Technology continues to shift power to the consumer.
The National Association of Convenience Stores held its annual conference in Atlanta this year. The NACS Show gives the industry a chance to showcase the latest and greatest in thought leadership, products, services, and solutions designed to advance convenience and fuel retailing. Prior to NACS, we wrote about The Future of POS Systems, which was a primary topic for retailers and solution providers. If you haven’t already, check out that piece as well. Here’s a brief recap of the channel-specific trends we witnessed during the conference.
The NACS Show served to reinforce that consumer expectations are increasingly high when it comes to convenience. Near instant gratification is becoming second nature, putting stress on retailers to reduce friction in the shopping experience. These demands are driving innovation in POS solutions. “As the consumer demands more at a faster pace, retailers are forced to evaluate their technology infrastructure and partnerships to find ways of implementing new technologies more quickly and securely,” commented Gabe Olives, Impact 21’s Chief Information Officer. At NACS, education session attendance and booth traffic for technology providers was extremely high as retailers and industry stakeholders looked to understand current POS functionality as well as the innovation roadmap.
“As the consumer demands more at a faster pace, retailers are forced to evaluate their technology infrastructure and partnerships to find ways of implementing new technologies more quickly and securely.” —Gabe Olives, Chief Information Officer, Impact 21
Due to the general dissatisfaction that US retailers have with the pace of innovation from the current convenience channel POS providers, many retailers are evaluating their current technology infrastructure. As a result, international POS players believe the US market looks to be an attractive opportunity. These players are trying to take advantage of their experience in fuel, payments and other functionality to appeal to US retailers.
To make matters even more interesting, incumbent POS providers in other US retail channels are attempting to push into convenience and fuel. This effort hinges on developing an approach to managing or integrating fuel transactions and bears watching.
Application programming interfaces (APIs) were an active point of discussion leading up to and during the conference. Industry standards bodies, including Conexxus and IFSF (International Forecourt Standards Forum), are trying to garner buy-in support from solution providers and retailers for the creation of APIs to support an interface layer. The goal would be for backend processes to leverage their APIs through a secure interface layer using industry standards. With this approach, the POS would potentially become just one of the interfaces in the layer instead of the technology hub. In order to enable faster speed to market of innovation, standards bodies are pushing for a strategic approach on the development of these industry standards.
While we cannot predict the speed of adoption for the interface layer, the market certainly appears to be moving away from comprehensive solutions managed entirely by POS providers.
Looking ahead, as the interface layer comes to fruition, the convenience store channel will have standards in place and a clearer path to innovation. That will accelerate a strategic shift among industry players. Retailers will see a significant increase in flexibility, essentially being able to pick and choose their solution providers versus being tied to one or a select few solutions. This will create differentiation opportunities for progressive retailers that can strategically leverage technology to help drive the customer experience. The added flexibility will require a more strategic and proactive approach to technology solution management than is required by single-source solutions that are prevalent today. As a result, many retailers at least in the short to intermediate term may choose to stick with comprehensive solutions. This will create a bifurcated market for both retailers and technology providers.
POS providers will have to evaluate how they fit in the new future state. Some will continue to push comprehensive solutions and focus on hardware/software sales. Others may shift to more of a cloud-based model and abdicate certain portions of the POS environment that were not as profitable or not a core competency. The decision has big implications for their revenue and support models.
Future State Benefits
Long-term, as the standards-based interface layer materializes, we will see the virtualization of functionality that runs through the POS. This would yield myriad benefits:
- Speed to market
- Lower cost of integration
- Lower cost of technology management (backend IT support costs are lower)
- Improvement in Service Level Agreements (up time)
- A decrease in technical debt
While the benefits seem clear, security and privacy remain concerns. As solution providers and retailers develop APIs, they are opening their technology and data to third parties which involves a degree of risk that needs to be mitigated.
We expect standards bodies and industry players to continue to employ best practices to work through security concerns and move the market to an API-based interface layer that provides a flexible, robust and secure environment that moves the convenience channel forward.
We will be watching this space closely. We look forward to attending the NRF Big Show in January to gather and share additional insights on the future of POS systems and other retail technologies. Don’t forget to check out our previous article on The Future of POS Systems.
Chief Information Officer
Gabe Olives is a POS and payments guru and an undeniable industry expert in the convenience channel for technology, fuel management, legislative affairs, POS/BOS and payments.
Chief Technology Officer
Through his 40+ years in the retail industry, over 30 of them in petroleum/convenience, Chuck has become an expert in the world of retail IT.