

Amir Wurzel, vice president and chief information officer (CIO) for Alon Brands, the retail arm of Alon USA, noted one other big happening for the company in the past year. Alon joined Merchant Customer Exchange (MCX), a mobile wallet payment processor intended to compete with credit and debit card providers. “This is a one-time opportunity to change the industry,” he said, referring to the fact that c-store retailers could help determine a more balanced approach to interchange fees and ensure retailers retain appropriate control of their customer data.

Several other tech executives alluded to improving or implementing a new point-of-sale (POS) system, as well as dealing with PCI (payment card industry) compliance.

One CIO was proud to report her company recently passed an in-house PCI audit. That statement opened the floodgates to several other conversations about PCI compliance. For example, one retailer lamented that the costs are too high to be compliant. In addition, a CIO for a Midwest c-store chain said he thought PCI guidelines made sense, but if retailers accept mobile wallet transactions, PCI compliance costs will rise even higher.

Ed Collupy, vice president of retail IT and POS systems at Cary, N.C.-based The Pantry Inc., concluded the PCI conversation by raising a separate concern. “Vendors often come to retailers wanting to add something to the network that isn’t PCI compliant,” he said. “That’s a real challenge.”

EMV SKEPTICS

Lending a much different perspective to the conversation was the one CEO in attendance, Greg Parker of The Parker Cos., who received this year’s CSNews Top Tech Executive Award. “At Parker’s, we’re very interested in blending loyalty and technology,” he stated. “We’ve partnered with Skyline [Products] to change fuel pricing and signage and are currently developing new ways to develop customized offers for individual customers using GPS technology.”

Loyalty programs, along with payment systems, EMV (Europay, MasterCard and Visa) and the use of social and digital media, dominated the afternoon portion of the CIO/Tech Summit.

On the topic of EMV, retailers expressed skepticism over both the readiness of the technology, which is already in use in 120 countries, as well as the practicality of the implementation dates. EMV is a set of guidelines that requires retailers to convert to a chip and PIN system for POS transactions by October 2015 for in-store and by October 2017 for pump transactions in order to avoid responsibility for fraudulent credit and debit card transactions.

“There’s no doubt that the banks are driving this [EMV implementation], but there are so many questions about the technology right now that they’ll probably push back the deadline,” Wurzel of Alon Brands weighed in. “Everyone is waiting to see what happens.”

Added another retailer: “We are not convinced these dates are hard deadlines, but the inside-the-store date is probably harder than the pump deadline.”

The cost of converting to EMV-capable equipment will be substantial. One retailer said he heard an industry consultant peg the cost of converting fuel pumps to EMV at more than $160 billion for the industry — and that figure doesn’t include the cost of upgrading retailers’ communication bandwidths at the store level.

Overall, the attendees agreed there is still much confusion surrounding EMV. “I’m not opposed to the technology,” said Jim Xenos, vice president of store technology at Oklahoma City-based Love’s Travel Stops & Country Stores. “But tell us when it will be ready for us to begin testing, what are the use requirements and when it will be used by consumers.”

THE LOYALTY GAME

Switching to loyalty programs, most of the retailers agreed on the benefits of these programs designed to build sales and reward repeat business. However, some retailers pointed out that several factors give them pause. “A lot of people have loyalty programs and haven’t been able to prove the efficacy of their program,” said one chief information officer.

Other tech executives pointed out the difficulty of launching a loyalty program because they sell multiple brands of gasoline at their locations. “We’ve been following and participating in some of the loyalty programs offered by our branded fuel suppliers,” said The Pantry’s Collupy.

Parker, whose Georgia-based Parker’s chain has rolled out three levels of loyalty with its PumpPal program, noted that 34 percent of his company’s gas transactions are made with the PumpPal card. On June 1, the retailer was due to roll out an elite version of PumpPal. “We expect to have an even higher percentage of our in-store sales transactions go through our loyalty program,” he said.

Jenny Bullard, CIO at Flash Foods Inc., also based in Georgia, said the retailer’s Rewards in a Flash loyalty program has been an integral part of its business since 2005. Today, 38 percent of in-store transactions are made by customers with Flash Foods loyalty cards, she reported. “If you take fuel out, loyalty customers spend $1.50 to $2 more per transaction.”

Another Southeast retailer echoed the value of such programs: “We’ve proved the efficacy of loyalty. We’ve issued over 200,000 loyalty cards and people really get it.”

Partnering with grocery retailers has been a winning proposition for some. QuikTrip Corp. (QT) offers 5 cents off on gas for every $50 spent at its supermarket partners. “QT has a great relationship with our grocer partners who are helping to fund the offer,” noted CIO Chris Truesdell.

Bullard added that two Flash Foods locations participate in Shell Oil Co.’s rewards program.

For other c-stores, however, supermarkets can be uneasy bedfellows. At one upper Midwest chain, grocers consider the c-store chain a competitor. “So, we have our own proprietary loyalty card that offers 3 cents off a gallon of gas and 10 percent off in-store purchases,” the retailer said.

Among the retailers around the table at the CIO/Tech Summit, those operating travel centers were more concerned with using loyalty programs to drive gallons, while the more traditional c-store operators view loyalty as a means to increase in-store sales. Most agreed, though, that the next generation of loyalty marketing will involve geolocation and more personalized marketing to customers based on their purchasing history.

“It’ll be like Amazon.com,” said one executive.

The event wrapped up with a discussion on the use of digital and social media. All of the retailers said they are active in social media, although most are still unsure what kind of return on investment they’re getting. Several expressed interest in using social reputation software to gauge customer interaction with their social media platforms, while others noted that text messaging appears to be a more effective marketing strategy for their companies.