Wednesday Feb 25, 2015

Eight Things Retailers Need to Know About EMV in the US

If you’ve received a new card from your bank in the last six months, it’s likely an EMV card with a chip.  Banks are issuing EMV cards, and retailers are installing EMV-capable terminals to accept those EMV cards.  Both are working toward the October 2015 deadline whereby the liability shift occurs.  Today, when a counterfeit card is used in a store, the bank takes the loss.  But after the liability shift, if the bank has issued an EMV card, but the retailer has not upgraded to an EMV terminal, then the retailer takes the loss resulting from counterfeit cards.

In that scenario the bank has done its part but the retailer hasn’t – so the retailer is the weakest link and takes on the risk.  If the retailer has an EMV terminal, but the card is not an EMV card, then the risk goes back to the bank since it’s the weakest link.

Most retailers understand the situation and have carefully weighed the risk versus the cost of upgrading terminals.  But there are many other nuances with the EMV migration.  Below are eight things every retailer should know:

1. If you’re not already testing EMV-capable terminals, you’re behind.  But you’re not alone as many retailers are questioning the cost of upgrading terminals.  The rollout in the UK and Canada took several years, so don’t expect anything special to happen on October 1 when the liability shift occurs.  It will be just like any other day.

2. The EMV specifications allow several methods for cardholder validation: online PIN, offline PIN, signature, and none (for low value transactions like vending machines).  The issuing bank decides which method to use when the card is programmed.  Then when the card is inserted into the terminal, the terminal will request a PIN or signature to verify the cardholder’s identity.

The card brands are recommending online PIN (where the PIN is sent to the issuer for verification, similar to debit transactions) instead of offline PIN (where the chip validates the PIN), but this decision will be transparent to both the cardholder and merchant.

In the US, a PIN is not mandated so many banks will configure their cards to request signatures.  Obviously this is not as secure and also places a burden on the retailers to retain signatures.  For this reason the NRF has been advocating “Chip and PIN” vs “Chip and Signature.”  Only Mexico and Brazil continue to use signatures.

3. The chip in the EMV cards is really aimed at preventing counterfeit cards, but it does nothing to help with other types of fraud.  Creating a counterfeit card, which is relatively easy with mag-stripe cards, is nearly impossible with chip cards.  The liability shift only impacts counterfeit cards; retailers are still not responsible for stolen card usage.

4. The EMV specification supports both contact and contactless (NFC) cards with some cards supporting both.  As mobile payments mature, it’s likely that contactless gains popularity so it’s probably worth the investment in terminals that support NFC.

5. New EMV cards will continue to have a mag-stripe for several years as terminals are upgraded.  If a consumer tries to swipe an EMV card in an EMV-capable terminal, the terminal will ask them to insert instead.  If the card’s chip or the chip reader malfunction, the consumer will be told to fall-back to mag-stripe.  And if the mag-stripe doesn’t work, merchants will call for a manual authorization.

6. When a card is inserted, it must be left until the transaction completes.  The chip is a tiny microprocessor that must communicate with the terminal, verifying each other’s authenticity.  Often consumers remove the card prematurely and the transaction must be restarted.  Or worse they forget to take the card with them when the transaction completes.  Cashiers will need to be diligent as consumers are educated.

7. Initially fraud won’t decrease.  Instead, card-present fraud in stores will migrate to card-not-present fraud online.  Thieves can still steal account numbers off the front of the cards or the cards’ mag-stripe, but they won’t be able to create counterfeit EMV cards.  That will drive them online where EMV doesn’t help (yet).

8.  Account numbers are not encrypted.  Each transaction gets a unique cryptogram that ensures the card is not counterfeit, but otherwise the account number and associated data travel the same path we’re used to.  Put another way, EMV cards and terminals would not have prevented recent thefts at large retailers.  But it does make it harder to use the stolen account numbers, because EMV cards can’t be counterfeited and used in stores.

Retailers still need to follow PCI recommendations to encrypt card numbers in transit and at rest, as well as protect point-of-sale systems from malware.

Infographic from

The worst mistake retailers can make is not knowing the facts about EMV.  Stay informed, and be prepared for the coming changes.

Monday Aug 18, 2014

NRF Online Merchandising Workshop: Where Online Retailers Are Focusing for Holiday and Beyond

Last month we attended the NRF Online Merchandising Workshop in LA, and it was a great opportunity to catch up with our customers, meet new retailers, and hear some great presentations from VF Corporation, Zazzle, Julep Beauty, Backcountry, eBags and more.

