CHICAGO -- A panel of information technology leaders presented an overview of existing and emerging technologies of interest to the vending industry during the NAMA OneShow in Chicago. The panelists were Anant Agrawal, a founder of Cantaloupe Systems; John Hickey, A href="http://www.tech2succes.com" target=_blank>Tech 2 Success; Michael Lawlor, USA Technologies; Yair Nechmad, Nayax; Paresh Patel, founder of PayRange; and Randy Smith, Smith Vending.
PHOTOS: Pictured, from left, are Paresh Patel, PayRange; Yair Nechmad, Nayax; John Hickey, Tech 2 Success; Randy Smith, LightSpeed; Anant Agrawal, Cantaloupe; Michael Lawlor, USAT.
Patel pointed out that vending, like other retailing channels, must come to terms with the younger generation. "They're different," he said. "They're our real target consumers, and they don't carry change in their pockets." What's more, he added, there now are more mobile devices than there are people. "The world around us is changing, and we must change, too. We're in the business of selling convenience, so our delivery system had better be convenient to use."
The rising generation relies on mobile devices for news, as an aid to social interaction and for a variety of transactions, from banking to receiving airline boarding passes. "The next step will be interfacing with the physical world, like Uber," he observed. "And that's where we fit in."
It is also necessary for the retailer to demonstrate affinity for its clientele. People coming of age in today's market are accustomed to "loyalty" programs, a trend begun by the airlines more than four decades ago. These have become widely used, as the technology of keeping track of purchases and customers has improved. "Look at Starbucks," Patel instanced. "Today, it's hard to build a long-term service staff to whom your customers will relate. This is the reason for loyalty rewards; but what's the best way to implement them?"
Another trend that must be accommodated is the growing consumer demand for "health" and "wellness," the industry veteran said. "As a former operator, I know that 'people don't buy that stuff' -- but now they do, and they're spending a lot of money on it. 'Better-for-you' products sell well in micromarkets; why would they not sell well in vending machines?"
The answer, to date, he pointed out, is that vending has lacked an attractive method for making a purchase that has a value of more than $1. The problem here is not so much technology as cash availability; people who routinely carry less and less change (and even banknotes) often find it awkward or undesirable to use a vending machine. This has created the perception of a "$1 price ceiling," but the constraint is not the customer's willingness to pay a fair price, but the ease and practicality of making the payment.
These demographic and attitudinal shifts described by Patel have created today's demand for noncash vending payment systems.
Yair Nechmad, chief executive of Nayax, an international leader in cashless payment technology, observed that the world has been undergoing a shift from the familiar swipe card that encodes user identity and other authentication data on a magnetic stripe to a smart card carrying an embedded chip that encrypts the data.
Specifically, the international market has moved toward the EMV specification (the name is short for EuroPay, Mastercard and Visa, which worked together on the standard). "EMV allows a 'handshake' between the card and a device without the need for a network," Nechmad explained. "But the United States has lagged behind other countries. The size of its market imposes a high cost on comprehensive upgrades involving new merchant terminals. And, to date, the U.S. has enjoyed a low fraud rate; merchants may ask, 'Why change?' But those days are over," he warned. "The old system is vulnerable."
For this reason, the Nayax chief predicts that EMV is coming, driven by changes in the rules governing liability for disputed charges ("chargebacks"). This process already has begun, and will affect everyone, sooner or later: "It's inevitable."
The change is bringing substantial benefits along with it, Nechmad emphasized. Nayax's international experience has demonstrated that EMV reduces loss caused by stolen cards. And EMV (and "contactless" NFC -- near-field communications) protocols have inspired a number of "wallet" applications, both closed and open. EMV offers greater transaction speeds and lends itself to a variety of techniques to promote sales, including interactive video and such incentives as time-of-day pricing, especially in closed environments. Operators can benefit by preparing for EMV when it is fully deployed in this country, the speaker noted.
John Hickey of Tech 2 Success noted that implementing vending management software is a process that provides the greatest benefit when done in the context of a comprehensive plan. Operators, in general, install a VMS in order to gain detailed accountability, more efficient route management, fast and accurate calculation of commissions and taxes, performance reporting and, perhaps, office coffee service order processing and inventory management.
"But now add better moneyroom information, fast and efficient 'pick-to-light' warehouse automation, and sales analytics," Hickey advised. The system can provide the information needed to prepare effective planograms; and, with some third-party software added, will handle accounting, dining POS systems for manual operations, and can accommodate micromarkets.
"You can merge separate systems," the Tech 2 exec said. "The purpose of data integration is to combine information from disparate sources into a meaningful form." The DEX standard does this, to some extent, by making the machine's data available for humans to read. And the ideal is interoperability, in which systems work together with no special effort on the part of the user. "The call today is for one system that can accommodate telemetry and cashless payments," he said.
The National Automatic Merchandising Association is spearheading this effort, Hickey reported. The most recent step in this right direction is the Vending Data Interchange project, which is assembling and publishing a series of standards for use by software and hardware developers in producing solutions that will work together seamlessly. Its most recent advance is the publication of a standard for vending management and micromarket system integration.
"You need a robust vending management system as a foundation for your business," Hickey summed up. "And you may need other applications, as well, so the ability to integrate them is important. Remember that implementing technology is not a goal, but a process that will help you achieve your goals."
Lightspeed Automation's Randy Smith pointed out that the much-discussed millennials are not only vending's future customers, but also its future employees. And making employment in an enterprise attractive to them is as challenging as making the vending machine an attractive destination for shopping.
