Tech Spending Up In 2010

As companies focus on social networking and mobile apps, 2010 shows an increase in spending and a continued focus on automation

As consumers evolve with the newest technology, retailers must advance to keep up with them. It's this evolution that has so many c-stores introducing social networking into their plans — Kum & Go actually appointed one person in charge of it for the entire company — along with mobile apps. At this year's CIO Roundtable, held in New Orleans during the NACStech conference, these two topics sparked a lot of discussion, and in the 2010 Convenience Store News Technology Study, 26 percent of chains reported the use of social networking, and of those, 100 percent have a Facebook profile and about half are on Twitter. Rutter's Farm Stores and Pilot Travel Centers are just two of the chains offering mobile apps for customers.

In addition to progressing in these emerging arenas, convenience store chains are looking to invest more money this year in the technology category compared to 2009. Last year, most retailers reported a freeze on technology spending — only putting money into PCI, upgrades and replacements necessary to operate on a daily basis. In fact, 10 percent of responding chains did not spend at all on technology in 2009. But 2010 will see an increase in dollars going toward tech investments, with 51 percent of respondents reporting plans to spend more than they did last year, compared to only 33 percent in 2009.

In fact, Gartner Research forecasted global information technology (IT) spending to be up 5.7 percent in 2010 compared to a 4-percent decline in 2008. And respondents of this year's CSNews study will continue to spend more on in-store technology (73.6 percent) than at the headquarters (26.4 percent), a shift that started in 2008.

While many still plan to spend on necessary improvements, including PCI, the majority of chains are either already PCI compliant (54 percent) or currently in the process (43 percent), with only 3 percent reporting they haven't started working towards compliance.

Connecting the Store

A total of 96 percent of respondents reported the use of a point-of-sale (POS) terminal and 78 percent have it integrated with the headquarters and store personal computers (PC), while 22 percent use a standalone PC. For companies selling motor fuel, integration of fuel pumps, fleet services systems and car washes have the highest integration rate, with 67 percent, 63 percent and 63 percent, respectively.

A total of 87.1 percent of chains have an in-store PC. The most popular use of it is for e-mail (70.6 percent), followed by daily reporting systems (69.6 percent), and automated time and attendance (48.6 percent). Other uses for in-store PCs include labor scheduling, with nearly half of respondents using this option (43.8 percent); computer- based training (37.7 percent); and inventory ordering (34.4 percent). Energy management systems increased slightly from 15.4 percent in 2009 to 17.4 percent this year. Those exploring the option also jumped from 6.6 percent to 10.9 percent, reflecting the recession's effect on cutting back operating expenses.

When it comes to automating inventory, each year more and more chains move from manual processes to automation, and this year is no different — particularly with vendor receiving. Manual data entry by item number dropped from 34.1 percent of chains using the technology to 21.7 percent, and manual data entry by category or invoice fell from 28.6 percent to 25.0 percent. In terms of automating inventory and ordering, automated fuel tank monitoring tops the list with 70.4 percent of chains using the technology, and computer assisted ordering software and automated fuel ordering is used by a quarter of those responding. Only 15.2 percent use automatic replenishment.

Nearly half of the respondents reported the use of electronic data interchange (EDI) with the majority using a proprietary system (31.5 percent) rather than a package translator (13.0 percent), and the most popular use is electronic funds transfer — 43.5 percent have implemented it and 5.4 percent are exploring this use. Only one-quarter utilize EDI between vendors and the headquarters, and a little more (31.8 percent) use it between banks and the headquarters. This year, EDI between payroll processors and headquarters increased from 18.7 percent to 21.7 percent, and interest also raised one percentage point to 8.7 percent.

Accepting Payment

Credit and debit, despite the skyrocketing fees, remain the most popular form of payment technology with 98.6 percent of chains reporting its use and 1.1 percent exploring. The second most popular is prepaid/stored value cards at 49.8 percent, with 7.6 percent exploring. Following prepaid is electronic check verification, with 40 percent of chains using the option and a little more than 7 percent exploring it.

