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USAT - Getting Into Cashless Vending: A Guide No Matter Your Size

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http://www.vendingmarketwatch.com/article/12300516/getting-into-cashless-vending-a-guide-no-matter-your-size

BY ADRIENNE ZIMMER
ON MAR 9, 2017

In the world of vending, “cashless” is trending. According to Automatic Merchandiser’s latest State of the Vending Industry report, the number of vending machines in the U.S. that accept credit and debit cards has reached 15 percent, and that number is predicted to consistently grow in the coming years.

It’s not hard to see why operators are looking to cashless options. Cashless has been proven to increase sales at many locations; it benefits operations’ bottom lines and increases customer satisfaction; it also has been shown to boost higher ticket transactions. But is a cashless investment right for your operation? Operators of all sizes speak to their own cashless experience, weighing the challenges and the many benefits.

A small-operator’s tale

The majority of vending operations in the U.S. are identified as small-sized companies. Automatic Merchandiser reports that 50.5 percent of vending companies are ‘small,’ with a revenue range under $1 million.

Mike Kever, president of Advantage Vending in Searcy, AR, is one of those operators, with a little more than 100 vending machines. Despite his size, Kever invests in cashless. He was initially interested in investing in telemetry so he could use a vending management system (VMS) and prekit, but after talks with USA Technologies (USAT), he was convinced to add cashless readers as well. “I was already going to be adding telemeters, so adding cashless readers was just the simple next-step,” he said. “If you have a machine doing $45 per week in sales, it’s worth it getting a cashless device.” Kever has 80 telemeters and 30 cashless readers. Within 3 months, he saw location sales grow 15 percent.

Many small operators who are using older equipment are fearful that integrating cashless will mean they also need to purchase new machines or spend a lot of money making upgrades, which isn’t the case, says Kever. “What some small operators don’t understand is that there are companies like Vendors Exchange and InONE Technology that will help you upgrade universal control boards so you don’t have to get a new machine to have cashless,” he said. In fact, cashless doesn’t have to be a huge investment, according to Kever, because more often than not, it will be an ongoing process for small operators.

Kever started adding cashless readers 3 years ago, beginning with 10, and has added a few more each year as he sees fit. “The nice thing about it is that the upfront costs are minimal. I paid a few hundred dollars,” he said. Small operators are challenged with adding new technology because personnel is limited when it comes to installing the devices. Kever notes that if you get the right partnership with your technology provider, they may come and help you install the devices.

Plus, cashless has fewer service calls, says Kever, which is a relief for small operators who wear many hats in their organization. In the future he will continue adding cashless with Parlevel and USAT. “It’s hard to say what the growth will be for operators but the easier you make it for customers to pay, the better,” he said. “For us, implementation wasn’t difficult. In fact, even after implementation, challenges that come with cashless aren’t different from daily operational ones. I’ve never had a card reader fail.” The reliability of the equipment and ease of installation made cashless a hasslefree investment for Kever.

A guide if you’re mid-size

Medium-sized operations — which make up 26.6 percent of the industry with a revenue range between $1 million and $4.9 million — face similar benefits of cashless. Gary Arwin, president of Orlando, FLbased Gator Vending, Inc., began beta-testing a cashless option for a company in 2012, but when the tech company went out of business, Arwin turned to PayRange, beginning with 30 PayRange devices. Today Arwin uses both PayRange and USAT and 35 percent of his sales are cashless, which has reduced cash loss risk and increased sales. “We have more than 200 machines with cashless,” said Arwin. “And with two-tier pricing, cashless is a worthwhile investment.” Medium-sized operations – which make up 26.6 percent of the industry with a revenue range between $1 million and $4.9 million – face similar benefits of cashless. Gary Arwin, president of Orlando, FL-based Gator Vending, Inc., began beta-testing a cashless option for a company in 2012, but when the tech company went out of business, Arwin turned to PayRange, beginning with 30 PayRange devices. Today Arwin uses both PayRange and USAT and 35 percent of his sales are cashless, which has reduced cash loss risk and increased sales. “We have more than 200 machines with cashless,” said Arwin. “And with two-tier pricing, cashless is a worthwhile investment.”

Vending operators, no matter the size, have the option of buying, renting or leasing card readers, but as Arwin notes, that decision is up to each operator. “We do all three because we didn’t know right away which one would make more sense for our company,” he said.

Ryan Harrington, president of Portland, OR-based Royal Vending went 100 percent cashless in 2015 in a partnership between Parlevel and USAT. He pays a monthly service fee but says the fee isn’t a negative factor in offering cashless. Rather, integrating cashless allowed the company to consolidate and become more efficient, eliminating some labor costs. “Now that I’ve done this, it keeps us competitive,” said Harrington. As a mid-size operator, Harrington worried that getting into cashless might be an expensive endeavor, however, the ROI was immediate.

