Evan Schuman's StorefrontBacktalk

Subway, the 31,000-store sandwich restaurant chain, has agreed to be the latest guinea pig for Visa’s contactless payment program. Subway confirmed Thursday (April 30) that it will soon make the payment technology available to “participating” locations in Canada. Subway has about 2,400 stores in Canada, many of which are franchised.

Typically, statements announcing such deals (which, in this case, included Subway’s acquirer for its stores in Canada, Chase Paymentech) feature a canned quote from an executive with the chain, praising the vendor for its wisdom. In this case, the quote provided by Subway was anything but warm.

A self-service printer that accepts payment cards is not extraordinary, but Office Depot is taking the next step by enabling customers to use their loyalty cards, gift cards, coupons and tax IDs.

With the business clientele, the ability for self-service systems to award points for purchases is important, but not necessarily as important as allowing customized screens delivering different options for employees of different companies, said Jay Eisenberg, a senior marketing director for the $14.5 billion 1,713-store office supply chain. The trick was in how to identify the customer given that the printer was initially only outfitted with a magstripe reader.

The developing retail markets of China and India are hungry for new point-of-sale units and that’s making the Asia/Pacific region one of the few places in the world likely to see any near-term increase in POS shipments, according to the IHL Group. The analysts portray their findings as good news for POS makers, especially given the stagnant POS market most everywhere else (including Japan).

Although IHL’s projection of “strong growth” for POS units in China and India should not have an immediate impact on POS pricetags, a secondary effect just might.

Starting in February, Borders quietly changed how it handled its coupons, changing them from being available for both in-store and online orders to solely in-store. In and of itself, that’s not so surprising, especially given that the $3 billion chain that month all-but-halted meaningful E-Commerce investments. But the move to push all sales into the stores runs counter to customer desires, which is rarely a good longterm strategy.

But that may be precisely the point. With the economy still scraping bottom, many retailers and E-tailers are having to craft strategies that are designed to be very temporary and very emergent. There’s a major E-Commerce vendor, for example, that is out there trying to convince retailers to halt efforts to bring in new sales, proposing that they instead force all efforts on the installed base. This forces us to consider three distinct issues.

Riding small CPUs enabling much smaller form factors, Motorola on Tuesday (April 28) a 1.8-pound fixed RFID reader measuring 7.7 inches long, 5.9 inches wide and 1.7 inches deep. The vendor described the FX7400 series units as being “less than half the size of traditional fixed RFID readers, making it ideal for retail stores and other customer-facing environments.”

But analysts were less than impressed, pointing out that the Motorola units were actually larger than many other major RFID readers today, despite being smaller than other Motorola RFID readers. “I definitely classify this as ‘ho hum.’ ThingMagic and Impinj as well as some others have much smaller form factors and more functions,” said Pete Abell, a longtime RFID analyst (used to be with IDC) who today works as an independent consultant.

Starbucks is boasting of a 60 percent redemption rate on a mobile coupon trial being done in Mexico, where customers send SMS messages to access 2D barcode mobile coupons. That is an unusually—suspiciously?—high redemption rate, especially for a mobile program.

“Every time you present your coupon, the offer would be modified, such as get a venti for the price of a tall, to make people come more often to the store,” said this story from Mobile Marketer. “The call-to-action urged consumers to text keyword STARBUCKS to short code 80080 to get a WAP link to download a buy-one-get-one-free 2D barcode mobile coupon. Starbucks is equipped with 2D bar code recognition software, so employees can read the mobile coupon directly from consumers’ mobile phones at the point of sale.”

J.C. Penney is the latest retailer to conclude that the deadly economy means that in-store must, for the moment, get unconditional IT priority. J.C. Penney CEO Myron Ullman was explicit about a change in tech priorities as he prepared for his shareholders meeting this week.