Electronic benefits transfer is still popular among chains, with 34.4 percent using it and 13.3 percent exploring, while RFID held steady at 13 percent (12.1 percent last year), with nearly 10 percent exploring the option. And each year, the use of biometric payment technology fluctuates. Last year, no chains reported using the technology for payments, but 9.9 percent showed interest. This year, 2.2 percent report using it and 10 percent are interested in exploring the technology.

Similar to in-store, credit and debit is still king when it comes to paying at the pump (94.4 percent), followed by prepaid/stored value cards at 25.6 percent, an increase from last year's 19.3 percent. In contrast, both partial debit authorization and cash acceptors dropped in popularity this year. Cash acceptors fell to 25.6 percent from 37.5 last year, and interest also fell from 10.2 percent exploring the technology last year to 4.4 percent exploring it in 2010. And for RFID/contactless, interest grew slightly from 4.5 percent to 6.7 percent, but there were not many new implementations, holding at a little more than 4 percent.

Digging Into Data

Since adding business intelligence (BI) to the survey a few of years ago, it has shown the increasing interest c-store chains have in analyzing data captured at the POS. Last year, 66 percent of chains reporting using BI systems, and this year it jumped to 74 percent. While the majority use vendor systems, with 70 percent reporting this option, 30 percent use proprietary programs.

The No. 1 use of BI is to analyze sales and category performance, with 69.4 percent of chains reporting this option and another 13 percent exploring it. More than half (56.6 percent) use BI for loss prevention and detection. Store performance management (49.2 percent) and inventory and in-store organization (44.4 percent) round out the top four ways to use BI.

Also popular is vendor management (34.8 percent), and marketing and promotion effectiveness (34.6 percent). Store layout optimization and assortment planning are other uses for BI. The two uses of BI that saw increases this year are market basket analysis — tracking what items people buy together — moved from 17.6 percent to 19.6 percent, and customer segmentation, up from 8.8 percent to 13.0 percent. Market basket analysis also has the most chains exploring it at 22.6 percent.

Promotions and Kiosks

More than half (50.7 percent) of the responding chains utilize some type of promotional sales technology, whether in-store or at the pump. In either case, video monitors are the most popular, with 27.2 percent featuring them in-store and 16.7 percent at the pump. Additionally, both show interest from those who don't have the option yet, with 10.9 percent exploring in-store and 13.3 percent exploring video at the pump.

Also popular in-store is satellite feed audio music and advertising with 20.7 percent of companies. Last month, The Pantry Inc. announced the deployment of Trusonic Inc.'s music and messaging solution in its 1,647 Kangaroo Express stores. The vendor is customizing multi-zone music and messaging, and The Pantry will be able to audit what is played across each location through a Web interface.

The majority of companies responding to the survey this year had sales of $100 million or more (34 percent) followed by $20 million to $99.9 million (27 percent). When looking at number of stores, 42 percent operate between two and 10 stores, while 38 percent run between 11 and 50, and 20 percent have 51 or more locations. Additionally, motor fuel is sold by 98 percent.

At the pump, 16.2 percent of responding companies use advertising and couponing, with 21.6 percent exploring the option, and merchandise ordering at the pump went up 1 percent to 3.3 percent utilizing the technology and 18.9 percent exploring it — up from 2.3 percent and 10.2 percent, respectively.

The use of kiosks in general rose this past year from 28.6 percent to 32.6 percent, as did those exploring the option. Car wash kiosks with automated payments systems are the most popular, with 22.2 percent of chains choosing this option, and foodservice ordering kiosks in-store rose from 6.6 percent to 8.7 percent, with 11.6 percent of chains exploring the technology for future use. The use of bill payment kiosks, advertising and couponing at the ATM, and outdoor foodservice kiosks also went up, along with those exploring each technology, especially couponing at the ATM, with those exploring at 13 percent compared to less than 8 percent last year, and outdoor foodservice ordering, with 12 percent exploring compared to only 5.5 percent in 2009.

Last year, 66 percent of chains reporting using BI systems, and this year it jumped to 74 percent.

Similar to in-store, credit and debit is still king when it comes to paying at the pump (94.4 percent), followed by prepaid/stored value cards at 25.6 percent implemented, an increase from last year's 19.3 percent.

Technology Study

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