NFC: Cost Cutter, Marketing Magic, Security Risk?

Last Updated Aug 21, 2008 11:50 AM EDT

Answer: All of the above.

Data security was a hot topic at the National Retail Federation's recent NRFtech leadership gathering. With TJX disclosing, the morning the conference convened, that it has incurred more than $200 million in costs related to credit card theft, retail CIOs have every right to be nervous about transaction and customer data.

So it made sense that near field communications -- wireless-enabled payment and marketing technology -- looked like a two-edged sword to Scott Langdoc of IDC Global Retail Insights, who spoke about security issues. New payment technologies will both help and hurt retailers' efforts to keep customer data secure, he said, adding, "Compliance does not insure security."

The complicated dance between card issuers, processors, and retailers is already acrimonious, Langdoc said. What might happen when you throw two more constituencies -- mobile device vendors and wireless service providers -- into the mix? Oh yeah, and customers.

These caveats didn't hamper a later discussion about the future of NFC. Cash is the most expensive payment method, NRF blogger Eric Olson points out. Panelist Tom Parker of Bay Area Rapid Transit noted that it costs BART 6 cents to move every dollar in fare, not counting 3 cents for the paper ticket. BART is piloting a test of mobile payment systems to cut transaction costs while speeding commuters on their way.

But BART's daily transaction environment is much less complex than a retail store, with limited choices in products and marketing needs. You're not likely to stock up on ride tickets if you see a good deal -- or buy one in a new color because it looked fun on a display.

Jim Scott, CTO of grocery giant Kroger, mentioned several large caveats -- the biggest being the cost to add 15 to 20 wireless devices to each of Kroger's 2,474 locations, which is a hard sell during a time of expense constraints. But as store systems get replaced, he predicts near-field communications will be a game-changing technology, especially in loyalty and in-store direct marketing applications.

Research shows that 50 to 60 percent more consumers will use a promo they receive in-store as opposed to one delivered at home or elsewhere. The data collected helps marketers quantify conversion rates to an unprecedented degree, and the idea of instantaneous feedback to a new planogram -- or wireless tracking of customers around the store, delivering the right offer as they wheel the cart past pharmacy or produce -- must seem pretty sweet to a brand manager.

  • Lisa Everitt

    A Denver-based business writer, Lisa Everitt is a veteran of daily and weekly newspapers and trade magazines, including The Natural Foods Merchandiser, Rocky Mountain News, Inter@ctive Week, San Francisco Business Times, and the Peninsula Times Tribune.