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CSD: What's Your Solution?

March 18, 2009

By Howard Riell

Through a special arrangement, presented here for discussion is an excerpt of a current article from Convenience Store Decisions magazine.

New technology continues to improve back-office systems, giving c-store operators better business performance and putting them in an ideal position to predict future trends. Chains not investing or monitoring these emerging technologies will find themselves behind the competition.

At Mansfield Oil Co. in Gainesville, Ga., having their system set up on a virtual server provides a view of daily sales in real time from anywhere in the world.

"If you're shooting for a target of 28 percent or 32 percent inside-store gross profit, it allows you to stay at that level," said vice president of retail sales and operations Rick Cosmer. "If a vendor comes in and changes prices on you, it will tell you immediately - as soon as you check it in - that your gross profit went down because your vendor changed his price and maybe didn't tell you. It also tracks whether your store employees are marking the product up correctly when they put them on the shelves."

Casey's General Stores in Ankeny, Iowa, has been using a Retalix system since 2002, in part because it permits prepared food items to be easily selected on a touchscreen. Staffers now can also use a handheld device to scan inventory, accept products from DSD vendors and order groceries.

"Like any system there are things you want to add to it - new reports, new enhancements - and we work with providers on adding them or developing them as needed," said Rich Schappert, senior director of information technology. "Innovation also comes from vendors, driven by their experience with various users. It's a collaboration."

Alon USA, for example, is currently working with a combination of back-office components to gather information from its 306 stores.

"Right now we're working on the consolidation and uniform application of point of sale," said Kyle McKeen, president and CEO of the Dallas-based oil company. "It's a complicated process since you have to work additional systems in order to reconcile and keep your categories consistent. You have to essentially have a mapping-reconciliation process to discern your product categories. It's not a winning long-term solution, or one that we intend to keep long term."

How long the conversion process will take is still to be determined, though Mr. McKeen said it will probably be completed some time this year. Coming up with the total price tag for the consolidation is difficult, he added, since technology always remains a moving target.

"We're not continuing on with 2004 technology. We have upgrades that we may or may not do, with both PDI and Retalix," he said. "The decision matrix changes from year to year. And so today the question is, 'Do we want to continue with the existing technology we have in our stores and just make it uniform? Or is it time for more dramatic change?'"

Discussion Questions: How do decisions around retail technology differ for c-stores versus other retailers? What should drive the decision to upgrade for c-store operators?

What's Your Solution? - Convenience Store Decisions

Discussion Questions

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Is inventory and sell-through accounting even more important for c-stores than retailers in most other channels?

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Comments:

It's been said, retail is retail and while that is true, there are certainly differences between the needs of various channels. C-stores used to be simple businesses that primarily sold replenishment goods to customers when other stores were closed. Today, they sell fuel, provide financing (credit card sales), entertainment, are involved in the gaming industry (lotto/lottery), foodservice (ranging from roller grill items to full blown QSRs), foodservice beverages (coffee, fountain, frozen carbonated drinks, cappuccino, etc.) alcoholic beverages (requiring technology to verify IDs), snacks, services (ATM, check cashing, etc.) and occasionally, even some replenishment goods.

Making it even more complicated, all of this is generally done with a limited store staff, which turns over on the average of once a year. Additionally, unlike some retailers, c-stores still get a great deal of their merchandise from DSD vendors.

One of our internal conventional wisdoms is "how you keep score determines how well you play the game." It is vital for today's c-store retailers to have the right systems in place to allow them to monitor inventory, record sales, do analysis on market baskets, etc.

System upgrades are not always the decision for the retailer. For example, as with anyone handing credit the decision to upgrade systems is often governed by the Master Card/Visa networks as evidenced by the changing PCI standards. Having to spend money to do this means other IT systems may go wanting. Overall, in our experience, too many c-store retailers see system upgrades as something that doesn't make them money and wait too long to do so.

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Steve Montgomery, President, b2b Solutions, LLC

Technology, not automation, has to be the key to every organization's success in today's changing times, not just C-Stores. As everyone strives to do more with less (which by the way, is against the laws of physics), we need to make sure to add something that allows us to increase the efficiency and effectiveness of what we are doing.

C-Stores with their thousands of transactions a day and a limited number of employees are in one of the best places to capitalize on technology to give them better control and help them to stay competitive. But there are three questions that need to be asked every time we look at implementing another change.

1. Does this make good sense from an overall business perspective?
2. How much is the pain of change going to cost us?
3. What are the hard dollar ROI savings?

Just remember two quotes from Edward Demming:

"The system will always give you 100% of what the system is designed to give you."

"94% of failure comes from systems, not people."

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Mel Kleiman, President, Humetrics