Mobile Anarchy

How smartphones may blow up the way customers shop, pay and fall in love with your c-store brand

By
Angel Abcede, Senior Editor/Content Development Coordinator

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Rethink Control

Cumberland Farms’ success comes amid industry confusion over the many mobile wallets that have emerged. Cumberland actually started out using San Jose, Calif.-based PayPal. After it was launched in March 2012 at 50 Boston-area stores, initial response was good enough that the company extended the offer to all 200 of its stores in Massachusetts after three months.

Granted, little effort went into advertising, but all in all the usage hit only 1% to 2% of the test stores’ payment mix. “The Cumberland-PayPal launch attracted a lot of attention in the tech and industry media,” Banks says. “But it didn’t have the interchange savings and resulting gasoline discounts to gain widespread consumer adoption.”

After evaluating the project, Cumberland came back with an automated clearinghouse (ACH)-based solution, which ties mobile payments to customers’ bank accounts. Cumberland Farms partnered with Coconut Creek, Fla.-based National Payment Card to develop an industry-first, fully integrated mobile-payment product based on ACH transfers. The solution bypasses traditional credit-card  rails and avoids high interchange fees, with the resulting savings allowing for the much-desired 10-cent discount.

Whether PayPal will factor in down the road remains a question, but Banks believes the company has hit on a winning formula.

Rethink Discount

To embrace mobile wallets, customers want a sizable discount first—that alluring hook—and convenience second, says Banks. The chain’s survey reinforced this message, with two-thirds of mobile-paying customers acknowledging the 10-cent discount hooked them to sign up and use the option, with about a third saying convenient payment method was the top motivation.

The one-two punch appears critical in driving consumer behavior. “People are getting more comfortable paying by using [mobile] phones in general,” he says. “But they’re really looking to save money on gas.”

Retailers’ desire to jump into mobile is palpable, with many initiating loyalty and applications (apps) offering reward points, location finders, pricing information and notifications of in-store specials. Some have followed Cumberland’s example and have taken on mobile payment, including Flash Foods, Waycross, Ga.; Maverik, North Salt Lake, Utah; Parker Cos., Savannah, Ga.; and Spinx Cos., Greenville, S.C.

In most of these cases, mobile payment goes hand in hand with passed-along fuel discounts, something that may not continue in the long term, according to Gray Taylor, executive director of NACS’ technology arm, the Petroleum Convenience Alliance for Technology Standards (PCATS), Alexandria, Va.

Though not completely in effect today, victories that accompanied the Durbin Amendment, enacted last year, will eventually level the financial advantages that going through ACH processing provides. However, Taylor says, that doesn’t negate the effort, referring to the audience these retailers would have accrued being first movers in their markets.

“If and when the pricing cues go away, then it’s about the number of eyeballs you have,” Taylor says. “At that point, they’ll need to come up with a different value proposition. But if they succeed, they’ll have the ability to keep customers on their mobile platforms.”

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