The one-on-one conversations with Merchants and the keynote presentations carry the same themes across companies of all sizes and across verticals. With only 125 days left (and counting) until Black Friday, these conversations provided some great insight in to what’s top of mind for retailers during the most stressful time of their year, and a sneak peek in to what they will deliver this holiday season. 

Some of the most popular topics were:

When to start promoting for holiday: seems like a funny conversation to have in July, but a number of retailers said they already had their holiday shopping gift guides live on their site, and it was attracting a significant portion of their onsite traffic. When it comes to timing, most retailers were questioning when to begin their holiday promotions -- carefully balancing when to release pricing and specials, and knowing that customers are holding out for last-minute deals and price drops. Many retailers noted the frustrations around transparent pricing by Amazon and a few other mega-retailers last year, publishing their “lowest prices of the season” as early as October – ensuring shoppers that those prices were the best they could get all season long. Many retailers felt their hands were forced to drop prices. Others kept their set pricing with negative customer reaction, causing some to miss their holiday goals. The pressure is on, and most retailers identified November 1 as their target start date for the holiday promotions blitz. Some are even waiting for the big guys to release their “lowest prices of the season” guides and will then follow suit.

     Attribution is tough – and a huge focus: understanding the path to conversion is a tough nut to crack, especially in the new omnichannel world where consumers use multiple touchpoints to make a single purchase, and internal management wants to know hard data. This has lead many retailers to invest in attribution; carefully tracking their online marketing efforts to determine what gets “credit” for the sale, instead of giving credit to the “last click.” Retailers noted that it is very difficult to determine the numbers when online and offline worlds collide – like when a shopper uses digital channels for research and then makes a purchase in a store. As one of the presenters from The North Face mentioned in her keynote, a key to enabling better customer service and satisfaction when it comes to converged online and offline sales is training the in-store staff, and creating a culture where it eventually “doesn’t matter what group gets the credit” if they all add to the sale. No doubt, the area of attribution will be a big area of retail investment in the coming years.

     How to plan for the converged world: planning to ensure inventory gets where it needs to be was another concern. In conversations with retailers, we advised them to analyze customer patterns: where shoppers purchase items, where the items were sourced from and even where items are returned. This analysis is very valuable in determining inventory plans. From there, retailers can more accurately plan and allocate inventory to support both the online and offline customer behavior. As we head into the holiday season, the need for accurate enterprise-wide inventory visibility, and providing that information to associates, is even more critical to the brand-wide customer experience.

      Improving the search / navigation / usability of the site(s): Aside from some of the big ideas and standard holiday pricing pressure, most conversations we had centered around continuing to improve the basics of the site. Reinvesting in search and navigation came up time and time again (FitForCommerce blogged about what a big topic it was at the event as well). Obviously getting shoppers on their path quickly and allowing them to find what they need fast is critical, but it was definitely interesting to hear just how much effort is still going in to honing the search and navigation experience. Adding new elements to search and navigation like typeahed, inventive navigation refinements, and new navigation categories like gift guides, specialized boutiques and flash sales were top of mind, in addition to searchandising and making search-driven product recommendations. (Oracle can help!)

      Reducing cart abandonment: always a hot topic that is top of mind for every online retailer. Getting shoppers to the cart is often less then half the battle; getting them to click “buy” and complete the transaction is much more difficult. While retailers carefully study the checkout process and where shoppers tend to bounce, they know that how they design their checkout page is critical. We’re all online shoppers in our personal lives and we know how frustrating it can be when total prices are not transparent (i.e. shipping, processing, taxes is not included until the very last possible screen before clicking that buy button). Online retailers are struggling with where in the checkout process to surface the total price to be charged to reduce cart abandonment, while not showing the total figure too early in the process that it keeps shoppers from getting to checkout altogether. Recent research shows that providing total pricing prior to the checkout process dramatically reduces cart abandonment – as it serves as a filter to those shopping within a specific price band. Much of the cart abandonment discussion leads us to…

      The free shipping / free returns question: it’s no secret that because of Amazon and programs like Prime, consumers expect free shipping, much to the chagrin of the smaller retailer. The reality is that if you’re not a mega-retailer, shipping is an expensive part of doing business that doesn’t allow most retailers to keep their prices low and offer free shipping. This has many retailers venturing out on the “free returns” path, especially in apparel. A number of retailers we spoke with are testing a flat rate shipping fee with free returns to see if they can crack the price threshold where shoppers are willing to pay for shipping with an added service. But, free shipping remains king.

