Evan Schuman's StorefrontBacktalk

When 235-store Guitar Center agreed to a PayPal proposal to offer the alternative payment method inside its stores, the music chain had very good reason to believe its shoppers would embrace PayPal in a way that the customers of other in-store PayPal retailers—including Home Depot, JCPenney, Abercrombie & Fitch, Toys”R”Us, Foot Locker and Barnes & Noble—might not. Musicians spend a lot of time buying and selling used instruments and audio gear on eBay, which means most have a healthy amount of PayPal dollars in their accounts.

Giving those shoppers an in-store option to use that PayPal currency, a place that has used (along with new) instruments and audio equipment and where said equipment can be touched and listened to before being purchased, made a lot of sense to Wes Muddle, Guitar Center’s VP for Finance. So it’s not surprising that the chain made it a priority to let every customer know about the PayPal option, through lots of store signage and associate training. And, gasp, Guitar Center is even considering offering cash incentives—though it would much rather PayPal do that instead.

EAS tags have an annoying tendency to come back to life after being deactivated. That’s embarrassing for the shopper who sets off the alarm, but it’s far more embarrassing for the LP executive whose people grow tired of the false alarms and start ignoring them—especially at peak times. One EAS vendor on Tuesday (Nov. 13) tried to end the LP Frankenstein monsters by switching to a digital—rather than a mechanical—tag mechanism, one that can be fully fried by the typical 10-volt deactivation pad jolt. “We make this happen at the nano level, leveraging very very small geometries,” said Amir Mashkoori, CEO of EAS vendor Kovio.

The tags are soft tags and Kovio’s approach is to try and get manufacturers to embed them deep within shoes and other clothing so they are not visible to the shopper, which makes the removal of the devices almost impossible without severely damaging the product. Mashkoori argues that this could change many standard retail tactics, such as having only one shoe on the floor and forcing the associate to go to the backroom to get the mate.

When a federal judge certified class-action status against Papa John’s on November 9, the pizza chain became the poster child for mobile text-messaging abuse. But this case raises some key questions retailers need to wrestle with—and which the court will decide—including the use of POS data for non-payment functions, the chain’s reasonable responsibilities for the decisions of very independent franchisee owners and what constitutes a business relationship sufficient to establish marketing permission (and in any definition, does buying one slice of pizza reasonably trigger it?).

The specifics of this Papa John’s case involve a vendor that never worked for Papa John’s but was retained by quite a few franchisees. That vendor, OnTime4U, sent a huge number of texts to customers of Papa John’s franchisees and never received explicit permission from any of those customers. If this had been a case of whether OnTime4U had violated the Telephone Consumer Protection Act (TCPA), it would be a very easy case. But because the case is focused on the retailer that never retained the vendor, things get much trickier.

When word broke on November 8 that Macy’s is testing in-store navigation technology in its Herald Square flagship store, the chain was surprisingly silent. A week later, Macy’s is still saying nothing about the “indoor GPS” system, even though it has been in the chain’s iPhone app since late October. Meanwhile, Macy’s is promoting a Black Friday product-finding system the chain is doing with eBay.

Part of the reason for Macy’s silence on in-store navigation could be that it’s only in the flagship store. A more likely reason: There’s only one safe way to roll out untried technology on Black Friday, and that’s very, very quietly.

In the middle of an analyst briefing on November 9, where he was detailing a painful 27 percent drop in quarterly revenue, JCPenney CEO Ron Johnson made a bizarre comment that “we can have loyalty programs for kids.” Such utterances have been heresy in retail circles, where it sets off every creepy warning alarm that parents have. But Johnson’s point, which JCPenney tried its best to walk back, may have a lot of legitimacy behind it.

Johnson’s comment points to a hole in the legal minefield of marketing to children. Federal law strictly restricts and all but prohibits online marketing and tracking of children younger than 13 (once they become teenagers, the government—and parents around the world—have pretty much agreed that it’s time to surrender). But there are no such restrictions in-store. Ironically, the reasons Congress agreed to restrict online activity are, today, probably more relevant to in-store, thanks to mobile.

