Over the past decade, the vending industry has struggled to reverse escalating profit loss. Industry data shows net operating profits declining from a high of 9 percent 10 years ago to only 1.4 percent today. In other businesses these conditions would have prompted price increases, but vendors fear that raising prices will result in lost accounts.
Progressive operators are turning to technology to help improve efficiencies, reduce labor and increase revenue. Many are using cashless transaction solutions to fight back, especially during this economic downturn.
Operators who have implemented cashless vending technology have begun to see that adding credit/debit card readers to vending machines can reverse the downward spiral. Cashless has provided an additional payment method to capture sales even when consumers are short on cash, as well as enable them to increase prices without subsequent loss in unit volume.
RECESSION BUILDS NEED FOR CHANGE
The recession served to make the benefits of cashless vending even more apparent to those operators who had it in place.
Consider the most likely avenues for combating falling profits: 1) raise prices; 2) increase sales at existing locations; 3) win new business; 4) lower costs. Operators are realizing that cashless vending can help ensure success in all four areas.
1) Raising prices. Raising prices in existing vending machines will typically result in an average 15 percent decrease in volume. But a study conducted by USA Technologies Inc. proved that raising prices in conjunction with an ePort cashless transaction device resulted in no material decrease in volume. The flat volume of the credit/debit-equipped machines paired with the increase in price resulted in additional revenue that was four times the additional revenue seen from increasing prices in cash-only machines.
CONSUMERS ARE USING CARDS MORE
2) Increase sales at existing locations. Every day, more consumers are turning to credit and debit cards for every day purchases, with many stating they do not typically carry cash. These trends are becoming evident in the vending industry in very real ways.
An analysis just last month of a USAT customer’s 143 machines in an education account in Texas found they were averaging more than $3,000 a year in credit/debit sales per machine, predominately on snack machines.
Many machines were averaging a higher-than-50-percent average of credit/debit transactions compared with overall transactions. One machine is projected to sell more than $30,000 in credit/debit sales alone this year.
Purchases at machines with credit/debit card readers that allow for multi-vends have average tickets that are 33 percent higher than their cash-only counterparts due in large part to consumers purchasing multiple items at once for greater ease and convenience.
In select channels, credit/debit machines enjoy revenue that is 15 percent higher on average then cash-only machines in the same locations.
3) Win new business. Many operators have been using cashless systems to win business from their peers. By offering cashless vending, they are responding to accelerating consumer demand for greater purchasing ease, convenience and speed.
4) Decrease costs. Cashless can also help operators decrease bottom-line expenditures by giving them access to valuable information about their business. Where route management systems can be costly and time consuming to implement, some cashless systems offer a reporting system to complement card acceptance as part of the service fee.
CAREFUL PLANNING IS NEEDED
The biggest challenge is selecting the right locations, knowing what to expect and what the likely impact on margins will be. That requires careful planning, access to consumer purchasing data, and guidance on how to translate it into an actionable plan.
With the proper plan in place, cashless vending may be the one proven way to combat the historic downtrend in the vending industry, and the additional pain that the industry is experiencing in the recession.
