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Chicago Convention Probes Market, Technology And Government Affairs

Posted On: 10/20/2009

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National Automatic Merchandising Association, vending trade, NAMA, vending, vending business, vending route, vending operator, vending trade show, automatic retailing, coin-op, coin-operated machine, foodservice, food service, beverage industry, hot drinks, OCS, office coffee service, Ken Schmidt, Ben Stein, Paul Schlossberg, Richard Geerdes, Jim Brinton

CHICAGO -- The pervasive weakness in vending's traditional market sectors did not deter operators from thronging the National Automatic Merchandising Association National Expo here. The 2009 convention and trade show, held in late September, returned to Navy Pier after half a century. The mood of the showgoers reflected a growing consensus that vending, which went into a slump well before the rest of the economy, is also in the vanguard of recovery.

Industry members had the opportunity to take part in the latest presentation of NAMA's expanded Quality Coffee Certification Program on the opening day of the convention, led by coffee industry veteran and consultant Mike Tompkins. The six-hour, in-depth workshop offered participants an overview of coffee from its countries of origin to its delivery to the consumer's cup, addressing different methods of harvesting and processing coffee beans, grading and trading them, roasting and grinding, and packaging and preparation. The program emphasized the factors affecting the quality of a brewed cup of coffee, from coffee type, grind and roast color through water quality, temperature, volume and contact time.


A choice of three concurrent educational programs followed. Mark Manney of Loss Prevention Results explained how operators can bolster profits by improving accountability to minimize shrinkage. The key to doing this, he said, is for management to establish and maintain a ''culture of control" that encourages honest employees to stay honest, and quickly identifies the dishonest ones for appropriate discipline and termination. He brought the audience up to date on developments that can improve surveillance and close gaps in the process of collecting receipts and delivering them to the counting-room. These include small covert video recording systems and a new line of disposable, bar-coded collection bags, available both for manual cashier stations and vending machines, that are designed for easy integration into audit systems using DEX data automatically collected by vending machines.

The second presentation was made by Paul Schlossberg, D/FW Consulting (Goshen, NY), a veteran vendible product developer and broker who now serves as an industry consultant. He urged operators to take their cue from their retail competitors in an economic climate in which capturing the largest possible ''share of wallet" possible is critical.

Increasing ''same-store" sales by driving repeat business and raising transaction averages is the overriding goal, according to Schlossberg, and he assured seminar participants that there is no situation in which they can't find a way to do that.

Strategies he suggested include placing idle machines back in the field alongside existing equipment, and merchandising them with unique products. There is also an opportunity for the vending industry to capture a larger share of the growing away-from-home breakfast market that's now dominated by fast-food restaurants.

It is imperative that operators find ways to deliver and convey value to cash-strapped consumers, considering the popularity of $1 menus at fast-food restaurants, according to Schlossberg. The speaker also recommended that vendors find ways to use social media like Facebook and Twitter, and participate in on-machine advertising programs to generate excitement around vending while keeping the industry relevant to a highly demanding and technology-centered generation.

At the same time, Dr. Michael Kasavana, NAMA Endowed Professor at Michigan State University's School for Hospitality Business, led a two-part seminar on ''Leveraging Vending Technology." He led off by emphasizing that steady improvement in communications and data processing have produced management tools that can give alert operators a competitive edge by enhancing route productivity and customer satisfaction and maximizing sales while streamlining inventory and logistics. Intelligent deployment of these tools will enable the industry's advance from automated retailing to what Dr. Kasavana calls ''V-commerce," offering patrons unprecedented convenience, reliability and choice.

Panelists for the first part of the session included Mike Lawlor, USA Technologies; Glenn Butler, Crane; Anant Agrawal, Cantaloupe Systems; Doug Haddon, MEI and Gene Ostendorf, InOne Technology.

Lawlor explained that the rapid increase in costs has outpaced the vending industry's ability to improve prices for its traditional product mix. Adding a cashless option greatly expedites the sale of higher-value merchandise, like premium cold drinks. USA Technologies has assembled the real-world results obtained by operator customers into a knowledge base that demonstrates the effect of allowing consumers to use their debit and credit cards at machines equipped with USAT's ePort system. It also identifies the types of location in which the benefit is most pronounced. This information is available to operators who want to implement cashless vending.