     Social ads and retargeting: they are working, but do they turn off consumers? That’s the big question. Every retailer we spoke with during a roundtable on the topic said that social ads and retargeting (where that pair of boots you’re been eyeing on a site magically follows you around the Internet) work and are meeting campaign goals. The larger question many retailers are asking is if this type of tactic is turning off a large number of shoppers, even if these campaigns are meeting their early goals. Retailers also mentioned that Facebook ads are working very well for them, especially when it comes to new customer acquisition, serving as a complimentary a channel to SEO when it comes to engaging new customers.

While there are always new things to experiment with in retail, standard challenges are top of mind as retailers scramble to get ready for holiday. It will undoubtedly be another record-breaking online shopping season, but as retailers get more and more advanced with each Black Friday, expect some exciting things. This excitement needs to be backed by sound solutions and optimized operations. Then again, consumers are expecting more than ever, so I don’t doubt that retailers are already thinking about the possibilities of holiday 2015… and beyond.

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Thursday Jan 09, 2014

NRF 2014

This year we're kicking off NRF with our new Release 14 which you can hear more about in the Oracle Retail booth.  I'll be spending my time there as well as walking the floor looking for trends and saying "hi" to friends.  Although I've always been a big supporter of RetailROI, this is my first year attending SuperSaturday and I'm really looking forward to it.  In additional to consuming all the great content, I'll also be leading a lunchtime discussion on innovation processes.

Here's a photo from last year's RIS/IHL/ARTS panel (courtesy of my buddy Darrell Sandefur):

On Sunday, I'll be delivering a part of the "ARTS and the Seamless Data Experience" presentation in which I'll focus on the value of standards for innovating.  I'd encourage NRF attendees to stop by and learn what ARTS has been doing this past year and what we're planing for 2014.  You can also stop by the ARTS booth and hear about our latest standard called Change4Charity.  Its an XML integration standard that simplifies taking charitable donations at the point-of-sale (which also includes Web stores).  Digital Donations, Donate Wise Now, and MiniDonations were all key contributors to this effort.

See you there!

Monday Sep 30, 2013

Standards Accelerate Innovation

At the beginning of the US Civil War there were over 20 different railroad gauges in use across America. That meant railroad cars could only travel on the track with a matching width thus limiting how far cars could travel.  For example, in 1853 there were three different gauge tracks leading into and out of Erie, Pennsylvania where a booming business grew for workers to unload cars on one track and transfer cargo to cars on a different track.  It was clear this approach wouldn't scale in our westward expansion so in 1862 Congress specified a standard gauge for railroad tracks.  During the spring of 1886 the standard was adopted across the US thus freeing minds to solve more important problems.  Instead of researching ways for cars to adjust their wheels to fit different gauge tracks, the industry focused on other aspects of improved transportation. Standardization frees capital for additional innovation.

The Association of Retail Technology Standards (ARTS), takes a similar approach.  One of its goals is to standardize the way in which we handle data so retailers can focus their limited resources on innovations that more directly impact consumers. Retailers spend far too much time integrating systems instead of adding features.  (Sometimes integration can be the innovation, but often times its just the cost of doing business.)

There's a three-stage cycle I've observed.  Typically an idea emerges, adoption begins, its standardized, then we move on to the next idea.  Its a cycle where the idea gets optimized and standardized for mass consumption.  Standardization reduces costs thus freeing resources to work on the next great idea.  In the case of the railroad, we don't really care if the gauge is 3 feet or 6 feet.  The important thing is that we all agree on a standard (by the way, the standard is 4ft 8.5in or 1435mm) and move on.  The earlier we agree on a standard, the less rework that must be done down the line (11,000 miles of track had to be fixed in the South to match the standard).

The Technology Adoption Lifecycle depicts how new ideas are adopted by the masses. (This was extended by the book Crossing the Chasm by adding a gap between the Early Adopters and Early Majority.)  The graph is depicted below along with ARTS inputs.

ARTS provides whitepapers, blueprints, and webinars that inform retailers and help the industry cross the chasm.  When its clear the industry is interested in adopting an idea, ARTS creates database and XML standards that lower the cost of adoption thus making the idea more affordable for smaller retailers.  To help the late majority, ARTS creates Request for Proposal (RFP) templates, training, and appears at conferences to tout the idea and best-practices for its use.