In another blow to mobile wallets’ credibility, word leaked out last Thursday (Nov. 1) that Google will soon copy PayPal by introducing a plastic Google Wallet Card—complete with the magstripe that Google Wallet’s NFC hasn’t been able to displace. (This may be what Google was planning to announce last month but didn’t.) Google will be pitching the plastic for times “when you can’t tap and pay,” and any coupons or loyalty cards in a user’s Google Wallet will be automatically applied.

But we have to ask—why? Sure, we understand that Google seriously misunderstood either how hard mobile payments would be, how much its competitors hate it or how unwilling consumers are to use anything but plastic. If this is really Google throwing in the towel on NFC-based mobile payments, we have to wonder what else Google isn’t going to follow through on for Google Wallet retailers. After all, Google will still be tapping the transaction stream for CRM data, even at places that haven’t signed on. Is the search giant going to act like a partner after all this? This move may be just what Google Wallet needs. But chains? Not so much.

Part of the purpose of giftcards is to get new customers into a store. Another part is making them happy with how easily they can spend money with the giftcard-issuing chain. Although the new giftcard options Target announced last Friday (Nov. 2) make it easier for customers to buy giftcards, they actually make it hard for card recipients to use them.

The problem: Target’s giftcards don’t move easily between the chain’s in-store, E-Commerce and mobile systems, each of which is in its own silo. Putting QR codes in-store to let people buy electronic giftcards is a fine, no-fuss step—but then making it particularly tedious to move those cards to the recipient’s preferred channel is not the way to make those new customers happy with Target.

As Superstorm Sandy blew its devastating winds through much of the Eastern U.S. starting on Halloween, retailers had to deal with it just like everyone else. But few seemed to have anticipated the more than eight days of outages—some outages continue, pushing past 10 days—along with the gas shortages, closed roads, lack of food and water, plus the dead phone lines, lack of Internet broadband access and dead cell towers.

Stores in this area of New Jersey—StorefrontBacktalk‘s main office is in the heart of Sandy’s path—are used to outages of a few hours and maybe, during severe situations, maybe one day. The bad news: With global weirding (the term for the many strange weather patterns caused by global warming), there’s a fine chance these week-plus outages may be something that has to be planned for. With that in mind, let’s look at what some of the chains—including Best Buy, Target and Starbucks—discovered when they could only exist via emergency generator. It meant POS without network (no debit, no gift cards, no returns, no lookups) and few ways to tell customers what they couldn’t do.

Price-match programs have, for decades, been a standard tool for retaining existing customers and potentially attracting tire-kickers by giving them a reason to not fear your pricing. But PayPal is creatively using the program to acquire new customers, and it is using its retail partners’ ludicrous price-match restrictions as the path to do it.

At a glance, retailers might be inclined to dismiss this price match as something akin to what Visa, MasterCard, American Express or Diner’s Club might offer and not at all related to what a retail chain might do. Although PayPal is indeed a payment device, its in-store retail efforts—where PayPal offers to handle POS purchases at Home Depot, JCPenney, Abercrombie & Fitch, Toys”R”Us, Foot Locker and Barnes & Noble, among others—make it something that can’t be so easily dismissed. For the doubters out there, note that the program stresses it covers both in-store and online purchases.

Toys”R”Us is now following Walmart’s lead and offering an online cash program, where shoppers can purchase something online and offer to pay for it with cash in a local store. The shopper then has 48 hours to get to that store and cough up the moolah. But these programs are taking an interesting twist. They have little to do with the unbanked, nor are they offering a more comfortable way for consumers who are still nervous about typing in their payment-card data—although both are factors.

No, this program has everything to do with getting E-tail shoppers into the stores. And, along the way, it has become the exact opposite of the original idea of merged-channel programs, where shoppers were encouraged to shop in whatever way was easiest and most efficient for their situation and the purchase’s particulars.

