Evan Schuman's StorefrontBacktalk

The CIO of the nation’s largest movie theater chain struggles with how to push 500 popcorn-popping patrons through the refreshment stand before their movies start.

For David King, CIO of the $2.7 billion Regal Entertainment Group with theaters in 40 states, the challenge is a combination of arithmetic and consumer incentives. Beyond staggering movie start times and trying to get people to arrive earlier, King’s non-technology options are limited.

“We’ve tried many different strategies to try and encourage people to come to the movie more than around 20 minutes before the movie starts, but it really hasn’t moved needles. Everyone still comes around 20 minutes before the movie starts,” King said. “If the auditorium that is showing the movie holds 500 or 600 people, then 500 or 600 people need to go through the concession stand lines in 20 minutes. Once the time for the feature to start approaches, they will leave the lines and go back to their seats in order to watch the beginning of the movie as opposed to standing there and waiting in line to get their refreshments. It’s a matter of getting a huge mass of people through as quickly as possible in a short window of time.”

King is exploring various options, but is quickly coming to the same conclusion that the huge German grocery chain The Metro Group recently came to: the product-selection-and-distribution (for groceries, scanning) portion of a transaction must be physically separated from the payment part.

“I think it’s pretty significant. We have a major challenge with handling payments today,” King said. “Even at a concession stand where people are buying popcorn and Cokes and hot dogs–where there are very low levels of ticket quantities–people are using plastic, promotions, coupons, giftcards, loyalty cards, cash and a whole variety of other payment methods. That’s what is creating more of the holdup at our cash registers.”

King is exploring various tech options, including contactless payment credit cards, kiosks, at-home-prepay, lobby prepay and “anything to move the payment component of the transaction away from the actual delivery of the service or goods or tickets or food. We’re experimenting with several of those types of things, trying to get the customer experience correct and to satisfy the security guys and those types of people. It’s a major concern.”

The security concerns are those involving the recently-changed PCI requirements for credit card transactions and how to push those transactions through quickly, but still be fully compliant. Changes with wireless requirements in the new standard pose a particular hardship to a theater chain, where mobile payment stations could benefit from flexible wireless connections.

King discussed both the wireless dilemma and the payment separation challenge during last week’s Week In Review show here on StorefrontBacktalk. Please click here to see the show and please click here to just hear King and the other panelists discuss the payment separation challenge and please click here to listen to King and other panelists discuss the PCI and wireless changes.

Part of the problem is perception versus reality among consumers. Ironically, points out IDC Manufacturing Insights analyst Pete Abell, the perception issues plays doubly with the payment separation challenge.

In the beginning, Abell said, based on his experience making such a change at Chicago retailer several years ago, consumers resent the move because it’s creating two separate lines and consumers tend to assume that it will take them more time and be less convenient. But once they deployed, Abell said, everything flipped. Not only did the retailer enjoy a substantial time savings?through accelerated checkout lines?but consumers perceived the time savings for them as even greater than they were. “By separating the places, you definitely did speed up the consumer,” he said.

Beyond contactless payment, King said his chain had tried concession pods to try and disburse traffic. One unsuccessful effort involved creating express lanes, which were restricted to either those who phoned ahead or loyalty card members. What went wrong? The chain underestimated the anger of people in the other lanes, the ones who had to wait longer. As the movie start times approached, the regular line people got more upset and resentful.

“We created such animosity from the rest of the people who were standing in the other lines, it ended up being a bad situation and we weren’t able to solve how to deal with it,” King said. “This is for those who aren’t allowed to go through the express line, even if their movie is starting. Now they’re becoming grumpy. How do you manage through that scenario? We don’t have good solutions yet.”

Among some of the options is stealing some ideas from sports arenas. “We’re even going to be experimenting with some things that are ballpark-like where people will take orders in the auditoriums and have food and refreshments delivered to them,” King said. “In a variation on that, we’re looking at something called hawking, which is like the guys who walk up and down aisles in a ballpark with Cokes and a tray that has a strap around their neck and they sell Cokes out of the tray to the patrons.”

Some of the pre-payment options?such as having customers purchase both their tickets and pre-order and pay for their refreshments on a Web site?have typical restaurant challenges. How early should a hot dog be made so it will still be hot when eaten? Ice in beverages will melt and dilute a drink if it’s made too early. What about no-shows or customers who arrive late? During a snowstorm or other difficult weather, the number of noshows?or customers who make a last-minute request to see the movie at a different time?could be substantial.

Will the Saturday night movie become a 21st Century E-Commerce purchase merged with a 1950s era hot dog vendor walking the aisles before the movie starts and during intermission? What’s next? Bringing back drive-in movies but the films are digitally beamed in from satellites and are played on the car’s navigation screen?

The entertainment changes today are already threatening video-rental chains. I half-expect to see Blockbuster’s new TV commercials featuring the old lonely Maytag repairman. (“Come rent from us. We’re lonely. Nobody needs us anymore. Remember our old waiver of late fee campaign, the one where late fees were replaced with automatically charging your credit card for the full purchase price of the movie? We were just kidding. This time. we’ll really waive the late fees. Heck, we’ll waive all the fees if you just visit sometime.”)

It’s even hitting music, with Tower Records’ financial problems marking the likely beginning of the end of physical music stores.

This brings us back to the Regal challenge. (By the way, I would be remiss if I didn’t point out that having a chain called Regal with a CIO named King is a wonderful gift for writers everywhere.) Concession stands are, in theory, very simple retail operations, with very limited inventory. It’s merely the wide range of payment options that makes them complex, along with the very tight time window of a movie theater. If the concession stands could just take and fulfill orders, they could easily handle the onslaught. So moving payment away from purchase makes a lot of sense. But retrofitting a very old system and theater and conditioning people to act differently is difficult.

This is especially true when one looks at what a movie theater has become today. On the marketing diagrams, it is one of the most blatant examples of pure experience.

It will not be long before first-run movies will be easily available for a fee on every cellphone, cable system and satellite dish out there. Therefore, moviegoers are theaters will not be going solely for the film. It’s the experience of watching it with friends in a audience of hundreds of strangers, laughing, crying or getting scared at the same moments.

That means it’s going to all be about comfortable seats, top-quality audio and video systems (smell-aroma? Movement that is synched with what is going on in the film? How about appropriate temperature and other changes?) and superb customer service. In short, it needs to create an experience that a DVD player cannot recreate. King and his counterparts are right to be scared of long lines, cold hot dogs, watered-down soda and stale-tasting popcorn. In a business that will soon be 99.9 percent experience, even one bad payment experience can be devastating. Nowhere is a CIO’s role more critical.