WIC EBT – The Retailer Perspective

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WIC EBT The Retailer Perspective

• Presented by
• Gary Huddleston, Director of Consumer Affairs
• The Kroger Company Dallas, Texas

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WIC The Retailer Perspective

• How big is WIC business?
• WIC is relatively small, approximately 1.5 total
  food sales, annually
• In 2006, WIC represented approximately 3.6
  billion in food sales nationwide
• The importance of WIC is not limited to WIC food
  sales, it extends well beyond, to total food
  sales
• When shopping, WIC participants buy much more
  than WIC food items
• Nutrition education classes teach WIC
  participants to purchase and prepare nutritious,
  healthy foods
• Families with healthy babies and children spend
  more money on food at home
• WIC customers are often part of a stores loyal
  customer base
• Use a loyalty card
• Use vendor coupons
• May use food stamps

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WIC The Retailer Perspective

• Generally, all retailers base major decisions on
  a profit-centered business model.
• Since 2004, WIC vendors in Texas and New Mexico
  have experienced a positive return on investment
  (ROI) in offline WIC EBT, the Smart Card
  Technology.
• Based on our experience, we would consider the
  WIC EBT system model deployed by Texas and New
  Mexico a best practice business decision, a
  smart and cost effective way to increase food
  sales while lowering the high costs of WIC food
  sale transactions.

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Retailer Profit-Centered Business Model
Considerations

• Increase sales
• Reduce operating/overhead costs
• Maintain/increase profit
• Efficient checkout for the customer

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Increase Sales

• Product selection/availability
• Price accuracy
• Speed of checkout

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Reduce WIC Operating/Overhead Costs

• Avoid/reduce loss
• Increase efficiency

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Maintain/Increase Profit

• Demonstrate a positive Return on Investment
  (ROI) related to WIC
• Maintain/improve the overall profit/loss (PL)
  ratio or net income (profit)

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Efficient Checkout For The Customer

• Transaction similar to credit/debit transaction
• Utilize any checkout lane

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WIC EBTIn the Beginning....
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Top Three (3) Retailer Concerns

• Technology Choice
• Cost
• Future Implications

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1 Concern Technology Choice

• Proven but evolving technology
• Lack of technology standards
• Limited retail use
• Limited technical support
• Introduction/maintenance of dual technologies
• Lack of FNS WIC EBT system design requirements
• Lack of national WIC EBT policy guidance for
  states

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2 Concern Cost

• High front end costs
• No federal regulations governing system design,
  system performance, technology deployment or
  adherence to industry standards.
• Shift of costs from government to retailers
  without a proven ROI for either

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Response WIC Positive ROI

• WIC Strategy Texas WIC modified proprietary
  electronic cash register (ECR) and point-of-sale
  (POS) systems to accept smart cards in-lane in
  exchange for long-term retailer commitment.
• Execution
• WIC EBT enabled ECR and POS systems representing
  75 of WIC vendor lanes nationwide have been
  certified by USDA/FNS and Texas as meeting
  design, performance and accuracy standards
  ICL-Fujitsu, IBM-ACE, IBM-SA, NCR, ACR, Wal-Mart
  (IBM), JPMA, Sweda
• ECR/POS representatives provide WIC EBT
  enhancements to WIC vendors with qualifying
  systems at no cost
• Texas WIC vendors with non-qualifying systems are
  reimbursed for their purchase of USDA/FNS and
  Texas certified ECR/POS systems in accordance
  with the USDA/FNS approved reimbursement policy.