If paying with a mobile phone isn’t any easier than just using a card in-store, maybe it can at least improve the mobile-commerce buying process. That seems to be the idea behind a trial MasterCard announced on Wednesday (Nov. 7). In the Netherlands-based test (which actually began in mid-October and runs through March 2013), an NFC-equipped phone can be used to make M-Commerce purchases, with the phone sending an EMV-compliant cryptogram to complete the transaction after the customer selects a payment card and keys in a PIN. In effect, it’s Chip-and-PIN over the phone.

That’s slightly easier for customers than having to key in the whole card number and slightly safer than the merchant storing the number. But the real value to retailers will show up if MasterCard declares that its own EMV solution qualifies M-Commerce transactions for card-present interchange rates (or at least for the EMV-based liability shift). In that case, online merchants may suddenly be very interested in offering customers that option. If not—well, there’s always room for yet another NFC payments approach that retailers have no reason to adopt, right?

In an October sampling of some 7,000 products shown on the 10 largest E-Commerce sites in North America and the U.K., 29 percent of the SKUs did not include the manufacturer’s name and some 8 percent offered up details that were simply wrong, according to a report released Wednesday (Nov. 7) at a Paris tradeshow. The fact that SKU GS1 data is imperfect is hardly a stunner, but the large number of defects was interesting. That missing manufacturer data, for example, could exclude products from a Kraft-specific search result. For the chain itself, it could interfere with analytics of which supplier’s products are moving well.

The study, performed by vendor Clavis Technology and GS1, looked at 500 brands and 7,000 packaged food/beverage products across 23,000 Web pages. One of the biggest numbers the report stressed was that 67 percent of products examined were missing information. But that could go either way. Were products dinged for not including marketing copy or other non-sales-essential datapoints? Another good figure: 14 percent did not include any ingredients. That could be a costly omission, if a product containing an allergen—a nut product would be the most obvious issue—was purchased and eaten after the shopper did a search excluding anything that had peanut in its ingredient list.

Amazon’s decision to begin testing a $7.99 monthly price for Amazon Prime is at least as interesting for how Amazon is doing the test as it is for the test itself. The new price was spotted by a blogger on Monday (Nov. 5) without any announcement from Amazon, which will only confirm that it is testing a monthly price. But Amazon has made the pricing option tricky for customers to find if, it’s offered at all. Click one Amazon Prime link, and you may be offered $7.99 a month; click a different link, and the price is $79 a year.

Which raises an interesting question: What exactly is Amazon testing here?

So much for the enduring power of big-box brands. On Halloween (Oct. 31), the owner of Circuit City and CompUSA’s brands decided to kill the online remnants of the former chains, redirecting traffic to TigerDirect.com. Systemax bought CompUSA’s Web site and 16 stores in 2008 for $30 million, picked up Circuit City’s intellectual property and some stores in 2009 for $14 million, and then relaunched the E-Commerce sites. Now Systemax will spend even more money to bury those brands.

It’s not clear how much the brand-kill decision may have been influenced by terms of the Circuit City brand acquisition, which required Systemax to pay a certain percentage of all revenue generated under the Circuit City name. Still, both these names were legendary just a few years ago, and Systemax paid millions for the names. Less than five years later, they’re apparently no longer worth the trouble. It looks like the half-life of big-chain brands is shrinking fast. After all, when was the last time you thought about Borders? And that was just a year ago.

In a case to be argued Wednesday (Nov. 7), the California Supreme Court will decide whether to treat brick-and-mortar stores differently from online stores when it comes to the collection of personal information about customers who make purchases by credit card. The case could have serious consequences for personal privacy of online customers, as well as for the ability of online retailers to prevent fraud and authenticate their customers.