As you can see, ARTS helps retailers take advantage of emerging technologies at various stages of adoption.  Membership and participation in ARTS is open to both retailers and vendors that want to be on the forefront on innovation.  I've certainly found it a valuable resource over the years.

Wednesday May 08, 2013

Legislation Impacting Retailers

Today, select retailers are accompanying NRF advocates to the hill to discuss key legislation with congress.  The Washington Leadership Conference is an opportunity for congress to hear directly from retailers and to better understand the issues they face.  The key issues being discussed are:

  • Sales Tax Fairness
  • Health Care
  • Patent Trolls
  • Tax Reform
  • Loss Prevention and Organized Crime
  • Mobile Location Tracking

The headlines have been focused on the recent passing of the Marketplace Fairness Act, which allows states to begin collecting sales tax for online sales regardless of a seller's physical presence.  This should help level the playing field for brick-and-mortar retailers vs the pure online retailers, plus it could prove to be a valuable source of revenue for states at a time when the coffers are low.

But for me, the more interesting legislation are those that have to do with technology.  Patent Trolls love to go after retailers for mundane things such as assigning unique transaction numbers to sales, using an online shopping cart, or making product recommendations.  Usually retailers calculate the cost of litigation and then just decide to license the patent for less, but recently Newegg fought a troll in court...and won.  Congress is considering the Saving High-Tech Innovators from Egregious Legal Disputes (Shield) Act, which forces patent trolls to pay for litigation costs when they lose.  That might make it easier for retailers to defend themselves.

Another pending issue is that of privacy and the use of mobile phones to track shoppers' location. There's an interesting battle going on between Senator Al Franken and Euclid, a company that provides analytics to retailers based on tracking mobile phones.  On the surface, the issue has to do with shoppers opting-in or -out to tracking, as well as full disclosure on who has access to the data.  That seems reasonable, but if those steps become too onerous then they detract from the relationship between consumers and retailers.  There are huge opportunities for retailers to better serve their customers if the data can be leveraged in a mutually agreeable fashion.

Thursday Aug 09, 2012

Integrated Mobile Initiative Launch

Back in 2009, ARTS (a division of the NRF) began to collect information on the use of mobile devices in the retail industry.  A committee was assembled consisting of retailers, vendors, analysts, and standards organizations for the purpose of authoring the first retail-specific whitepaper addressing mobile marketing, mobile commerce, mobile payments, and mobile operations.  The tremendous reception of document led to a second version that followed in 2011.

As mobile continues to gain momentum in retail, the NRF has now established the Integrated Mobile Initiative (iMi), an effort aimed at providing crucial resources to retailers for all things mobile.  Today a portal (  was launched where all the NRF's information on mobile can be easily found.  This includes research, articles, whitepapers, and webinars.

Expanding upon the previous Mobile Blueprints, ARTS has published the Mobile Integration whitepaper on the new portal.  This document is available for download and explains how existing standards can be leveraged to integrate mobile applications into a retailer's existing business processes.

The upcoming ARTS User Conference, September 30 to October 2, is a gathering for experts to exchange ideas about mobile retailing and more.

Monday May 16, 2011

Social Blueprint for Retail

The Association for Retail Technology Standards (ARTS), a division of the NRF, has three primary objectives for helping retailers: build standards, produce RFP templates, and educate.  Lately I've been focused on the education aspects, helping with the SOA Blueprint, Mobile Blueprint, and Cloud Computing whitepapers.  Our next endeavor will be a whitepaper that discusses the use of social media in retail.

This will be an interesting project since social media is relatively young and fluid.  In my discussions with retailers, most generally understand the value of mobile right away, but the jury is still out on social.  Therefore, this paper will focus on classifying the different types of social media campaigns and programs, examples specific to retail, and advice on ways to get started.  Regular readers of this blog know there are many interesting examples, and retailers will benefit from having them easily accessible in a single document.

Unlike the NRF Mobile Blueprint, this project is sponsored by ARTS and therefore requires ARTS membership.  Big names like IBM, SAP, Oracle, and Pier 1 Imports are already signed-on along with others to create a healthy mix of vendors and retailers.  If you are interested in joining ARTS and participating on the sub-committee, please contact Richard Mader (  There will be several conference calls leading up to our next face-to-face in Minneapolis, July 25-27.


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