Many operators are expressing interest in cashless vending as a very real opportunity to grow their businesses. With less than 5% of all vending machines now configured to accept card-based payments, this curiosity is certainly understandable.
The escalation in consumer credit card usage, competitive pressures and the need to seek out vehicles that increase revenue and expand margins are all helping stoke the fire of cashless payments. Naturally, with this growing interest, operators have many questions about the mechanics of accepting credit and debit cards, including the technology, the security and processing requirements, and, of course, the costs of making such a move.
The most frequently asked questions revolve around choosing the physical locations for cashless vending machines. Most likely, every bottler and operator has several strong candidates for these solutions. But identifying these locations can be tricky. There's no "cookie cutter" solution that will work ideally in every location. Our experiences tell us that combining the right locations with the right products can generate substantial profits. But in order to achieve these benefits, operators have to do their homework.
KNOW THE TERRITORY
Understanding the profile of the vending location is the first step in vetting a site for cashless payments. Operators need to consider a number of variables: demographics, product preferences, price elasticity and tolerance, and site traffic patterns.
Buffalo Rock (Birmingham, AL), the nation's largest single-family, privately owned independent Pepsi bottler, joined with MEI and Apriva to conduct an in-depth field trial of cashless in 2010. The results of the study provide strong evidence that cashless can be profitable in the right situations.
Jim Jernigan, vice-president of administration, technology and strategic support at Buffalo Rock, observed that "cashless vending makes sense for Buffalo Rock. But it's not a magic bullet by any stretch of the imagination. Think about location, products and prices carefully. If you can work out this balancing act, the profits will be there."
Certainly, such high-traffic areas as airports, shopping malls, military bases and entertainment venues are attractive locations for cashless payments. But they are just the tip of the iceberg. There is a whole universe of other spots – some obvious and some not – that, if they fit a particular profile, may support cashless vending successfully. Operators should take a look at a number of attributes to assess the opportunity for success.
To help identify the right locations, consider a number of demographic traits:
• Consumers under the age of 35 tend to prefer card payments; the trend is even higher among young adults and teenagers.
• Consumers are more likely to make a $1 to $5 purchase on a card, rather than with cash.
• Consumers who are "ready to buy" but have limited choices or limited access to cash - such as at an entertainment venue, behind security at an airport, in a city location, or in a hospital or campus setting outside foodservice locations or hours.
SALES VOLUME & PRICING
Choosing the right location also means establishing the right balance between products, sales volume and vend prices.
Locations that historically do well with cashless have a number of commonalities:
• Vend price is typically more than $1.
• Sales volume must provide revenue sufficient to support the recurring costs for cashless payments, which typically run about $10 a month for communications fees plus interchange fees.
• Sites with inconsistent traffic - military bases, college campuses, etc. - must generate enough revenue to cover recurring monthly fees during periods when traffic is slow, like troop deployments and school holidays.
THE WIRELESS NETWORK
There's no way around it: cashless payments without strong network connectivity just will not work. And transactions conducted over wireless networks are substantially more efficient and secure than fixed-line solutions. Even more importantly, most facilities do not want vending machines hanging off their secured local networks, making Ethernet and Wi-Fi an impractical option.
That's why the leading cashless payments providers opt for wireless networks. But even with the technical advances made in wireless technology, not all locations are created equal.
Operators should carefully assess the connectivity of each location; the vending solution provider should be able to handle this task. If a location fits the right demographic and sales volume profile but has a weak signal, there's no need to despair. A number of remedies are available to boost signal strength, or even to network machines to a site with strong signal strength. In general, wireless technology is sound, secure and robust, and has enough ubiquity to work well in practically any scenario.
IT'S ABOUT LOCATION
Like any other real estate decision, the success of cashless vending ultimately comes down to location. It is not a panacea that will work in every location. Operators need to accurately assess the demographics, foot traffic, sales volumes and network connectivity in order to gain the most benefit from cashless solutions. But once these locations are identified, operators will very quickly see an uptick in sales, greater margins and improved profitability.
STACEY FINLEY TAPPIN is vice-president of sales for Apriva's POS division, where she oversees expansion of wireless payment technology products and development of new business revenue channels. Tappin has more than 20 years experience in sales and program management, strategic planning and global training. Prior to joining Apriva, she held a sales post at TSYS Acquiring Solutions and served 12 years at MasterCard International. She serves on the Electronic Transactions Association's membership committee.
For many operators, cashless vending is unexplored territory, full of uncertainties regarding technologies, payment processing procedures, security mandates and related costs. To help bottlers and operators successfully integrate card-based payment into their operations, Apriva (Scottsdale, AZ) has introduced the Cashless Coach program.
The program gives operators direct access to Apriva's team of certified experts who can walk them through each phase of implementation. These include the mechanics of card processing, establishing relationships with card processors and financial institutions, wireless technology support and choosing the right locations for cashless deployment.
Apriva is a leading provider of end-to-end wireless transactions and secure information solutions. Information on the Cashless Coach program is available at aprivavend.com.