” I’m saying IT isn’t the back door. It’s the front door,” Ullman said in an interview with the Dallas Morning News. The story continued: ” Penney has decided dot-com isn’t the hub anymore. It has put information technology at the same level with store operations, merchandising and marketing when planning the company’s future.”

The neighborhood physical video rental business is in a very difficult position these days. Blockbuster is trying to survive with a kiosk strategy, courtesy of an NCR acquisition of a large operator of video rental kiosks.

But is this too little, ludicrously too late? A nice discussion happened Wednesday (April 23) at RetailWire about the Blockbuster strategy. My favorite comment comes from author Ryan Mathews from Black Monk Consulting: ” Blockbuster stumbled because the notion of physical access became less important in the video rental business. Does creating another physical solution change all that? I don’t think so.” The discussion is worth a read.

The reason that so many PCI self-assessments are wrong is that they focus on the mainstream business processes of the company. They often ignore a lot of “back-channel” or “just-in-case” practices that result in card data coming into the company not protected by the various PCI and other data security measures to protect more mainstream applications, data repositories and processes.

GuestView PCI Columnist David Taylor said the problems crop up in easy-to-miss ways and he rattles off three of his favorites.

Washington State’s governor has signed into law one of three bills relating to RFID and privacy, a measure that prohibits, with a dozen exceptions, the scanning of RFID chips by anybody other than the company that attached them.

The signed bill includes a number of significant changes to the initially-proposed measure which was denounced in January by Dan Mullen, President of the Association for Automatic Identification and Mobility (AIM), as potentially being “traumatic” to retailers and consumers. Mullen, according to an RFID Journal report, believes the enacted version is “pretty reasonable” because it focuses on banning the surreptitious scanning and reading of RFID chips, as opposed to the devices directly.

This is one of those end-of-an-era markers. A 31-store Colorado grocery chain with stores in Colorado, New Mexico, Texas and Utah is claiming—and it seems like a very plausible claim—that it is the first chain to go entirely bag free, insisting that customers use either reusable cloth bags or less convenient cardboard boxes. To be fair, the Natural Grocers chain is an all-natural chain, which borders on being a healthfood chain, so it’s rejection of paper and plastic bags certainly may not indicate a national trend.

Still, the cost-savings above and beyond environmental issues are fairly significant, not to mention that packing cloth bags is likely to be slightly faster as they are sturdier and can hold more. But it also discourages last-minute shopping, at least at that chain.

This is one of these ideas that could work extremely well in a very limited set of circumstances. A whisky company opted to put up a billboard in a densely-populated and traveled urban area and wanted it to change–very significantly–with every person who saw it, tailoring to that person. The problem is that it can’t scale, requires workers on site (and workers who can craft ad copy on the fly, with literally seconds to create) and is likely quite expensive.

Still, as this video of Jameson’s truly interactive billboard illustrates, the marketing tactic can break through the clutter of a message-laden environment. And it’s hard to argue with the potential of a billboard that–as shown in the video–hailed a cab for a prospect. But could it be practical for in-store use? Maybe at a large mall? And what of the flip side: Are there consumers who would be alienated by having such a public message directed at them? And what if it was connected with CRM, allowing for personalization beyond that which can be observed? In this day of digital messages overflowing consumers’ cellphones, Web screens and shopping carts, it’s absolutely a concept not be dismissed too quickly.

A grocery chain has gotten involved in a deal where it is sharing extensive POS customer data with a business that is marrying that data with those same consumers’ entertainment-watching history. The goal? To overlay the two to see what those consumers are buying after they watch certain entertainment shows or commercials.

In this particular effort, the retailer has chosen to mask the individual consumer identities—for now—and is trying to draw general conclusions based on the actions of people in that Zip Code. But the technology was there for them to tie everything back to the individual consumer, raising quite a few data and privacy strategy issues.

