Implementing EFTPoS at Store Level

The data and quotations used in this chapter are a result of a series of interviews with a selection of large and small retailers 1 carried out during 1994 and 1995 and through comments made at key industry conferences. The retailers listed in figure 8.1 were contacted at store level and head office level where applicable.

They were first presented with a selection of questions to establish their position in the retail market and to identify that the most appropriate member of staff was being interviewed EFTPoS and bank card technology was then discussed in as much depth as possible. A sample report used in these interviews is included in Appendix II.

Figure 8.1 Interviewing the retailers at shop floor level.

Name of Store Location Turnover

Independent Grocer Brighton £ 200.000

Independent Grocer Brighton £ 300,000

Independent Newsagents Brighton £ 350,000

Group Newsagents Brighton £ 500,000

Independent Chemist Brighton £ 650,000

Group Off Licence Brighton £ 800,000

Independent Supermarket Brighton £ 1,400,000

Independent Garage Forecourt Brighton £ 3,000,000

Group Supermarket Brighton £ 3,500,000

Group Supermarket Brighton £12,000,000

Group Supermarket Brighton £19,000,000

Group Supermarket Brighton £22,000,000

Group Supermarket Brighton £27,000,000

Group Supermarket Brighton £30,000,000

Source: G Boxall, Open University

Consider the basic needs of the retailer. According to Sainsbuiys, their IT managers are looking for a confidence in the level of service and a relatively fast response for on-line credit authorization through the EFTPoS terminal. Card technology is not a key issue, although the larger retailers are resigned to the smart card for future implementation, so long as they can work closely with the banks to please their common customer.

The furniture retailer, MFI, has four main considerations. The training of part-time checkout staff is a concern, being repetitive as new systems are constantly being introduced and revised by the technology suppliers. The physical lack of space at the EFTPoS also effects the customer image of efficiency. The reconciliation process at every store, over 200 stores, each having between 8 and 10 terminals already takes too long and the process would seem over-complicated for the resulting benefits to the retailer. During a presentation made by MFI at the Retail Solutions Conference, the subject o f terminal upgrade was only briefly mentioned, although well emphasised.

’with over 2,000 terminals to upgrade, we would hold back on changing over to a new EFTPoS system until our next upgrade or the banks would have to pay!'

Ideally, MFI would like to see full implementation with existing EFTPoS systems, upgrading across the country on a phased basis. Most large retailers, including MFI, expect the latest EFTPoS system to remain in use for at least 5-7 years, with the banks and technology suppliers driving new technology forward.

In chapter six, I introduced the ‘Shoppers Concern Survey’ which was carried out by Lehman Brothers International. The same list of features was presented to a small number of retailers - whilst this cannot be assumed to be representative of the LTC as a whole, there was a m^or difference between retailers and shoppers (figure 8.2). Retailers put product range and product layout above the need for a fest checkout and low prices. However, they do recognise the needs of the consumer, with each of the larger supermarkets claiming to have the fastest checkouts.

Figure 8.2 Shoppers and Retailed Concern Survey

Importance 1992 Shoppers 1994 Retailers

Concern Survey Concern Survey (fi'om chapter six) (my research)

1 St Friendly staff Friendly staff

2nd Fast checkout Product range

3rd Low prices Product layout

4th Product range Fast checkout

5th Product layout Low prices

Source: Lehman Brothers (1992) / G Boxall, Open University

Even within the large supermarket, the need for a fast checkout is 4th in the stores requirement. A store manager of Sainsburys explains that

'it is not so much a fast checkout that is required, but a fast reaction time for us to have more staff working during busy period. Queues are traditionally an English problem, and we want to reduce these as much as possible. Technology does not necessarily help us to do this'.

Within the larger retailers, all decision making is handled at head office. At store level, even the most senior staff, store managers etc., have only a limited knowledge of the retail banking industry. None of the twelve retail managers questioned directly had heard of APACS, The British Retail Consortium or Mondex. The large retailers (supermarkets in this respect) have high expectations from their EFTPoS hardware as detailed by one large

systems supplier.

