March 31, 2005

Ritz Camera Focuses on RFID-Accelerated Checkout

By Evan Schuman, eWEEK

The 1,200-store Ritz Camera chain wants to let customers drop off film without having to slow down and thinks RFID-enabled contactless payments are picture perfect. With competitors including Wal-Mart moving in, this specialty retailer is stressing expertise and getting people in and out quickly.

Vice President of Information Systems Bob O'Hern (Ritz doesn't have a CIO, but he acts in that capacity) said he likes the RFID capabilities within a contactless payment system, but doesn't yet see its value in his supply chain.

Back-office use of RFID to track inventory "is still evolving, still several years away," O'Hern said in an eWEEK.com interview. "We are still in a wait-and-see mode."

But it's a very different story with payment. The RFID functionality there is much more limited, with the wireless component acting as little more than a translator. It wirelessly grabs payment data from a chip embedded into a credit card held six or fewer inches away. The reader then translates the data so that the chain's traditional POS (point of sale) system is tricked into thinking it just scanned a bar code. After that, the POS transaction proceeds normally.

When the card data is seen by the reader, it still requires a clerk to take an action to charge the card, which is to prevent a charge against an RFID-enabled card that is accidentally seen by a reader. O'Hern said Ritz does not currently plan on deploying self-checkout lanes, so a clerk should always be there to prevent accidental charges.

Test trials have "gone well," and the readers have proven "very accurate," O'Hern said. "It's really a nonissue from a systems standpoint. It appears the way it would if it had been swiped."

Traditionally, contactless payment systems are used to accelerate payments by anywhere from 20 seconds to about a minute. That can make a huge difference for businesses where speed is critical—such as at a convenience store chain like 7-Eleven or a quick-service restaurant such as McDonald's—but little difference at a clothing store or a car dealership where the actual swiping accounts for a minuscule portion of the transaction time.

Ritz customers, however, fall into two camps, and some of the larger Ritz stores even split those two camps into separate checkout lanes. The first camp is the one where customers just want to pick up new film or pick up or drop off developed pictures. The second camp purchases cameras and photographic equipment. Contactless payments are focused on the first group.

"In some of our stories, during peak seasons, the lines do get long," O'Hern said. "Saving a few seconds on that does help."

Like most specialty retailers today, Ritz has come under intense pressure from everyone from local family-owned camera stores to national electronics chains. Even supermarkets and the ever-present Wal-Mart are now selling and developing photos.

"We're in a phenomenally competitive environment. Today, you can buy digital cameras anywhere," O'Hern said. "We are a specialty retailer. We have to have the expertise, and we have to get people in and out quick."

The major credit card companies have been aggressively pushing contactless payments as a way to differentiate themselves from each other—although, ironically, most are trying to differentiate themselves in seemingly identical ways—and to boost the size of typical purchases, which increases their fees.

American Express, for example, has been saying that average transactions are 30 percent larger with their contactless payment systems compared with cash purchases. But it is unclear how contactless payment system purchases compare with those from non-contactless credit cards, which would seem the more logical comparison.

Discover has also been working with contactless payments as well as some biometric options—fingerprint mostly—that try to achieve similarly convenient results. A finger scan is slightly more intrusive than a credit card scan, but a consumer doesn't have to go into a pocket or purse to pull out a finger. It's always—no pun intended—handy.

At Ritz, O'Hern has been working with American Express, Visa and MasterCard on various contactless payment trials for the last year. "To be honest, the credit card [firms] are moving in the direction of contactless payment," he said. "We want to move with them."

The American Express contactless payment system that Ritz is evaluating is called ExpressPay, and American Express officials are quick to point out that it adheres to ISO 14443, which is the interoperable standard that the major credit card firms have been using for contactless deployments. Beyond Ritz, ExpressPay is currently being evaluated by Fry's (Kroger), Carl's Jr., Blimpie Subs & Salads, Dairy Queen, Cold Stone Creamery and Schlotzsky's Deli, an American Express statement said.

Ritz is in the midst of replacing its entire 12-year-old line of homegrown POS systems, and the new units will include signature-capture devices as well as the RFID contactless readers. The new POS systems will be using POS hardware from Ultimate Technology of Victor, N..Y, and will be running on an all-Linux network. The network being replaced includes Linux and some SCO Unix.

Why become a sole Linux shop? "It's technology that we were already comfortable with," O'Hern said.

With its low cost, Linux is generally seen as an easy return-on-investment argument, provided the support and applications are in place. But contactless payment systems are frequently seen as much harder boardroom sells.

Ritz had an easier time justifying a contactless payment system because it had already decided to completely replace its POS network. That made the additional expenses for contactless relatively trivial.

What if the POS swap had been completed before the contactless payment trial had been proposed? That probably would have made a difference, O'Hern said. "Contactless all by itself probably would have been a very hard sell."