Grocery chains have for years struggled with self-checkout systems that couldn’t easily deal with produce, POS stations that simply couldn’t handle complicated coupons and barcodes that didn’t understand expiration dates. But in a move that many in retail IT see as the potentially biggest change in product labeling since the rollout of the UPC barcode 35 years ago, the GS1 DataBar is looking to sharply increase its retail presence as of January. Among the chains most vocally advocating for the advance are American chains Walmart, Winn-Dixie and Krogers plus Canada’s Loblaw.

At its core, the DataBar codes are today’s barcodes but are much more tightly packed with much more information. But not all of this transition will be akin to scanning sugar and spice. Most chains will have to absorb non-trivial costs to support the upgrades, a tricky move at a time of store closings and massive layoffs. Most product scanners built since 2000 are capable of reading DataBars but investments need to be made beyond just the scanners.

In a land “Beyond PCI,” there’s trouble brewing. Issues involving everything from tokenization to end-to-end encryption are being debated and the PCI SSC is hiring a consulting firm to look into the implications of these (and other) technologies and processes.

This all raises the issue of “should retailers wait for the PCI SSC to ‘bless’ or integrate so called ‘beyond PCI’ technologies into the standards?” GuestView PCI Columnist David Taylor’s answer is a profound “no.”

Execs at Domino’s Pizza learned a painful lesson in the power of Web video and social networks this week. Although the chain already understood the power of those new channels to sell product and boost brand loyalty, it seemed to have been offguard how those channels could just as easily halt sales and hurt brand loyalty. It also seemed stunned that the powerful national chain could be undone by a 10-minute effort from two low-level employees.

The story—deliciously told here by The New York Times—involves two workers at one restaurant that posted a video of them doing some impressively unsanitary things to a pizza before he was sent. See the picture accompanying this story? All I can say is that that had better be cheese.

Ran into a marketing exec who came up with a wonderfully different measuring approach for evaluating social networking sites. Understanding that social media is about influence, persuasion, he did a very informal study (resources: a pair of interns) of his targeted social site. The project was to count up every time anyone on the site referenced one of their brands and to note whether the reference was favorable, unfavorable or neutral.

After tracking that for an extended period and noting the ebbs and flows, he then ran a major campaign. But instead of looking at impressions, clickthrough, leads generated or any other typical Web metric, he simply repeated his study. The only test of a social site marketing campaign, he reasoned, is to see if it was changing the dialogue at all. Were his brands getting talked about more? And was it boosting his favorable and dropping his negatives?

The POS system is the Rodney Dangerfield of the retail IT world: It gets no respect. (Could have gone back yet further and said it was the Red Buttons of the retail IT world because it never gets a dinner, but that’s an even more obscure pop culture reference.)

Chains are just starting to see the business ROI potential of POS—especially when working with CRM—to fuel upsells and to legitimately increase loyalty. But few look at POS as a potential protector and a protector against some potentially very large expenses. Consider four items from the last few days.

Fighting a subpoena for CRM and POS data from the Los Angeles District Attorney, Macy’s attorneys are arguing that privacy expectations prevent them from revealing the names of their customers who purchased children’s jewelry made with potentially toxic lead. The D.A. argues that it needs the names so that the consumers can be contacted to try and stop the health threat.

The case raises many critical retail IT issues, including how private—or proprietary—the courts should consider data, including purchase histories from CRM/loyalty and POS payment files. Beyond privacy issues, such subpoenas could force retailers to publicly reveal that they are collecting and saving a lot more information than they want to disclose. There are also PCI implications, where a merchant could theoretically be shown to be saving prohibited payment card data.

Shoppers with RFID-enabled loyalty cards from a chain of Washington State grocery stores get their accounts automatically credited the price difference, plus 1 percent, if products they buy go on sale within a week of their shopping trips. Now there’s an incentive to use the cards. The program is being trialed at the Top Food & Drug chain, which owns 33 supermarkets in Washington and Oregon under the TOP Food & Drug, Haggen Food & Pharmacy and Larry’s Market names.