Haddon of MEI emphasized that a good, full-featured management information system is the necessary foundation for applying attractive new tools, such as remote machine monitoring, cash-and-cashless vending and accurate forecasting to allow individual machine orders to be made up in advance. He added that, once the management software is in place and working well, maximum benefit is obtained by using the information gathered from it to modify procedures, gauge the effects of each modification and continually make adjustments that will maximize return on investment.


InOne Techology's Ostendorf, a long-time advocate of open architecture and full interoperability to permit operators to mix and match products from different suppliers, hailed NAMA's establishment of a Vending Data Interchange standard as a major step in the right direction. Since data from machines is transmitted to different remote servers (for telemetry and for cashless transaction processing, for example) and those servers then must relay it to operators' management information systems, it is essential for all the data to be formatted and encoded in the same way, and transmitted under the same protocol. VDI is designed to ensure this, Ostendorf said.

Cantaloupe's Agrawal explained that remote machine monitoring simply speeds up the flow of information that always has made its way from the machine to the operating company's office. Traditionally, details of the merchandise loaded into and cash removed from each vender, and of machine malfunctions, has been obtained by the driver, brought back to the company and turned over to the office staff, which records it, initiates necessary action and informs the manager. A telemetry system delivers the same data directly to the manager much more quickly, without eliminating the links in that chain, each of which does other things. Rather, it allows them to do those other things more efficiently -- and has many additional uses. Equipping machines for remote monitoring also makes it easy to add cashless transaction capability, Agrawal pointed out. He reported that Cantaloupe's operator customers have experienced very positive results, ranging from cutting the number of routes almost in half to winning most bids.

Crane's Butler observed that the new Vending Data Interchange standard will accelerate the industry's adoption of new technology by freeing operators from the fear that an investment in a particular system is an ''all-or-nothing" proposition. It will allow selective use of different solutions from different suppliers, he said. Butler noted that VDI 1.0 deals with DEX information exchange between servers; the next version, now under development, will cover the alerts sent from one device to another. Under consideration are definitions for configuration interface, the sharing of master files, programming machines remotely (for example, changing prices from a central station), and a standard cashless interface.

In the second part of the session, the inital panelists were joined by Warren Phillips of Validata Computer & Research; CompuVend's Mark Kronenberg; Cary Sagerty of USA Technologies and Chris Lilly, Best Vendors/Compass Group, coordinator of the VDI task group. They discussed the importance of easy integration, transparency and modularity, and fielded questions from the audience.


The association conducted its annual membership meeting, during which LyNae Schleyer, NAMA's senior director of education and trade shows, welcomed members to the last fall ''National Expo" and observed that the new OneShow, slated for April 28 through 30 at Chicago's McCormick Place, is an event to which everyone can look forward with eager anticipation. OneShow will supersede the traditional two yearly conventions, and Schleyer noted that it will go further than they did in uniting the industry.

Trade show chairman Howard Fischer, U.S. Roasterie (Des Moines, IA) then introduced Jim Brinton, Evergreen Vending (Tukwila, WA), NAMA board chairman for 2008 and 2009. Calling the meeting to order, Brinton presented the list of nominees to the association's board of directors and the members present approved their election.

Brinton noted that ''our industry is not different from others; we can use the present 'downtime' to get ready for the good times that lie ahead." Few industries have as much new, potentially transformative technology available to them as vending does at present, and the operators who succeed will be those who study, evaluate and adopt the solutions that will make them more competitive and profitable.

NAMA president Richard M. Geerdes brought members up to date on the association's major initiatives: government affairs, next year's ''OneShow," and the fast-changing coffee service business. He explained that NAMA's revenues, like those of most operating companies, are down, but there are encouraging signs of revival. ''We're moving again, and we have to look up," he emphasized. ''We must change and evolve."


Keynoting the annual meeting was Ben Stein, an economist and attorney who has won fame as an actor, game show host and writer. He congratulated the NAMA membership on having ''a president whose slogan is 'change you can believe in'" (to which Geerdes replied, ''Thanks a lot!"), and explained that he is an enthusiastic consumer of vendible products, ''especially ice cream sandwiches."