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Concern 3 Future Implications

• Potential for change in direction,
  technology(ies)
• No national strategy or regulations for WIC EBT
• Inter-operability

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Response National Standards

• Ability for customers to use their WIC card in
  other states
• Multi-state retailers ability to spread cost over
  more stores

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WIC EBT Today...
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WIC EBT Milestones

• Wyoming Offline WIC EBT Demonstration (1994)
• Proof of concept offline smartcard technology
  works
• Proprietary, stand-alone/stand-beside, WIC-only
  ECR
• USDA/FNS funded (100)
• Texas Offline WIC EBT Pilot (2004)
• National industry technology, performance and
  policy standards
• WIC fully integrated at the point-of-sale (POS)
• WIC EBT ECR/POS System Options
• Small store solution government-owned,
  stand-alone/stand-beside, WIC-only ECR (kWICpos),
  similar to the proprietary system in Wyoming
• Large store/supermarket solution
  retailer-owned/modified, multi-tender ECR
  (ICL-Fujitsu, ACR, IBM SA, IBM-ACE, NCR,
  Wal-Mart)
• Government-owned system (kWICpos) was replaced in
  mid-2005 with WIC certified commercial ECR/POS
  systems, with retailer reimbursement of
  WIC-authorized lanes based on a ratio of WIC
  sales to total sales.
• Texas Offline WIC EBT Cost Effective Source
  USDA/FNS WIC EBT Evaluation (February 2005)

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Technology Choice
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Retailer PerspectiveAdvantages of Offline

• Avoids third party transaction processing charges
• Avoids additional in-lane time for repeat of
  transactions due to communications loss
• Increases transaction speed no required user
  authentication/benefits download to store upon
  entry
• Avoids installation/maintenance of additional
  store EBT host or modifications to store host for
  interim benefits download/storage
• No wait time central host authorization
  dialup/return
• Furthers interoperability for WIC and other
  nutrition/health programs
• Eliminates/avoids transaction processing and
  interchange fees
• Eliminates/avoids added telecommunications costs
  (batch file transmission)
• Public advantages reduced government costs
  through use of single card for multiple benefit
  programs (Medicaid, Food Stamps, TANF, Child
  Support, State Employee Pay and many others).

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Retailer PerspectiveAdvantages of Integrated
ECR/POS

• Eliminates double scan
• Eliminates separate WIC transaction, separate of
  WIC and non-WIC
• products
• Price and inventory management in store ECR
• Eliminates manual changes to product pricing for
  WIC items
• Avoids increased costs to maintain, accommodate
  separate, stand-beside (closed) system

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Cost
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WIC is Expensive, Labor Intensive

• Eliminating Paper is a High Priority
• The cost to complete a WIC food sale can be 6
  times higher than the cost to complete a cash or
  credit/debit sale
• Young, inexperienced sales clerks must police
  WIC food sales
• Only WIC allowable products are sold
• Price controls are enforced traditionally least
  expensive brand, maximum/not-to-exceed
• Valid food instruments presented between
  first/last dates to spend
• Fully executed with proper signatures
• Accurate entry of item and price information
• Backroom processes are costly, complicated,
  labor-intensive
• Claim processing, packaging and mailing
• Errors/mistakes cause delays in claim processing
  and settlement
• Settlement delays make it necessary to
  monitor/track claims submitted for payment and
  reconcile differences between the claim and
  settlement totals.

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WIC is Expensive, Labor Intensive (Continued)

• WIC is high risk, with a lower profit margin than
  non-WIC sales
• WIC regulations and policies, particularly those
  designed to control WIC food costs, are
  complicated, difficult to learn and subject to
  change
• It is not a matter of if a store will suffer
  WIC loss, it is a question of how much a store
  will lose
• Whether a store remains a WIC vendor in good
  standing is almost entirely based on the actions
  of its youngest, most inexperienced employees.
• Mistakes are common common mistakes are costly
• Monetary penalties/fines
• Suspension
• Disqualification, removal from WIC
• In order to keep its customer base, suspended and
  disqualified stores often continue to accept WIC,
  then write-off WIC food sales as losses

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Top Five (5) Reasons Retailers Support EBT

• EBT significantly reduces the risk of store loss
  as a result of WIC violations, sanctions and
  disqualification
• EBT reduces store overhead costs related to WIC
  food sales
• EBT eliminates most payment delays
• EBT normalizes WIC food sales
• EBT increases customer and employee satisfaction

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1 Reduced Store Losses

• EBT systematically enforces WIC regulations,
  policies price controls
• UPC scanning ensures only WIC allowable products
  are sold
• Unit price controls are strictly enforced
• Access limited to current month benefits
• No signatures are missing signatures are no
  longer required
• WIC-allowable identifier accuracy ensured by
  Authorized Product List (APL)
• Unit price accuracy ensured through store
  inventory and pricing database
• Price controls enforced through item-level claim
  adjustments
• EBT eliminates most opportunities for violations,
  sanction and disqualification
• In Texas, avoid losses of 1.3 million solely
  attributable to clerk error (2004).

