EDITOR'S NOTE: Information contained on this page is provided by Apriva as a case study submitted for consideration. VENDING TIMES did not interview the parties represented in this article.
CHARLOTTE, NC -- As far back as Terry Hester can remember, the vending business has meant lots of hard work and time invested in running all its aspects. But the owner and chief executive of AmeriVend learned that generating consistently substantial profits was an ongoing challenge in vending, and that hard work and time alone were not enough.
"For years, we've had to run the day-to-day operations on paper-thin margins, because we were convinced that the competitive environment inhibited us from increasing vend prices," explained Hester. "We were afraid that if we boosted the price for a can of soda, our customers would flock to the machines of our competitors to make their purchases. And the competition had the same concerns that we had. As an industry, vending was -- and frankly, still is -- completely stagnant. There is little room for growth under the old business model of trying to squeeze out profits in a totally commoditized environment."
AmeriVend operates about 600 machines in the Charlotte metropolitan area, selling a wide variety of products, including snacks, drinks and coffee. While AmeriVend's cash-only operations ran in the black, there were escalating costs with which to deal: ongoing maintenance, and overhead required for collecting, counting, transporting and depositing cash receipts.
Like many other operators, Hester found the notion of cashless payments intriguing, but initially resisted the integration of cashless technology. He assumed that the costs associated with deploying new technology would probably chew up what little extra profit the move would yield.
This preconception was proven wrong when AmeriVend placed a bid to provide vending services at a high-profile location in downtown Charlotte.
YOU DO WHAT YOU HAVE TO DO
"The property manager mandated that in order to win the bid, the vendor was required to supply the technology to accept cashless payments at these machines," Hester recalled. "We were somewhat surprised to see cashless as one of the requirements. We had not come across this before. But winning the bid was important to us, so we agreed to comply and as fate would have it, our bid was successful."
With the incentive to use cashless technology at the downtown Charlotte location, AmeriVend investigated a number of cashless technology vendors and services. Hester elected to integrate MEI's cashless bezels into the machines. For the wireless transaction processing, he chose the Apriva Vend solution, which provides a comprehensive service that includes all system software, payment processing, wireless services and reporting tools. The ability to use an end-to-end service was particularly appealing to AmeriVend.
"The Apriva Vend solution is delivered as a service, so we don't have to worry about tying together a lot of moving parts," Hester said. "From an operations perspective, this is critical. We didn't have to worry about integrating disparate systems -- Apriva did all the heavy lifting. Once we were set up and running, we found the technology to be completely reliable and secure, and it was easily integrated with our back-office processes, ensuring that we had full command and control of every machine."
According to Stacey Finley Tappin, Apriva's vice-president of sales, the initial trepidation most operators experience when considering cashless technology soon dissipates when they learn about the economic benefits.
"By and large, the operators we speak with understand the value of cashless technology, but they are convinced that it is an expensive proposition that will not deliver a tangible ROI," Tappin said. "But when they see the numbers from both projected top-line growth and the money they'll save in lower operating costs, a light comes on and they say 'yes, this does make sense.' And we're seeing more operators come to this realization every day."
Hester's experiences support this claim.
"The cashless technology has performed exceedingly well; much better, in fact, than we had anticipated," Hester noted. "We have had no issues with the card reader, and the wireless transmission service is more reliable than we had originally expected."
According to Hester, the reduction of cash has improved efficiency. "With coin mechanisms and bill acceptors come jams, malfunctions, theft, vandalism and a host of other issues," he explained. "This is not the case with the cashless payments. I think we may have had three or four instances over the course of the year where a cashless system was not functioning properly. With cash-only machines, we could easily experience malfunctions every three or four days. In terms of reduced maintenance, there is no comparison between the two technologies.
"In addition," he continued, "collecting, counting, bagging and transporting cash is expensive and cumbersome. Cashless has helped eliminate these huge headaches, and has made us a more efficient organization."
Another component of the cashless solution that appeals to AmeriVend is the full array of reporting tools available to the company, which provides it with instant visibility into the financial performance of its cashless operations.
"The reporting tools allow us to track the revenue of each machine, and give us full, detailed reports on the profitability of every route and every location," Hester said. "We know exactly what products are selling, when we need to dispatch trucks and service personnel, and what our profits should be. Our staff has found the reporting tools very easy to set up and use. If we have any questions, Apriva's support team has always been able to help us out at a moment's notice."
PRICING TO REFLECT VALUE
But the biggest impact the cashless vending solution has had is enabling AmeriVend to break out of the commodity cycle and start charging appropriate prices for its merchandise. This strategic move has helped AmeriVend recoup the cost of investing in cashless technology much faster than it expected and, most importantly, has allowed the company to increase its profitability almost instantly. Rather than cannibalizing its strong cash-only revenue, AmeriVend found that the integration of cashless actually produced an increase in sales across the board.
"Our cashless sales now account for some 40% of our revenue, and that percentage is steadily growing," Hester said. "And our cash-only sales have remained consistent, which was just as surprising. We've noticed that many of our customers appreciate the convenience of paying by card. This convenience has certainly translated into higher sales, as consumers can now make purchases when they want, without having to worry whether they have coins or small bills. In this particular office setting, the cashless payment option was definitely well received."
While providing the added convenience, AmeriVend took the opportunity also to raise vend prices 5¢ across the board for its drinks and snacks. While the notion of raising prices a few years ago was practically unthinkable, Hester saw cashless as the perfect opportunity to align potential growth with operating expenses.
"Adjusting the prices of our merchandise has made a big difference for our business," the operator said. "We've found that the price increase hasn't affected sales one bit. Our customers who pay by card enjoy the convenience of doing so. They are looking to buy that snack or drink on the spur of the moment. When paying by card, the price almost becomes secondary."
According to Dr. Michael Kasavana, professor of the NAMA-endowed chair at Michigan State University, the ability to fine-tune vending prices is a significant benefit of cashless technology.
"I speak with countless operators around the country who continually bemoan the fact that they are working harder than ever to make some profit in an environment beset with razor thin margins," Kasavana said. "The experience of AmeriVend should be a shining example for all operators who are looking for readily available methods to expand their customer base and improve profitability."
With its first foray into cashless payments a resounding success, AmeriVend is now looking to integrate the technology at other locations throughout the Charlotte area. While cashless may not be the right choice for some locations and clientele, AmeriVend is reviewing location and customer profiles to select the sites that are likely to provide similar positive results.
"The numbers speak for themselves, in terms of sales and profits," concluded Hester. "We are looking at a number of locations across the network that we think would be ideal for this particular technology. In Apriva and MEI, we have the right partners to build on this foundation. It was the right decision to implement cashless, and we see it as an important part of our growth strategy."