At the recent 2012 NACS State of the Industry Summit, it was no surprise to hear that costs are higher, margins are slimmer and competition is stronger and more varied than ever before. Creditcard costs are up, continuing to rise as a percent of fuel margins and representing an increasing drain on profitability. The largest inside sales category, cigarettes, continues to struggle. Clearly, convenience retailing is both difficult and in a state of flux.
To help retailers in this challenging environment, technology products from companies such as Pinnacle are available to strengthen store operations and provide reporting solutions to expand the view of consumer purchase behavior down to the market-basket level. However, item-level inventory, computer-assisted ordering, replenishment, loss prevention and realtime business intelligence solutions are still underused in this industry. How can retailers offer a faster, lower-cost and even more convenient consumer experience via technology? Having a replenishment system that can ensure products are on the shelf is fundamental, but stronger benefits come from leveraging consumer insights derived from business intelligence tools and loyalty systems, and by better connecting your organization with the consumer.
Buzzing About Payments
Starbucks provides an interesting insight into what is possible on a large scale. I’m intrigued with the idea of “selling” gift cards and then allowing consumers to pay for future transactions with their “own” money. The consumer benefits from a fast, convenient transaction, while the retailer benefits from enhanced cash flow and elimination of processing fees. As a component of a comprehensive loyalty program, it can provide the retailer with detailed information on purchase behavior that can be viewed across demographics to finely tune loyalty promotions.
Last January, Starbucks enhanced its proprietary gift card and took it mobile. Consumers loved it, to the tune of $2.4 billion loaded onto Starbucks gift cards in its most recent fiscal year. Today, one in four Starbucks transactions is paid with a Starbucks gift card or mobile payment. I’m betting convenience consumers would respond positively to a clever marketing program that leveraged prepaid cards, loyalty offers and fuel discounts. Our client experience with fuel price-per-gallon discounts when paid via ACH vs. traditional credit/debit supports this thinking: Use an ACH transaction to load a proprietary prepaid account, share some of the traditional credit/debit cost savings with the consumer, control the cash, build strong loyalty promotions across categories, and strengthen your brand. It’s a win-win.
High-Tech Food
Recent SOI numbers also reported strong growth in foodservice. Strong sales don’t necessarily translate into profitability in this particular category, though, when considering the high costs of operations, equipment and potential waste; technology solutions to best optimize inventories, ordering and sales forecasting are critical. Equally as important is better connecting the retailer with the consumer, another area in which technology can enhance the in-store consumer experience and produce stronger results. A successful loyalty program can be a key component in this area, not only providing a platform to better market this category, but also providing a means to move prior consumer purchase behavior toward other growth categories. Self-service food ordering kiosks that integrate your foodservice management platform and the POS greatly improve the customer experience and will produce stronger results. The consumer is enabled to order at their own pace and benefit from a rich display interface, and those graphics in combination with upsell opportunities also greatly improve per-ticket averages in areas of much higher margin.
It’s no surprise that our industry continues to be challenged. Technology solutions resulting in operational efficiencies are a requirement, without question, for continuing to compete in this business. I also believe that in today’s market, it’s just as important, if not more so, to look beyond operational efficiencies and toward technologies that will better connect you as the retailer with your consumer. Don’t stop with operations and efficiencies technologies— look toward technologies that will help you better understand the behavior of your consumers, and capitalize on that behavior.
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