Monday, January 22, 2018 | Today's Vending Industry News
Industry Sees Pluses, Minuses In 2002 Business Outlook

Posted On: 12/25/2001

  • Printer Friendly Version
  • Decrease Text SizeIncrease Text Size
  • PDF

U.S.A. - The economic downturn heralded by the bursting of the Internet bubble last year took shape as 2001 progressed, and has been intensified by the continuing impact of the terrorist assaults of September 11. However, the duration and even the precise nature of the slowdown remain unclear, and the vending and coffee service indutry enters the new year with some reason for optimism, especially in the areas of energy cost and availability of labor.

Nine months ago, the workplace route service industries were grappling with spiraling fuel costs and intense competition from other service industries for qualified employees. The summer of 2001 saw demand for electricity outpacing supply, which had a severe impact on business and industry locations in many markets and which created serious problems for vendors running food, milk and ice cream machines.

Some observers would be willing to trade today's problems of declining sales occasioned by location downsizing for those of last spring and summer, especially in view of the entirely new challenge posed by intense security awareness on the part of locations in the wake of the recent attacks. An industry convinced of the vital importance of route efficiency now confronts restrictions on access that slow down route deliveries and impose new requirements for employee screening and identification. While many hope that an increasingly professional approach to surveillance and screening will address genuine security threats without extensive disruption of everyday commerce, the increased difficulty of making deliveries and providing technical support seems likely to increase operational friction for the foreseeable future.

The economic downturn was in prospect throughout last year, and speculation centered on its likely length and severity. The energy crisis last summer had more or less serious economic consequences, depending upon market area, and 2001 was not shaping up as a banner year for stocks even before the shock of September 11.

The principal question, of course, is the overall outlook for the nation's economy in 2002. The consensus seems to be that the worst is over, and recovery will become evident in the second half of the year, although the pace and strength of that recovery are impossible to predict.

According to the Bureau of Labor Statistics, weekly claims for unemployment benefits hit levels exceeding 500,000 in October, as business reacted to the September 11 assaults. By mid-December, the rate had fallen to fewer than 400,000 claims per week.

At the same time, The Conference Board (New York City) reported that consumer confidence has risen steeply this month. The Board's consumer confidence index uses 1985 as the base year (index=100), and is based on a monthly survey of 5,000 representative U.S. households. The December survey showed the index rising to 93.7, up from 84.9 in November.


"The deterioration in current economic conditions appears to be reaching a plateau," said The Conference Board's Consumer Research Center director, Lynn Franco. "Consumers' short-term optimism is no longer at recession levels, and the upward trend signals that the economy may be close to bottoming out and that a rebound by mid-2002 is likely."

The challenge for vendors during periods of suppressed economic activity and consequent reduction of workforces is to maximize sales to the customers who remain. The industry confronted this issue during the downturn a decade ago, and continued to grapple with it in the ensuing flurry of "downsizing." Many of the solutions devised and tested then have found a role in vending. They may well be taken to the next level before employment recovers..

One of these approaches is category management, a method developed by new-generation high-volume retailers. As applied to vending, and discussed and demonstrated over the past decade, it involves determining the mix of product types, or categories, that will appeal to the patrons in a specific location. With that framework in place, the next step is to adjust the number of items to be offered in each category, conforming to the tastes of the machine's patrons, and to identify the most popular.

The key to achieving this is to track sales continually, which high-volume retailers accomplish through monitoring the information flowing from scanner-equipped electronic cash registers. This allows swift adjustment of product reorders and ongoing assessment of store profitability.

New technology is becoming available to help operators obtain the same sort of information from vending machines, and to enhance consumer convenience as well.

The rapid pace of development in data communications has made practical two advances that have been discussed for decades: remote monitoring of vending machines , retrieving audit and line-item sales data, receiving alerts when mechanical failure has occurred or is imminent , and acceptance by vending machines of widely used cashless media, primarily major credit and, more recently, debit cards.