Several online retailers, including Apple, eHarmony and Ticketmaster, were sued in a class-action lawsuit that claimed their collective practice of collecting certain personal information—including consumers’ names, street addresses, telephone numbers and E-mail addresses—violates the provisions of a 1971 law that precludes the collection of personal information about users of payment cards. The E-tailers are arguing before California’s highest court that the 1971 law didn’t contemplate online transactions, that prohibitions on merchants “writing down” consumer information don’t apply to data entry into a computer databases and, besides, they need this information to authenticate users and prevent fraud, pens Legal Columnist Mark Rasch.

The recent theft of cardholder data from the State of South Carolina’s computer systems presents an interesting question: What would happen if South Carolina were a retailer? What would the state do, asks PCI Columnist Walter Conway, and what would be the reaction of the state’s acquirer and the card brands to the data breach?

To recap briefly, the state announced in early November that hackers had stolen 387,000 payment-card numbers from the state’s tax office. Some 16,000 of those payment-card numbers were not encrypted. As a result of the loss of the card data—together with the 3.6 million Social Security Numbers and the tax records of 657,000 businesses, none of which was presumably encrypted—the state is looking at a $12 million bill to provide one year’s worth of credit monitoring and identity theft protection to those affected.

Now Google is testing same-day delivery, too. That isn’t likely to have Amazon, ebay, Walmart or any other quick-delivery wannabes quaking in their boots, because Google’s trial looks pretty much like all the rest. But there’s a question overshadowing all these efforts: How quickly do either E-tailers or brick-and-mortar chains have to do those deliveries?

For those few critical days before Christmas, any same-day delivery for last-minute orders could be a high-margin bonanza for retailers. But for the rest of the year, the customers already know what they expect when they order something for quick delivery. And the benchmark to beat isn’t Amazon. It’s Domino’s.

At a panel last week, a Best Buy finance exec questioned whether card-not-present rules make sense—and she’s hardly the first. It’s not just NFC, which may or may not end up having a major impact on mobile payments, at issue. Rather, it’s various other mobile payment methods, including stored-and-accessed card data systems such as iTunes and PayPal.

The original idea of card-not-present was simply a way to justify a higher interchange rate for less-secure transactions. The premise was that fraud is less likely when a magstripe card is swiped and potentially examined by an associate than it is when a shopper types numbers into a browser or tells them to a call center rep on the phone. But what happens when the card data is authenticated and used repeatedly—a la iTunes, PayPal and many mobile apps? What if the card is physically swiped and that data is then stored on the phone? Card-not-present is only meaningful today in one respect: In a few years, mobile payments will indeed likely make almost all cards not present.

At the Web site for $85 billion grocer Kroger, the site makes its best guess for the customer’s location. But this week it identified a New Jersey customer as being in Missouri and located an Oregon visitor in Texas—off by more than 1,000 miles each time.

Was that a storm-related glitch? We’re still waiting for an answer from Kroger, and we know that location feature has worked fine for at least some shoppers in the past. But considering how critical geolocation is in merged-channel retail (where’s the closest store? What’s on sale right now?) and the fact that IP addresses can often be tied to other CRM data, this may be a good reminder of how tricky outsourcing location services can get. Even if your datacenter is safely out of harm’s way, an outside location provider can still be inside a disaster zone and may need its own third-party help—and end up scattering your E-Commerce credibility all over the map. So many other things can impact location accuracy: A VPN can throw it off, and an ISP’s own disaster plans can alter where others think your customers are. Then again, it’s not especially onerous for customers to fix their location, as long as the site makes that at an easy fix.

The fact that U.S. retailers have been the world’s top fraud targets is nothing new, but recent Visa stats show a startling new reversal. In 2009, the U.S. accounted for 38 percent of the world’s data breaches, with the rest of the world the victim of the remaining 62 percent. But by the next year—2010—those numbers did an almost full 180-degree flip. The U.S. suddenly accounted for 61 percent of all incidents globally, with the total of all other countries’ breaches delivering the remaining 39 percent.

That pattern continued—mildly—last year (2011), with the U.S. inching up to 67 percent of all breaches globally. But it’s the huge flip in 2010 that’s fascinating. What happened then? Jennifer Fischer, Visa’s head of payment system security and acceptance risk, said her people saw it as a combination of factors.