The setup and implementation was simple, too, Harrington notes. “We deal with the cashless provider very little.” Harrington warns operators that an additional investment may be needed if the signal at a location is weak, in which case an antenna may be necessary to ensure transactions go through.

Scott Halloran, co-owner of Richmond, VA-based Trolley House Refreshments, agrees. “Cellular coverage is an issue at some locations,” he noted. “Some buildings simply do not have the signal we need to run the cashless units.” To remedy the challenge, Trolley House Refreshments — which has grown to 85 percent cashless with NAYAX — works with its clients to find solutions such as cellular repeaters, internet connection, or exterior antennas on the building. “This is another layer of cost for the operator,” Halloran continued.

One of the biggest challenges Trolley House Refreshments faces as a medium-size operator growing into the ‘large’ category is manpower to focus on the deployment of cashless. “We have to fit deployment in around our normal operations which slows the process,” he said.

Additionally, there are challenges with managing data once an operation begins adding technology. “Data management is a struggle for an operation of any size,” said Halloran. “As operators we are all using three to six different platforms, many of which do not communicate with each other. Deploying cashless is another database to manage and we have to be careful when units are swapped from one machine/location to another to keep the data accurate in the backend system. This can get messy. Our partner has listened to our issue and is working on a solution that will auto populate data using the VMS information.”

Despite the challenges, customer acceptance of cashless is high for Trolley House Refreshments. In fact, usage can be as high as 50 percent at some locations. In 2017 the company’s goal is to merchandise its machines differently with higher price point items that did not sell prior to credit card acceptance.

When growth continues

For large and extra-large operations — categorized as those companies with a revenue of more than $5 million per year — adding cashless is no easy feat. Those operations must consider hardware costs, transaction costs and service charges, according to Mike Coffey, senior vice president of strategic initiatives for Canteen Vending which currently has more than 100,000 vending machines with cashless capabilities through Crane, USAT and Cantaloupe. When getting into cashless, Coffey warns that operators need to know what network they will be on and invest in technology that will work with network changes. “AT&T just shut off 2G and we had to travel to 12,000 machines and make upgrades on our equipment,” said Coffey. “Make an investment into the most futuristic network, even if it’s a quarter more for that service, you’ll save money in the long run. Otherwise you’re going to have to replace the card or the whole reader and you’ll have to cover the costs associated with installing and changing them.” Coffey recommends going with a 4G network. “You might have issues with signal at some locations so do your research on who the best carrier is in the area. Even then, that might not be enough so you’ll have to invest more in a booster signal,” he said.

Coffey warns that the larger a company gets the bigger the management task when adding cashless. The company has trained its drivers to swipe a card and cancel the transaction during each stop to guarantee the device is operating properly, which cuts into time spent at the location.

One thing large and small operators alike have in common is that cashless is an ongoing investment, says Roger Sweeney, vice president of sales at Illinois-based Ace Coffee Bar, which uses both Microtronic US and USAT. The company first started into Microtronics pure cashless system when a customer had to eliminate the use of change in its manufacturing plant. Since then the company has installed a second large facility with Microtronics cashless system, and has USAT readers on 30 percent of its machines.

While the company has seen 30 to 40 percent card usage on machines and an 11 to 15 percent sales lift at locations, there have been challenges, too. “There’s a difficulty recovering the cost at first,” said Sweeney. “But card processors have dropped the price down in the last six months, so it has been less expensive.” Sweeney sees a return on investment in about one year in most locations.

But cashless isn’t just about swiping a credit or debit card, says Sweeney. It’s also about creating an experience for the customer. “Cashless also means you can offer Apple Pay or Android Pay,” said Sweeney. “The only tough decision is choosing which payment methods you want to offer. We are betting on Apple Pay.” Offering these up-to-date payment options has kept Ace Coffee Bar ahead of the competition. “Cashless is good because it keeps us contemporary and it helps with customer retention,” said Sweeney.

Investing in tech

Generally, Coffey notes, it’s beneficial to add a cashless option. In fact, it’s just simple math. “Even a machine doing $1,000 per year in sales is making money with cashless,” said Coffrey. “So why not do it?” Zachary Oliver, operations manager at Dependable Vending believes it’s also an essential investment for operators looking to grow. “You have to offer it in your accounts or you’ll be bumped out, guaranteed,” he said. Oliver recommends that operators network outside their area of business and shadow an operation installing cashless. “Ask questions and learn what’s compatible with your business.”

Cashless doesn’t come without its learning curves, but it can be a simple investment that reaps great rewards.