These concepts, in the past, have confronted one challenge common to both, and challenges specific to each. The first was the need for the provider of hardware and software to simultaneously modify the vending equipment and provide the wide-area network over which the data would travel. The Internet has emerged as a universal medium for electronic commerce, offering standard protocols and easy access , wireless or landline , for a vast range of applications.

The specific challenge to remote data collection was the lack of a standard communication protocol. This has been addressed by the adoption of the Vending Industry Data Transfer Standard, which in the United States is a superset of the DEX Uniform Communication Standard. This has taken shape as handheld computer hardware and software became more sophisticated and affordable, retrofit devices were developed to upgrade older machines for standard data capture, and these developments convinced operators that the potential productivity improvement inherent in automated data collection actually were attainable.

In fact, the improvements can be incremental. Simply downloading machine data to a handheld computer saves time and reduces errors while preserving detail. Attaching the DEX port to a short-range wireless data transceiver permits the driver to poll the machines at a location before going in, saving more time. Telemetry over a wide-area network then can be added, when and if desired.

The past year has seen widespread recognition that the final crystallization of DEX in vending is dependent upon field experience, and operators who have worked through the process began to report very positive results.


The distinctive obstacle to cashless vending in the "open" retailing environment has been the barrier imposed by transaction processing cost. One solution that took practical shape in 2001 is to introduce intermediating software that permits the consumer, in effect, to establish a balance that can be debited for low-value purchases (micropayments), which are totaled for billing to the patron's card or other medium. Some media that underwent testing in 2001 are contactless "smart" devices ( also called "RFID" media) similar in concept to those used on toll roads, and cellular telephones.

Credit-card actuation is commonplace for vending large-denomination prepaid telephone cards in sites frequented by business travelers and tourists, and has been successfully implemented in several high-value retailing niches. Micropayment systems have been applied to a number of vertically integrated self-service applications, from fuel pumps to automated public-access business centers for travelers. Their advent in vending seems to be only a matter of time.

And the benefit may be substantial. Long experience with cashless payment systems using prepaid ("debit") cards in "closed" environments has demonstrated that sales increase markedly when patrons need not choose between vending machines and competing demands for change.

The January 1 conversion of 12 Western European nations to the multinational euro currency will create a market of more than 300 million people with a single monetary system, larger than that composed of our 50 United States. Five billion euro coins and 4.5 billion banknotes have been delivered to the 12 national banks that will administer the system in unison, and the participating nations have set fairly short transition periods during which their "legacy" currencies must be exchanged.

The consensus among European Community members in favor of a universal currency early in the last decade was one of the principal motives for the creation of the European Vending Association in 1994. EVA represents the national vending organizations of eight of the 12 countries in the European Currency Union, as well as the United Kingdom, Denmark and Sweden (European Union nations that have not adopted the euro currency) and Hungary and Switzerland (which do not belong to the EU).

The organizers recognized that, with a regulatory apparatus being established in Brussels to draft multinational rules and standards for the EU, the vending industries in each nation needed representation there as well. During the long deliberations preceding the introduction of the euro, EVA has played a major role in making the transition as smooth as possible for operators, explaining technical issues to the planners and publicizing the industry's concern.

Although arduous, the campaign to make the vending industry's voice heard in EU councils and the public forum has been a valuable image-booster, according to EVA director-general Catherine Piana. "The euro has given the EVA, and the vending industry at large, tremendous exposure and visibility , at the EU level, in the press and with the general public," she wrote on the eve of the New Year conversion. "It will be difficult to maintain this."

However, many critical issues remain to be addressed, Piana added: proposed food safety and environmental rules, energy efficiency criteria, the development of statistical information documenting the economic importance of vending, the promotion of quality initiatives and the strengthening of industry standards.


Those standards, developed in cooperation with the National Automatic Merchandising Association in the United States, have internationalized the vending business. The increasingly integrated Western European market has developed strong manufacturing organizations that compete effectively in international markets, including the U.S.; and the traditionally attractive but fragmented European market becomes much more accessible to U.S. manufacturers in turn. Operators stand to gain from a wider range of interoperable equipment designed to meet a diverse and demanding clientele.