The Convenience Store of the Future
February 5, 2014, By Michael Youngkin, Heartland Payment Systems Inc.
According to NACS and Nielsen’s most recent data, there are more than 150,000 convenience stores in the United States, two-thirds of which are owned by independent operators. The industry is poised for further growth as it continues to meet consumer demand for services way beyond the pump. Over the next decade, the industry will concentrate on the following game-changers: foodservice evolution, payments innovation and in-store network technology.
Food sales comprise about 55 percent of convenience store sales, and with high gas prices and dwindling cigarette sales, these profit margins become crucial. As convenience stores offer a greater variety of food options beyond fast food and grab-and-go sandwiches, the importance of proper storage and food safety grows as well.
When it comes to monitoring and control over the quality and freshness of food in a convenience store, operators currently tend to employ one of two methods: manual monitoring by employees or use of controls that are part of larger HVAC systems. Unfortunately, neither method is 100 percent reliable and easily lends itself to mistakes, misreporting and compliance problems.
In order to meet the back-office demands of expanded foodservice offerings, operators will, out of necessity, seek out better technology to ensure food quality for their customers, protect their business and meet Hazard Analysis and Critical Control Points guidelines.
This is where cloud-based foodservice monitoring comes into play. By offering continuous monitoring and recording of cold storage and preparation equipment, operators can use cloud-based foodservice monitoring data to analyze performance and identify degrading equipment before a complete failure occurs, thus saving thousands of dollars in inventory and emergency service calls. Additionally, cloud-based continuous temperature monitoring enables operators to better maintain safe temperatures using as little energy as possible, offering a significant reduction in energy costs.
Just as convenience store foodservice experiences an evolution, the world of payments is undergoing an unprecedented wave of innovation, especially in mobile technology. However, the question many convenience store and other retailers ask is: Which option is right for my business?
Currently, there is a glut of offerings in the marketplace, but there is simply not a clear winner among consumers as most still cling to traditional methods of payment. Because of slow consumer adoption, retailers are also challenged with respect to implementing mobile payment solutions at their point-of-sale.
According to Berg Insight, the mobile wallet market will reach $35 billion by 2017. A segment of this is likely to come from the convenience store industry, but it will still be a small percentage of transactions in comparison to credit and debit cards.
So, what will it really take for consumers to swap cash and credit cards for their smartphones, and for retailers to meet the demand? Because many mobile solutions either aim to benefit the consumer or the retailer, rarely both, one of the best ways to combat this challenge is to look for solutions that provide incentives and additional value for both parties, such as combining innovative loyalty and reward programs with mobile payments and applications. Integrating loyalty and personalized applications with smartphones will be the true driver of mobile technology in the convenience store space.
Operators looking to invest in any mobile payment or loyalty solution should ensure they have a viable and usable solution that allows them to meet Payment Card Industry compliance, expand their offerings, increase their bottom line, stand out from the competition and, most importantly, meet the demands and needs of their customers. In this chicken or the egg situation, it’s important to note that consumers will only be sold on the concept of mobile technology when retailers are as well.
In-Store Network Technology
As c-stores become even more reliant on technology to facilitate in-store traffic, many operators will come to the realization they need to upgrade their infrastructure. By investing in a sophisticated managed network, operators will increase their efficiency, ensure security, save time and money, remain competitive and, ultimately, increase their profits.
With cybercrime running rampant, network security is of utmost importance. First, each operator should determine what security features they need to protect their business from threats such as skimmers and hackers. This is where the expertise of a network provider can be crucial. Second, they must ensure their network complies with all Payment Card Industry Data Security Standard requirements and that the cardholder data environment is segmented from the rest of the network for greater security. Operators should also establish the right firewalls, as well as a system that logs and monitors all network events.
Lastly, c-store operators must educate themselves on the U.S. implementation of EMV (Europay, Mastercard and Visa), a smartcard standard for secure debit and credit card payments. EMV chip-based payment cards contain an embedded microprocessor and are protected by various security features. Although not mandated, the recommended deadline for implementation begins in October 2015 for in-store transactions.
The Bottom Line
The key to becoming a convenience store of the future lies in setting priorities; understanding market conditions, customers and business environments; and ensuring each and every technology investment solves a key problem. Because of the number of technology partners vying for a piece of the c-store pie, operators have the luxury of evaluating and piloting different solutions to ensure they are getting the best possible return on their investment.
By Michael Youngkin, Heartland Payment Systems Inc.