They [The Retailers] would write-off the investment over a minimum of 5-7 years, with a guarantee that we can continue to supply parts and support for an additional 10 years. There are two discrete processes involved. A cross-functional evaluation team of perhaps 10-20 engineers and administrators will first draw up a specification of the requirements. This is usually a hybrid of what they have seen on the market and combines the ideas of many manufacturers. This initial process takes typically 9 months from inception to the second stage which is the competitive trial. This involves equipment from at least 2 preferred suppliers and can last a further 12 months. At this stage we still have to get final approval at board level.

Up until recently, staff at shopfloor level were not involved. They now form part of the evaluation team.

Open systems are high on the list of priorities, replacing the traditional proprietary route.

Advantages of open systems considered important by the large retailers are

1. Increased choice in linking hardware from different suppliers together.

2. Reduced costs in systems development.

3. Greater choice of application software for retail application.

4. More choice for servicing contracts from more than one supplier.

This is not good news for the EFTPoS system suppliers as their products become a general commodity with increased competition and less up-front funding for the development of new technology.

APACS (1995, p4) estimate that here are approximately 400,000 retail outlets in the UK which can accept some form of plastic card and according to APACS, by the year 2000, a debit card will be used in preference for almost all retail purchases, about 3 billion transactions every year. This is already happening within the larger supermarkets.

Payment by debit card at Sainsburys is increasing at every store throughout the country, and in one store increased from 17% to 50% of transaction between 1992 and 1995. APACS predict that cheque payment will remain predominantly non-retail. Within the smaller retailers and independents, the question of Who Pays?' for new technology still remains intractable as far as debit cards are concerned. In the past, in particular during 1987 - 1992, this was the major concern of the large retailers. As each negotiated with the banks and came to an agreement, otliers were obliged to follow, offering services such as CASHBACK as an incentive to capture more customers and recirculate the large amounts of cash generated at the checkout.

Clough (1994) suggests that

'CASHBACK is less controversial than ATM withdrawals because of signature verification (with all its faults) and because so many stores have in-house security personnel and CCTV cameras. It is cheap, efficient and popular and it keeps the cash in circulation rather than channelling it back to the banks.

Importantly, it is not haunted by the spectre of phantom withdrawals.

In the past, large retailers had the advantage of buying power and could negotiate good clearing rates based on the volume of transactions and by using their financial 'muscle'.

Small, medium and independent retailers were forced into buying or leasing their EFTPoS hardware to accept debit cards - with the merchant service charges being paid on top of these up-fi-ont costs. According to a senior manager at Tesco "the larger retailers are not able to make any further savings on EFTPoS transactions, since the merchant acquirers have reduced their margins to fund the corporate business'.

The smaller retailers are NOT proactive, but will eventually react to long term change. The banks and building societies will have to provide EFTPoS terminals to smaller retailers at a very low cost or even free of cost, if debit or credit cards are going to replace cash at every retail outlet. Small retailers find cash useful. Part-time staff are paid in cash, in many cases avoiding the administration of PAYE and stock is often purchased on a just-in- time basis using cash to obtain the best discounts. None of the retailers interviewed were concerned about the cost or security problem of banking cash receipts. The attitude appears to be that the costs would remain the same whichever method of payment is preferred and that there are so few cases of burglary with violence that concern cannot out­

weigh daily administration convenience. One independent garage forecourt clearly points out that 'our insurance would cover any losses if we were hit - nothing has happened in my nine years with the company!'

The monthly trade publication ‘Independent Retailer’ suggests that Britain’s small retailers will suffer badly in today’s uncertain business climate if they do not take advantage now of the benefits modem technology can offer. It suggests that a fully integrated EFTPoS system bring immediate benefits in terms of financial control as well as allowing payment by all types of debit and credit card. It provides accurate daily stock figures allow ing retailers to

accurately identify the popular faster moving stock lines and take account o f seasonal variations. The small retailers still need convincing.