Stein offered a brief overview of last fall's financial crash and the ensuing recession, which he described as a particularly bad one and attributed to ''the total incompetence of those who run the financial sector." As bad as things are, he said, he often wakes up thinking, ''thank God I'm waking up in America."

He went on to deliver a biting commentary on contemporary attitudes that he regards as personally and socially destructive: contempt for knowledge and skill, ingratitude, refusal to accept responsibility, self-centeredness, ignorance of history, improvidence and obsession with the present moment. He explained how these traits can ruin one's life. To ruin the country, he continued, one can ''privatize reward while socializing risk," stifle entrepreneurship with regulation and litigation, allow the courts to make the laws, and ''believe that politicians have our best interests at heart." But to save the nation, he concluded, what is needed is hard work, asking hard questions, practicing forgiveness and ''knowing one thing about God: you're not Him!"


Following Stein's presentation, showgoers had a choice of two educational sessions. The first was led by Casey Fictum, president and chief executive of Hi! Gen Y, who shed light on how to best attract customers in the younger demographic, which encompasses some 70 million consumers born between 1977 and 1995. He also outlined strategies to most effectively hire and retain them as employees, and win their loyalty.

Like Schlossberg, Fictum (himself a 21-year-old Gen Y'er) underscored the importance of technology to his generation and the need for operators to engage younger patrons through social networking, which can generate word-of-mouth marketing for vending. Fictum said vending innovations, including the new machines with touchscreen interfaces he saw in the exhibit area, are what's needed to ''wow" his demographic and capture more dollars from the generation that is conditioned to instant gratification. ''Healthy" and trendy products are also a big draw for Generation Y, he added.

As employees, Fictum said, Gen Y'ers -- contrary to the widely held view that they are lazy -- will work hard if they feel their duties are challenging and that their efforts are valued. They also demand flexibility in their schedules and seek an element of fun in their work environment.

In the concurrent session, Bill Teller of AssetPro, accompanied by Gary Pretzer, Consolidated Services Group, offered an overview of the increasing drag exerted by unproductive equipment on coffee service operators and outlined a plan for putting it to profitable use. A 30-year industry veteran, Teller has held executive sales and marketing positions with Bunn, Bloomfield Industries and U-Select-It. Pretzer also is an industry veteran, having established, built and eventually sold a respected OCS operation.

They pointed out that asset management in coffee service and vending, as in most industries, involves a cycle of procurement, service and maintenance, and refurbishing or disposal. Because OCS brewers traditionally have been inexpensive when compared with vending machines or vehicles, operators have tended to regard them as essentially disposable; when they cannot readily be put back out on location, they accumulate in the back room. As brewers become more complex and costly, and the competitive climate requires more frequent reinvestment, the failure to find a use for that idle equipment becomes increasingly costly.

Teller discussed the calculations used to determine return on investment in equipment, and outlined ways to put unproductive assets back to work. He pointed out that, at present, mass-market auction websites like eBay have found some favor with operators wishing to sell old brewers. The difficulty is that, because most of the prospective buyers are not engaged in OCS and don't know the industry and its members, they exact a high ''risk premium" when bidding on equipment. But this equipment still can have real value for operators in particular markets and serving certain kinds of accounts. ''What if we work together to create an OCS member-owned equipment exchange?" he asked.


On the closing day of the convention, Ken Schmidt, former director of communications for Harley-Davidson, inspired showgoers to take a fresh approach to sales and marketing in order to attract and retain more customers. In a lively presentation entitled ''Make Some Noise," he emphasized that business owners who work to understand what attracts (and repels) people become more effective at winning customers and securing their loyalty.

''At the end of the day, we do business with people we like," stated the branding legend. ''They don't just buy for the product; we have to give them a reason that transcends price, and that sets us apart from our competitors who offer exactly what we do." By understanding that people make decisions based on an emotional connection and not a logical one, and adjusting their business approach accordingly, Schmidt explained, operators are guaranteed to grow their customer base.

Connecting with consumers on a personal level helped Harley-Davidson recover from near bankruptcy in the 1980s and is the underlying reason why a $25,000 Harley-Davidson continues to outsell competing motorcycles with comparable features that cost a third of the price, he summed up.