The idea that mobile wallets should also house loyalty cards is all but mandatory at this point, and the rationale appears to be the classic, “why not?” But shoppers have been decidedly apathetic, responding with their own, “Why should I?” It’s a replay of the mobile and contactless payment problem, where a digital system is trying to displace a manual system (magstripe swipes, in the case of payment) that works perfectly well and that customers are used to it.

What makes this disconnect worse is the real reason mobile wallets need CRM/loyalty functionality: Shoppers have no problem with existing loyalty cards, because they just don’t use them that often. The retailer benefit in mobile loyalty cards is clear: much greater use of CRM. But the benefit for shoppers? That’s much more amorphous.

Starbucks on Monday (Oct. 29) threw its support behind a group pushing a wireless power standard. Such a wireless approach would have power-charging pads re-energizing shoppers’ mobile devices while they sit in a Starbucks. And the standardization part simply means Starbucks wouldn’t need to support a half-dozen different devices, in theory. But will this option have any meaningful impact on M-Commerce, which seems to be Starbucks’ bread-and-butter (excuse me, coffee-and-cream) tech issue these days?

The M-Commerce implication is one of those good news/bad news/good news situations. Good for M-Commerce: One of the more daunting obstacles for M-Commerce is infuriatingly short battery lives—and the Wi-Fi offerings of places like Starbucks only shortens those lives further. So from the perspective of “this is a good place to literally recharge my batteries,” it could help M-Commerce. On the Bad for M-Commerce side: Unlike plugging a smartphone or tablet into a laptop’s USB connection to charge, the wireless charging pad approach pretty much prevents the user from actually using the mobile device while it’s being recharged.

A little late October housecleaning here at StorefrontBacktalk. First, a quick reminder: StorefrontBacktalk now has five free Monthly newsletters, each one focusing on a different key area for you: E-Commerce, Mobile, PCI/Security, In-Store and CRM. The Monthlies—see the descriptions here—are available to anyone via a quick E-mail sign up and the November monthlies will publish next week.

The Monthlies are a great way to catch up on all the news in a given area. So before you miss the November Monthlies, sign up for your free copy—and remember, you can sign up for multiple topics. Finally, a quick thought for Kindle users. For those of you who have not yet subscribed to our Kindle feed, it’s not bad for convenience while traveling. You’ll get the latest on retail tech, E-Commerce, mobile and security beamed into your Kindle when you’re not looking.

A grocery chain was not happy with the profitability of products purchased by certain customers, so it had someone slip into their homes overnight and steal their refrigerators with all of the low-profit food. Three houses away, a national sports chain suspected one of its high-school athlete customers of buying some items from a direct rival, so it activated heater-equipped active RFID tags that melted or set on fire all of the disloyal customer’s athletic gear. Sound absurd? Well, it’s apparently not, if you work for Amazon. That is, in essence, what the world’s largest e-tailer has done with one European customer.

In this age of digital content, Amazon is acting as though it has the right to deal with one dispute on one piece of content as license to steal back all of that customer’s paid-for content. With the newness of digital rights issues, it’s frighteningly possible that Amazon may be right—for now, pens Legal Columnist Mark Rasch.

Aéropostale, the 1,108-store teen apparel chain with stores in all 50 U.S. states, is trying a creative iPad jukebox flytrap experiment to precisely track clothing, teen and music interactions. By giving teens control of the songs, they will gleefully wait 30 minutes to hear their tunes throughout the store—time spent browsing and likely buying.

The potential here isn’t just to track generic music influences. The stores can already play different songs in different areas of the store and specific dressing rooms, with the sound bleeding out of the store and into the mall. What if specific songs influence—or attract—shoppers focused on specific types of clothing? Which tunes pull in tire-kickers and which are good buyer lures? Critically, though, this is all based on the psychology of how teens interact with apparel. It has very little to do with actual tailoring.