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By Tammy Mastroberte
Looking back on 2008, economic concerns didn't have much affect on technology spending, although many retailers saw chunks of their budget go toward becoming compliant with Payment Card Industry (PCI) security mandates. More companies spent money on technology (93 percent) than the year prior (89.1 percent), and the average amount spent per company rose to $1,114,353 from only $632,694 in 2007, according to Convenience Store News' 2009 Technology Study, focusing on chain operators.
However, the outlook for spending in 2009 doesn't look as promising.
In almost an even split, 33 percent of convenience store chains plan to spend less this year compared to last, while another 33 percent plan to spend the same amount. Only 34 percent report plans to spend more.
And with PCI compliance hanging over the heads of retailers in every industry, many chains will allocate a good portion, if not all, of their budgets to upgrades and improvements in this area.
When asked how current economic conditions will impact technology spending in 2009, common verbatim replies included, "We are only spending on what is absolutely necessary;" we are "focusing on PCI compliance with all other developments on hold;" and, "We won't buy new, only fix and repair the old."
In 2008, the majority of chains spent their money on store-level technology (74.8 percent) compared to headquarters (25.2 percent), and while 63 percent report they are compliant with all PCI standards, 29 percent said they are still in the process of becoming compliant, and 8 percent report they haven't started the process yet.
Aside from PCI compliance, c-store retailers are investing heavily in a variety of Business Intelligence (BI) systems in order to gain insight into their collected data, allowing for better business decisions. Business Intelligence saw the greatest gains in adoption compared to any other technology in the study, with 65 percent of the responding companies utilizing BI software. Additionally, the majority use vendor-based systems (77 percent), rather than proprietary (23 percent).
The various ways retailers use BI tools increased across the board, as did those who are exploring the technology. Measuring sales and category performance is the top use for BI, jumping from 45.9 percent in 2008 to 71.4 percent in 2009. This is closely followed by loss prevention and detection, which also saw a big increase in use, from 37.7 percent last year to 63.7 percent in 2009.
C-store retailers also utilize the technology to measure store performance management (52.7 percent); inventory and in-store organization (47.3 percent); vendor management (38.5 percent); marketing/promotion effectiveness (36.3 percent); store layout optimization (27.5 percent); market basket analysis (17.6 percent); assortment planning (12.1 percent); and customer segmentation (8.8 percent).
POS and Payment Systems
Convenience store chains reporting the use of point-of-sale (POS) terminal systems totaled 95 percent, with 79 percent having the system integrated with the headquarters office and in-store personal computers (PC), and 21 percent reporting stand-alone PCs.
Adoption of scanning continues to increase among chains, with 82 percent utilizing the technology. Looking at integration with the POS, the majority of chains offer credit/debit authorization (97 percent), with 87 percent reporting POS integration. Also, 97 percent report having safes in the stores, but only 20 percent currently integrate their safes with the POS.
Moving out to the fuel island, 90 percent of responding chains utilize pay-at-the-pump technology (all integrated with POS systems), while 51 percent use integrated tank monitors and 77 percent have integrated fleet services systems.
The most popular form of in-store payment is credit and debit authorization with 96.7 percent of chains offering this option, up slightly from 95.1 percent last year, and 2.2 percent of chains reported they are exploring use of the technology.
Prepaid or stored-value cards is the second most popular payment offering inside stores, with more than half (53.8 percent) accepting it, and slightly less than half (47.3 percent) utilizing electronic check verification.
And while use of RFID/ contactless payments rose slightly to 12.1 percent, from 11.5 percent the year prior, biometric payment technology took a dive from 4.9 percent of chains using or testing the technology last year to 0.0 percent in 2009. However, 9.9 percent said they are still exploring biometric payments.
Additionally, 26.3 percent accept prepaid or stored-value cards at the pump, down from 33.3 percent. The biggest jump in usage was with partial debit authorization, which went from 25.4 percent of chains in 2008 to 37.5 percent.
As chains adopt more sophisticated systems, automation continues to take over manual tasks. One area in which this shows up strongly is vendor receiving, with 45.1 percent of responding chains now scanning items received at the stores, up from only 27.9 percent in 2008.
Additionally, chains are moving from inventory by category to item level, with manual data entry by category dropping to 28.6 percent from 36.1 percent in 2008, and manual data entry by item increasing to 34.1 percent in 2009, compared to 32.8 percent a year prior.
The most popular function of in-store PCs is daily reporting systems, used by 78.8 percent of responding chains, followed by e-mail (62.2 percent). And with companies trying to gain control over labor expenses, automated time and attendance rose from 36.1 percent to 50.5 percent this year, and labor scheduling was up from 36.1 percent to 44 percent.
Of those companies using electronic data interchange (EDI), more chains utilize proprietary systems (27.5 percent), compared to packaged translators (14.3 percent), and the most popular use is for electronic funds transfer (44.0 percent). EDI between the vendor and headquarters increased to 35.2 percent in 2009 from 26.2 percent in 2008, and EDI between banks and headquarters was up slightly at 34.1 percent from 31.1 percent.
Promotions & Kiosks
More than half of the responding chains use some type of promotional and sales technology (56.0 percent), and 11 percent report exploring the option. Satellite feed audio music and advertising is used by 28.6 percent, up from only 16.7 percent last year, and 26.4 percent of chains offer video monitors in the store, while only 15.4 percent installed them at the pump.
Car wash kiosks increased from 12.8 percent in 2008 to 20.5 percent in 2009, as did prepaid card kiosks -- up from 6.6 percent to 11.5 percent. Foodservice ordering kiosks remain flat at 6.6 percent, with 11 percent of chains reporting exploration of the technology.
Bill payment kiosks also grew in popularity to 4.4 percent of chains with the technology, compared to only 1.2 percent last year, and job application kiosks saw a slight increase to 2.2 percent, up from 1.6 percent last year. However, interest seems to be decreasing across the board for advertising and couponing through the ATM, as well as with job application kiosks and outdoor foodservice ordering.
Digital/video surveillance remains the No. 1 technology c-store chains feel had the greatest impact on business in the past two years, followed by scanning, pay-at-the-pump, backroom automation and integration of systems.
When looking at 2009, planned technology investments changed from last year with the No. 1 priority being the reduction of theft and shrink, followed by replacing aging POS technology and better management of store level inventory and revenue.
Research by Debra Chanil, Research Director, firstname.lastname@example.org.