Get Smart: Use of Contactless-Payment Systems Growing
A berdeen Group of Boston released a benchmark report on the adoption of contactless-payment systems in the retail industry. The findings were based on extensive analysis conducted in September and December 2006 of the procedures, experiences and intentions relative to contactless-payment systems across hundreds of retail enterprises.
The study concluded that the adoption of contactless-payment systems, sometimes called smart cards, has reached the “tipping point.” Key findings of the study included:
Within 24 months, 58% of respondents indicated they will have a contactless-payment system in place within their organization;
Nearly 30% said they had already adopted or deployed a contactless-payment system;
Retailers said their top concerns for deploying contactless payments were lack of consumer adoption and potentially poor performance of the devices and technology supporting contactless payments; and
Challenges cited paralleled the concerns, namely integration with POS systems, training checkout associates and developing consumer enrollment to justify the investment in contactless systems.
The report, which can be acquired through www.aberdeen.com, highlights recommendations for and expectations for deployment, including: Retailers should test contactless payments in select locations for at least two quarters. They should expect to realize at least a 20% improvement in the throughput rate at the point of sale and a 10% improvement in customer satisfaction.
Alternative Online Payments
A number of online retailers are providing options for shoppers to buy now, pay later. Home Décor Products, NetShops Inc., Toshiba America Information Systems and the Sharper Image have begun to offer their shoppers a “Bill Me Later” credit-based payment option, facilitated by Omaha, Neb.-based First National Merchant Solutions. The “Bill Me Later” plan is designed for consumers who prefer not to divulge their credit-card information or who might not have a credit card on hand. After selecting the “Bill Me Later” option during the checkout process, shoppers receive instant credit to complete the purchase. A bill is issued in 14 days, giving consumers the option to pay in full or finance the purchase and pay through installments.
Similarly, online computer-hardware retailer TigerDirect has begun offering its customers an option to pay for purchases from their existing online bank accounts, the same way they might pay household bills by accessing checking or savings accounts through their banks’ Web sites. TigerDirect has partnered with MODASolutions of Philadelphia to provide the SECURE-eBill payment option. In a prepared statement, Tiger Direct CEO Gilbert Fiorentino stated, “The integration of SECURE-eBill’s credit card-free option is simply another great way to support our customers … and serve all online shoppers, while delivering the highest levels of security and fraud prevention with every transaction.”
New BOC Rule Alters Check Processing
The highly anticipated Back-Office Conversion (BOC) rule takes effect on March 16, allowing retailers to accept checks at the point of sale and convert them to electronic debits in a centralized location. Many retailers already convert paper checks to electronic transfers in a point-of-purchase (POP) process, but the new BOC rule is expected to provide greater efficiencies and reduce costs, particularly for stores with multiple checkout lanes.
BOC processing moves the electronic transfer from each checkout lane to a single “back-office” location, replacing the need for conversion technology at every POS terminal with one device in the back room. Additionally, the rules set by NACHA—The Electronics Payment Association differ for BOC vs. POP transactions. In POP transactions, each cashier had to be trained to obtain written authorization for the electronic transfer from the consumer and then return the scanned check to the customer after a transaction was completed. With BOC, the retailer retains the paper checks, simplifying the interaction between cashier and consumer.
However, BOC requires that a notice be posted at each POS location as well as printed on the customer’s receipt advising that the check will be converted into an electronic payment for ACH (automated clearinghouse) processing. Until Jan. 1, 2010, the posted notice must also contain an explanation that funds may be withdrawn the same day the retailer receives the check and the customer will not receive a cancelled check back from the financial institution. (For specific guidelines, refer to www.nacha.org or www.electronicpayments.org.) Under BOC, the retailer is required to maintain an image of the check for at least two years and is responsible for disposing of paper checks after the electronic transfer has been completed in the back office.
Home Depot Projects Lower Profit in 2007
Atlanta, The Home Depot Inc. said Wednesday it will pump $2.2 billion into improving its business this year even as it expects lower earnings and slim sales growth. Home Depot said that for fiscal 2007 it expects sales growth in the range of flat to an increase of 2%, a decline in comp-store sales in the middle single digit percentages and an earnings per share decline of 4% to 9%.
Including the effect of a 53rd week in its fiscal year, consolidated sales are expected to increase by 1% to 2%, and earnings per share are expected to decline by 3% to 8%, Home Depot said.
CEO Frank Blake told investors at Wednesday’s conference that like last year, “2007 also will be a difficult year.” But he said it will be a year of focus on Home Depot’s priorities and a year with “hopefully less noise.”
The “noise” was apparently a reference to the investor furor over former CEO Bob Nardelli’s hefty compensation in light of the company’s lagging stock price. Nardelli resigned in early January after six years at the helm of the company. He took with him a severance package valued at $210 million.
To improve its business, Home Depot said it will invest $2.2 billion this fiscal year in key priorities, including the opening of 115 stores. The investment includes $1.6 billion in capital spending and $600 million in expense.
Home Depot said it will recruit master trade specialists, simplify its staffing model, use more technology to aid customer service, and redesign employee compensation and reward plans. It also will invest in new merchandise and review its pricing strategies. Additionally, the chain will spend money on customer loyalty programs, direct-ship programs, credit programs and other specialty sales initiatives.
Federated Plans Name Change
New York City, Federated Department Stores on Tuesday said it would ask shareholders to approve changing the company’s corporate name to Macy’s Group Inc. A vote to amend the corporation’s charter to accommodate the new name will be held in conjunction with Federated’s annual meeting on May 18. If approved, the company will be known as Macy’s Group Inc., effective June 1. The move comes on the heels of the company changing most of its store nameplates to Macy’s.
“Macy’s Group is the appropriate name for our company, given that about 90% of our sales involve the Macy’s brand. That said, Bloomingdale’s is—and will remain—a very important part of our company,” said Terry J. Lundgren, Federated’s chief executive. Federated Department Stores also said stronger sales at established stores and lower costs drove a 5% rise in fourth-quarter earnings. For the quarter ended Feb. 3, net income rose to $733 million from $699 million the prior-year period. Sales fell 4% to $9.16 billion from $9.57 billion, as the company shuttered 80 “duplicative” store locations. Comp-store sales rose 6.1% in the quarter.
During the quarter, Federated lowered its selling, general and administrative costs 11% to $2.31 billion.
The company also announced a $4 billion increase to its stock buyback program and said it will immediately repurchase 45 million shares for $2 billion under the plan.