At a time when convenience and one-stop shopping are king, it's no wonder why many retailers have installed gas pumps next to their stores.
Kroger Co., Cincinnati, operates more than 300 fuel centers, including outlets at its Denver-based King Soopers. Brookshire Grocery Co., Tyler, Texas, opened its first fuel center in June 1995, and now sells gas next to 56 of its 152 stores in Texas. Pittsburgh-based Giant Eagle entered the fuel business in July 2000, and today operates outlets alongside 13 supermarkets in Pennsylvania and Ohio out of its total store count of 213.
These retailers and others around the country said they will continue to add fuel outlets where they make sense. Meanwhile, they will enhance the offering so that swiping the loyalty card at the pump or buying certain products in the supermarket earns a discount off a gas purchase.
But making the fuel business successful requires more than retailing vision and marketing savvy. The right technology infrastructure has to be in place to account for fuel sales efficiently and to dole out appropriate incentives. All of this is easier said than done.
"You have a POS system that pumps and sells gas, and then you have a POS system inside the grocery store," explained Dave McGeary, retail technology adviser for Giant Eagle. "You're trying to interface two distinct technologies that prior to this have never really interfaced. The fuel POS vendor needs to learn something about the grocery POS vendor, and vice versa. Making the two systems interface is the technology hurdle."
Indeed, experts at NCR Corp., Dayton, Ohio, said the communication of information between the fuel outlet and the supermarket typically has been "loosely coupled." In these scenarios, fuel outlet transactions are downloaded to the store's primary POS platform at closing or at other times during the business day. In many cases, this is a manual process. But retailers prefer a "tightly coupled" communication interface for the entire system infrastructure.
Giant Eagle is evaluating three solutions to find the "most effective and reliable" platform, according to Russ Ross, the chain's senior vice president of strategic planning. "We've been experimenting with various platforms: One station is straight-fuel point of sale from the pump vendor, some stations have a POS system operated at the pumps and another POS system for everything going directly to the store, and another station is trying to do both with one point of sale," he said.
Hardware and software vendors are now offering solutions to upgrade the technology infrastructure. In general, they aim to integrate the POS of the fuel outlet with the supermarket. NCR, for example, approached the fuel business in supermarkets by working with several partners who know the fuel industry. The result is POS software that helps retailers manage fuel sales better as part of their overall store operations.
NCR partnered with Dallas-based ACS Retail Solutions to offer fuel pump management as an extension of NCR's Advanced Store portfolio of Microsoft Windows-based POS solutions. The Web-based application allows fuel outlet sales to be processed automatically as they occur. At the same time, item and store control information flow seamlessly between headquarters, the store and the fuel outlet.
"We developed a touchscreen interface with a couple of unique features to speed up the process," explained Rock Wight, director of product and solution marketing at NCR. "We were able to minimize the hardware cost because, in an on-premise fuel outlet, we connect to the store server. We don't have to have additional servers in the store." C.C.S.I. Tech has helped grocery retailers put together the requirements and the plan for their first fuel sites, as well as formulate a long-term road map to install as many sites as they want, explained Dickson Perry, president and CEO of the Irving, Texas-based company.
The firm integrates the dispensers and card readers at the fuel site and ties that to the supermarket. Its focus has been on the IBM 4694, the POS terminal. Two of the company's grocery customers are Safeway and Publix Super Markets.
"When you buy gasoline," Perry said, "the integration we are able to do breaks it down such that as a consumer, whether you're buying bananas in the store or you're buying fuel from the fuel site, at the end of the day for the reporting purposes, it all comes through the IBM 4690 [the server in the back room] as another product sold in the store. "Previously, people would have the IBM platform running in the store. Then they'd put in a fuel control unit, and they would run them side by side," he continued. "If you do that and you don't integrate, you're essentially managing two different operations."
Perry said his fuel management solution saved one retailer $100,000 a month by integrating EFT transactions into the enterprise switch. Beforehand, the retailer was going out to a separate processor and paying a much higher rate because the transaction couldn't be consolidated into the supermarket's overall volume.
"For another customer, we integrated the whole EFT system into their loyalty database of eight million names," said Perry. "They're out there literally marketing -- direct-target marketing by customer -- including price on the fuel, promotions, cross marketing between profit centers, as well as 10-inch VGA screens on the dispensers where you're getting targeted advertising. When a customer slides a loyalty card, we know who they are and we start shooting ads and content to them."
Adding gas-related loyalty and incentive programs to fuel sales is gaining momentum around the country. Some of the well-known companies offering promotions are Catalina Marketing, St. Petersburg, Fla., and Fuel Rewards, Dallas. The former program offers coupons at the checkout register when certain products are scanned. The latter promotion generates free gas vouchers at checkout when specific purchase minimums are met. Fuel Rewards is offered in more than 500 grocery stores operated by such retailers as H-E-B, Meijer, Brookshire and Stop & Shop. The free gas vouchers are redeemable at any participating grocer's on-site or fuel partner gas stations.
"The integration of in-store sales with gasoline savings that are subsidized by the food wholesalers is a powerful customer offering," said Joe Leto, founder and president of Denver-based Energy Analysts International. "Significant gasoline savings provided as a reward for in-store purchases provides a very strong offering for building customer loyalty and increasing store traffic."
The level of technology involved depends on the promotional vehicle, and not all retailers selling gasoline have made a substantial investment in fuel marketing.
"It's a software issue," said Sam Anderson, spokesman for Brookshire. "We have the necessary software to accept credit card transactions in the fuel centers. We do not currently have the software to be able to use our loyalty card at the pumps. Obviously, the Fuel Rewards coupons are generated from the purchases inside the store, and printed at the bottom of the regular sales receipt. Those coupons are accepted at the pumps, but we don't have the ability to scan a coupon at the pump. There is a kiosk at the fuel center that is staffed, and coupons can be redeemed there where customers pay [for fuel]."
Giant Eagle has experimented with a few promotions tied to fuel sales. For example, it offers Catalina coupons that give a discount off gas at the pump when certain products are bought in the supermarket.
"We plan to continue to roll out existing marketing programs, plus looking for additional ones," said Ross of Giant Eagle. As with transactional systems, the integration of the fuel station point of sale back to the POS operating in the store is needed to do other types of loyalty programs, he said, "whether it's a continuity program where you buy so much gas and get so much off a product, or you fill up 10 times and get a free product, or buy certain items in the store and get a discount at the pump, or spend $100 in the store and get five cents off a gallon of gas. Those are the types of things we'd like to do, but technology inhibits us from doing them."
Radiant Systems may have an answer with a fuel solution that integrates with the IBM ACE platform, enabling grocery and other high-volume retailers to extend targeted loyalty programs and customer service to the fuel island.
"We have an integrated POS solution that runs the entire fuel outlet," said Scott Kingsfield, general manager of the petroleum, convenience store and grocery group for the Alpharetta, Ga.-based company. "We integrate back into the grocery store. From a customer's perspective, every bit of functionality you get inside the store, you also get out in the fueling kiosk. That's what most of the grocers' vision is. They want a consistent consumer experience."