"What do these young job candidates know about you? What we need is 'innovation of motivation,'" Smith observed. "Salesforce.com speaks of a 'war for talent,' and the campaign today is driven by the employees. There is a good deal of discussion about an 'epidemic of disengagement' today; by some estimates, 63% of employees are 'engaged' -- the rest aren't."
The Internet has brought about unprecedented transparency, and this, in turn, has created what is being called "the naked organization," the speaker continued. Just as the website Yelp enables customers to critique sellers, sites like Glassdoor allow employees to critique their jobs. "A prospective employee can do a background check on a company -- so the candidate is, in effect, interviewing the prospective employer! In hiring today, the question is: Do they want to work for you?"
Smith recalled that General Electric's celebrated former chairman and chief executive said, "Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others." Millennial job candidates value candor and the opportunity to put their talents to work in order to advance, the LightSpeed executive summarized, and managers who can establish the right company culture stand to be the winners.
Anant Agrawal, who cofounded Cantaloupe Systems, emphasized that the workplace services industry does not sell vending machines, micromarkets or coffee brewers. "We sell food and beverages," he reminded the audience. "As operators, you sell solutions to problems: hunger, thirst, fatigue ... You're in the refreshments business."
That business has evolved dramatically from its origins in the past century. The speaker recalled that the classical arrangement involved a client who wanted a vending machine, an operator who put one in, and a driver who filled and collected it. The driver brought back the collection and data, in the form of a route ticket. Computer systems became available to process the information on those route tickets, and eventually to replace them.
Things became more complex when the client asked for coffee service, too. The operator responded by putting in a brewer and setting up a system for selling and delivering coffee kits. And software became available for keeping track of clients and their specific prices, their purchase and payment histories, and related information. Again, this could be run on a desktop computer, even a well-proven model powered by a 386 microprocessor.
In today's market, however, the client is likely to ask for a micromarket, and the operator must contend with an increasing variety of payment systems, as well as highly specific product requests (for example, healthier food). Micromarkets supply their own data, which must be processed, too.
"You can't scale something like that, with three systems for reporting and control," Agrawal argued. "And it's not about food. Can you have one way to enter all that data into one system?" This question requires an answer, and the Cantaloupe official promised that an answer is at hand: "Expect a single software solution for vending, coffee service and micromarket operations."
Mike Lawlor reported that USA Technologies has been fortunate in growing along with the adoption of cashless payment technology in vending. "We've tracked average vending sales since 2008," he said. "Today, two in five vending transactions -- about 37% -- are cashless purchases. This figure has more than doubled since 2008."
To date, Lawlor continued, 98% of those cashless vending purchases are made with cards, with debit cards accounting for three of every four sales. Payments made with mobile devices over NFC links and with other types of mobile wallet account for the remaining 2%. "But I expect that this percentage will grow," he forecast. "Mobile wallets are great for vending purchases, and so wallet providers love vending." He noted that 16% of Starbucks sales are made by customers with mobile devices.
USAT's knowledge base also allows an overview of the typical effect of adding a cashless payment option to a vending machine on location. "During the 12 months following the installation, cash sales don't decline," Lawlor reported. "In fact, they grow; but noncash sales grow more." The noncash percentage generally approaches the 37% average after the system has been in place for 18 months, he said.
At present, colleges and healthcare facilities often require card-based payment systems other than the major credit and debit cards; Blackboard and Cbord are widely used by colleges and universities. In the business-and-industry sector, payroll deduction systems are finding favor. The payroll deduction method has proven its ability to capture 50% of vending sales.
"To maximize your cashless sales, market the capability," Lawlor advised. "The goal is to be able to tell your audience, 'We accept all credit and debit cards, as well as Apple and Android Pay ... And be sure you address the PCI compliance issue; consumers care about this. Think about consolidating your payment systems so you deal with one provider, one payment processor and one loyalty program."
NAMA ONESHOW TECHNOLOGY SPOTLIGHT
April 13-15, 2016, McCormick Place, Chicago, IL
ONE STOP: Todd Elliott, Tomdra Services (Tucson, AZ), gets an update on Cantaloupe Systems' comprehensive telemetry, cashless payment and management software solution from Cantaloupe's Nancy Woodham.
ENGAGEMENT: USA Technologies' Mike Lawlor (l.) reviews new ePort Interactive terminal with industry veteran Chuck Treister, U.S. Vending Management LLC (Orange County, CA). The latest ePort combines the best features of the original ePort reader with a multifunction touchscreen to enable cloud-based interactive media and content delivery management, nutritional information delivery, remote refund administration, loyalty program management and the conduct of multimedia marketing campaigns. The new platform complies with the Payment Card Industry Data Security Standard (PCI DSS). It supports magnetic-stripe credit and debit cards, as well as NFC mobile wallets including Apple Pay and Android Pay.
END TO END: Pictured, from left, are Matt McDonald, Anaid Gonzalez and Mark McCauley of Vendwatch Telematics, which unveiled its Vendmine system at the NAMA OneShow. Vendmine is a vending management and reporting system with cashless payment option. The heart of the system is the VM Connect telemetry module (Gonzalez is holding one), which incorporates an internal power supply and offers a universal DEX processor with Bluetooth data retrieval capability, battery-backed bidirectional communication over a secure network and support for status sensors that monitor electric power, door status and internal temperature. It makes provision for automated remote price changes or corrections. VM Connect can be expanded to accommodate VM Pay, a versatile cashless payment system that can handle magnetic-stripe and chip cards, as well as mobile payment options, including Apple Pay and Android Pay (McDonald and McCauley are showing VM Pay terminals).