There are a lot of upgrade forces at work in the industry. On the point of sale side, you have the planned end-of-life among the major oil company networks requiring platform upgrades. At the card readers and pin pads, you have the credit industry PCI security requirements coming due. And, you have the pull of digital merchandising at the dispenser and, in the store, that requires new technology. Shell, working heavily with its wholesaler council, has put together a number of packaged program initiatives to help its marketers get on board with new technology.
“S4 stands for Shell Site Systems Solutions, which we worked with our wholesale council over the past several years to develop,” said Walt Gothard, North American retail change & wholesale process manager for Shell Oil Products. “Looking across the industry, it's very obvious that there is a lot of opportunity. Your magazine features articles all the time on PCI compliance and such issues that wholesalers (marketers) face, and we had a number of sessions at our conference and trade show put on by vendors that centered on PCI. You could tell by the looks on people's faces that this was top of mind and how it would impact their business going forward. And from that we put together S4.”
The S4 program focuses on providing an end-to-end solution for the challenges associated with PCI compliance, the implementation of high-tech software to deliver Shell's marketing programs and to help to assist our marketers with the costs they face as they upgrade their systems and software. Elements addressed include vendor management, fraud prevention, cost efficiencies, marketing programs and network flexibility objectives.
“To support S4 we have an incentive supporting a twofold objective,” said Gene Goll, national wholesale operations manager for Shell Oil Products U.S. “The first is to accelerate the participation of our wholesale outlets in the Shell Rewards loyalty program. This is a powerful loyalty tool that allows a location to compete at really compete at a whole new level by speaking directly to the consumer at the point of purchase. We've had a tremendous amount of success with our wholesalers to account on this program. The second objective is to get ahead of the curve on the PCI compliance requirements and getting our wholesalers to get PCI compliant sooner rather than later.”
The program is open to the majority of Shell sites nationally, and the incentive is a penny a gallon for 24 months with a prepaid CPP option that can be handled as one lump sum payment upfront, provided that the PCI upgrades are completed by June 30, 2009. Shell does not plan on continuing this program passed 2009.
“In return for the incentive, Shell is asking its wholesalers to commit to two additional years of brand term,” Goll said. “For example, if they have a location that is currently under an M7 agreement, we will begin paying the incentive on completion of the EPOS upgrades, and in return they will agree to remain branded Shell for two additional years.”
Lori Van Ryan, marketing alliance manager for Shell Oil Products U.S., noted that in talking to the wholesale council and other marketers, it became apparent that loyalty programs were regarded as being very important for their businesses in order to be able to differentiate themselves from the competition.
“We always try to keep our EPOS software updated. And one of the things we announced at our conference was an upgrade for the Gilbarco Passport and the VeriFone Ruby and Topaz with Sapphire,” she said. “We’re going to be able offer the capability of Shell Rewards, our loyalty program that allows us to target customers with different offers, to run on dispensers with a single line display in addition to those with a 4” x 5” screen.”
Additionally, the software upgrade supports PCI requirements for pin pads and data encryption, and electronic journal capabilities for marketers to be able to store their customers' information securely, electronically without having to worry about paper rolls stacking up behind the counter.
The software also offers flexible carwash prompts, which is something Shell marketers had requested. This allows the marketer to prompt the customer before or after fueling if he or she wants a carwash. For example, a customer can buy a carwash then receive a rewarded of a cents-per-gallon offer.
One of the things that is always a challenge is the cost to get every single site in a wholesalers network upgraded,” said Van Ryan. “In response, we’re allowing our wholesalers to co-opt their 2009 software upgrades. That is something we have not done in the past and we've expanded it to where today they can co-opt different advertising and marketing programs, uniforms -- we are opening it up to a much broader scale. An average site upgrade is about $750 and shell is providing a $500 per-site support for that fee.
Cost support beyond software
Shell is not only assisting with the costs associated with software upgrades but with some of the larger cost that are incurred at sites, such as the hardware PCI compliance requirements and loyalty program support.
“One of the key items associated with PCI requirement hardware systems is the point of sale -- and we continue to work with our strategic vendors, primarily VeriFone and Gilbarco,” said Scott Taylor, wholesale technology advisor, Shell Downstream Inc. “Some of the older platforms will not be carried forward to be made PCI compliant and will need to be retired and replaced.”
Shell has worked with its vendors to provide some direct purchasing programs that involve special pricing and other incentives. Shell marketers can still purchase equipment through local distributors, but in most cases they will save money by taking advantage of the direct purchase programs and other incentives Shell has been able to negotiate with these vendors. For example, Gilbarco and VeriFone each offer a certain amount of trade in rebate that can be applied towards the cost of the new system. Other incentives include offering the 2009 version software free of charge as part of a purchase deal.
“We've also looked at some of the other costs sites incur primarily around their network fees,” said Taylor. “The majority of our sites today use satellite for their network activity and one of the challenges we've had is that our contract with our satellite provider has always been based around a five-day service code—Monday through Friday—and wholesalers incurred an additional expense if they needed to have a technician dispatched to work on the site over a weekend. We've been able to negotiate with our satellite service provider to now include seven days service coverage at no additional cost to the site.” Shell has also negotiated a reduction in that monthly network fee from $125 per month to $115.
On the fraud reduction front, Shell is also extending its software reimbursement program for adding zip code authorization at the dispenser, through the POS software, for the remainder of the end of this year. Shell will also work to address fraud that involves blocking VSAT transmission to allow a window of opportunity for fraudulent cards to be used at a site. The company will pay the fee associated with dropping satellite service and converting to broadband or a portion of the costs associated with relocating a dish to a safer location. The broadband network access fee has also been reduced by about 20 percent as well.
New customer card offer
On Jan. 5, 2009, Shell Oil Products US launched an electronic check payment solution – the Shell $aver Card. It provides a convenient, new way to pay for purchases through a direct link to a consumer’s checking account and offers a savings on each gallon of fuel pumped at participating Shell-branded stations. Shell marketers and retailers benefit from the Shell $aver Card’s flat, per-transaction merchant service fee that is lower than third-party debit and credit cards.
“If you look at the industry averages for credit card approval rates, it’s about 35 to 40 percent,” said Elizabeth Hudson, US consumer cards for Shell Oil Products US. “So that leaves the population that cannot get one of our credit cards even though they are trying to. This allows us to put cards in the hands of people who cannot get one of our credit card products or those customers that simply do not want to credit product, especially given the economy today.”
The Shell $aver Card has no application or annual fees and will offer a promotional savings of 5 cents per gallon on Shell fuel purchases until June 1, 2009 and 2 cents per gallon thereafter. The card can be used at participating Shell-branded stations for any purchases except lottery tickets. However, the discount applies only to gasoline and diesel purchases.
Consumers interested in obtaining a Shell $aver Card will be required to pick up an inactive card at a participating Shell-branded station to start the application process.
The Shell $aver Card will also cut down the cost of doing business for Shell wholesalers and retailers. The Shell $aver Card offers up to a 50 percent merchant service fee savings per transaction over costs to accept third-party credit cards. Additionally, based on the results of a 2007 Shell pilot program that offered the option of e-check payment technology, wholesalers and retailers saw customer loyalty increase by as much as 40 percent through consumer conversions to this payment method. All Shell $aver Card transactions will be routed through the Shell network by payment processor First Data, and each transaction will be processed using First Data’s TeleCheck® check verification services.