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2 Reduced Store Costs, Improved Efficiency

• Reduces time in-lane
• Eliminates time spent confirming first/last dates
  to spend
• Eliminates manual entry of item price, except for
  unreadable UPC codes
• Eliminates time for customer signature and
  signature-matching reduced space and
  administrative costs for paper storage, problem
  resolution
• Eliminates labor costs of handling paper vouchers
• Eliminates postage and handling costs
• Avoids loss of sales due to transaction breakdown
• Reduced training costs for clerks

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3 Reduces Payment Delays

• EBT reduces most payment delays
• Automatic (systematic) item-level adjustments to
  WIC claims
• No delays for WIC food instrument handling and
  processing errors
• No delays for WIC claim preparation and accuracy
  errors
• No delays due to postal or private courier
  schedules
• Reduces float (45 days lt x lt 60 days) to 2 days
  average

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4 Normalizes WIC Sale Transactions

• EBT normalizes WIC food sales at the
  point-of-sale (POS)
• Integrates WIC EBT into the store electronic cash
  register (ECR) system at the POS, adding WIC as a
  type of tender
• Enables mixed basket purchases, without the
  need to separate WIC and non-WIC foods at
  checkout
• Reduces the time in-lane for WIC food purchases
  to that of cash and credit/debit customers
• Participant able to purchase part, not all of WIC
  prescribed foods
• Increases the number of WIC participant shopping
  trips, total food sales
• Increases product availability
• Normalizes Product Orders, Shelf Maintenance

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5 Increases Customer and Employee Satisfaction

• EBT increases overall WIC customer satisfaction,
  store loyalty
• EBT reduces a customers time in lane for WIC
  checkout
• EBT reduces customer stigma
• EBT improves customer-employee communications
• Increases customer store visits, purchases
• Reduces customer/participant peer pressure
• EBT increases employee satisfaction, reduces
  turnover
• EBT eliminates the need for clerks to police
  WIC sales at the POS
• EBT reduces employee-customer confrontations at
  the POS
• EBT reduces employee errors, personnel corrective
  actions
• EBT modifies (reduces) training needs for cashiers

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Future Implications
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Texas and New Mexico Have Paved the Way Other
States Should Follow

• Technology and conversion costs are significantly
  lower today
• Texas and New Mexico have already paid for
  ECR/POS systems modifications/enhancements on
  behalf of other states they are free.
• Funding should be prioritized to encourage states
  to implement the Texas and New Mexico model at
  NO/REDUCED COST
• If implemented nationwide, the Texas-New Mexico
  model can represent.
• Cost savings to retailers
• Cost savings to states
• Cost savings to the federal government

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Prepaid Costs for Integrated ECR/POS

• Retailers with qualified ECR/POS systems and
  software are entitled to EBT-enabled enhancements
  at no cost and
• State costs are limited to the cost of upgrading
  terminals in-lane from single to dual technology
  (Texas 200/terminal)

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Next Steps for Future States

• State activities
• Establish timeline for eliminating paper WIC
• Complete/submit feasibility study
• Cost-benefit analysis
• Determine baseline costs for WIC paper
• Use FNS WIC EBT Model Evaluation
• Calculate baseline costs (State, Grocer)
• Determine EBT costs and return on investment
  (ROI)
• EBT System Design/Implementation Alternatives
• Texas offline model
• Key considerations cost savings, cost avoidance

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From the Retailer Perspective.....

• Texas-New Mexico WIC EBT is the only system,
  online or offline, proven to be 1) a measured
  improvement over the paper voucher system and 2)
  cost effective and affordable.

We want to know, Where will the TX-NM model be
implemented next?