“If you buy milk for $4 on Tuesday and the provider sells it on Thursday for $3.50, you get an E-mail saying you’ve got fifty cents in your account based on the fact we put this on sale,” said Peter Gruman, president of Accelitec, a vendor involved in the program. “The next time the customer visits the store and taps his loyalty card at the POS, the cashier will see he has fifty cents credit and will ask if he wants to apply it to the sale or let it remain in the account.” The program also provides no-questions-asked automated refunds for products with quality problems. If a loyalty card holder finds the milk was sour, he can call the store and ask for a refund, which will also be credited directly to the CRM card.

Macy’s and J.C. Penney apparently let their lawyers loose on a recent batch of consumer coupons, with some wonderfully unintentionally humorous results. And The Consumerist, now owned by Consumer Reports, had more fun than any media outlet should be allowed to have. With Macy’s, it was an impressively lengthy list of exemptions that merited the attention.

The list of exemptions on J.C. Penney’s coupon was much shorter and they probably would have been left alone had some marketer not insisted in a bold coupon declaration of “No exclusions” right next to a healthy list of exclusions.

When Calvin Klein brands, the diversified apparel line that sold almost $6 billion worth of clothing last year for parent company Phillips-Van Heusen, launched its first E-Commerce site six months ago, it had to deal with the same channel conflict issues for any business so dependent on its retail distributors. But instead of seeing a lot of sales shift from in-store to online, it found an increase in revenue as younger consumers embraced the brand online. “Our sense is that this (Web) consumer skews a little younger than the department store channel,” said Tom Murry, president/CEO of Calvin Klein Inc..

But from a strategic marketing perspective, Calvin Klein’s approach-avoidance relationship with E-Commerce and New Media is fascinating. They waited more than a decade to get into E-Commerce, even though they wanted that audience. Even when they did launch, they’re hesitant to go mobile and social. And yet, this is the same fearless company that pushed the envelope—many would say blew past that envelope—of good taste in X-rated advertisements, trying to stir up attention among younger consumers. That’s fine, of course, but it hardly fits the profile of a brand that is scared to move into mobile and social in 2009.

Subway, the 31,000-store sandwich restaurant chain, has agreed to be the latest guinea pig for Visa’s contactless payment program. Subway confirmed Thursday (April 30) that it will soon make the payment technology available to “participating” locations in Canada. Subway has about 2,400 stores in Canada, many of which are franchised.

Typically, statements announcing such deals (which, in this case, included Subway’s acquirer for its stores in Canada, Chase Paymentech) feature a canned quote from an executive with the chain, praising the vendor for their wisdom. In this case, the quote provided by Subway was anything but warm.

When a federal appellate ruled on Monday (March 30) that it was sending a small part of one of the civil lawsuits involving TJX’s death breach back to the district court, it was a very narrow decision. But the act of sending it back and allowing for discovery to start again is likely to force TJX to spend millions more, according to attorneys watching the case. Perhaps even more importantly, the ruling is likely to slightly alter the risk-cost balance of retail security, putting just a little more pressure on chains to invest in their security operations.

It is true that discovery can be frightening for typical companies involved in class-action civil lawsuits, but for TJX, it can be positively terrifying. Throughout two trials, TJX showed itself to be far more worried about revealing thus-far-unreleased security details than monetary payments or almost anything else.

In a piece last week, we talked about a series of future security offerings that Visa is pushing, including a comment from a Fifth Third Bank executive that end-to-end encryption has logistical challenges, especially “a tremendous key management issue.”

One reader argued that Fifth Third’s resistance had much less to do with making life easier for retailers and more to do with minimizing the processor’s own liability. “Fifth Third sees a major transfer of card fraud liability shifting exclusively to them from the merchant who traditionally has (effectively) 100 percent of the liability. This dynamic would leave Fifth Third (and all acquirers) as the sole liability holder for all card fraud,” wrote one reader. “I can understand their concern. It is rational and it is well-founded.”