Vending Technology Experts Probe Fast-Changing Market Environment

Posted On: 10/23/2015

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TAGS: vending machine trends, vending technology, National Automatic Merchandising Association, Michael Kasavana, V-Commerce, food service, cashless vending, Neil Swindale, VendCentral Web Design, Payment Alliance International, omni-channel consumers

Current trends in technology were in the spotlight at a panel discussion during this year's OneShow, a vending industry trade show produced by the National Automatic Merchandising Association. Moderated by Dr. Michael Kasavana, the seminar covered a wide spectrum of subjects in the fast-evolving field of retailing to contemporary consumers in an era of digital disruption.

Kasavana is the emeritus NAMA endowed professor at the School of Hospitality Business in Michigan State University (East Lansing). He coined the term "V-Commerce" 15 years ago to epitomize the unique nature of vending transactions. At this year's OneShow in Las Vegas, he invited eight industry tech experts to sit on a panel and asked each to describe the manner in which an ongoing trend is affecting the vending, foodservice and office refreshment industry, and how that trend can be harnessed by operators seeking a competitive edge.

vending, vending technology, mobile payments

Neil Swindale of VendCentral Web Design (Pleasonton, CA) addressed the increasing importance of search engine optimization. At a time when prospective clients looking for suppliers turn first to an Internet search engine, the goal for the operator is to maintain a website that will be displayed at or near the top of the list of search returns.

Swindale observed that optimizing a website is a process, not a one-time procedure. Search engines like Google maintain staffs of experts who continually try to refine the process of ranking websites. "Everything can change tomorrow, so stay updated," he said.

At a minimum, the operator's website should be optimized for the major search engines Google, Yahoo and Bing. Given the local nature of most workplace refreshment service operations, it's important for the operator to get a Google local-business page, the VendCentral executive advised.

Optimizing a website, at base, involves understanding how search engines identify the sites that are likely to be most relevant to the user. Swindale suggested that operators ask their customers what they would type in if they were looking for vending, coffee service or a micromarket, and then include those terms in the keywords they choose. At a minimum, he added, a vending company should include "vending machines" and the operation's city in the title tag.

The uniform resource locator should be as specific as possible; a good URL might be The site's pages then might be /healthy, /snacks and so forth. And it's valuable to include links to the company's active social media channels.

Good, relevant content also improves search engine ranking, the speaker continued; he recommended working on this at least once a month. Blogging about the subjects of keywords, if interesting and well done, can be very helpful in attracting traffic -- and, perhaps more importantly, in encouraging "back-linking" with other sites that wish to share that content, and with social media.

"Yelp [a website that hosts crowd-sourced reviews of local businesses] can be good for back-links, too," Swindale added. "You hear about negative reviews on Yelp; ask your customers to post positive ones." Paying continual attention to the website and investing in it will pay off.

It also is essential to keep abreast of trends in online searching, and to make sure the company's online presence is up to date, the speaker concluded. "Google is now 'punishing' websites for not being optimized for mobile devices," he warned.

Donna Embry, Payment Alliance International (Louisville, KY), pointed out that vending operators, not unlike retailers, are compelled to deal with today's "omni-channel" consumers whose expectations are unprecedented. "This represents a major shift, like the one that Marshall McLuhan associated with television in 1966," she observed. "It changes everything."

These consumers wish to pay for purchases with their specific choices of media made from an extensive and fast-growing menu. "The trend today is toward 'me-tailing' to mobile, inwardly-focused and social customers," she observed.

One effect this is having is a change in the technology at the point of sale, Embry noted. Once that was a "reader" for a cashless payment instrument; today, it's a "retail management system," she said. The payment media choices have expanded from the classic magnetic-stripe card to "chip" or "smart" cards (now including the EMV-compliant contactless ones) and the growing array of mobile payment systems that permit making transactions with smartphones by use of electronic "wallets" and wireless interaction through near-field communication or Bluetooth.

Major players in mobile payments include Apple Pay (which uses NFC), the CurrentC system (based on a QR code displayed by the phone and read by an optical scanner on the merchant terminal), Google Wallet and Samsung Pay (which adapt the LoopPay magnetic-stripe emulator to Android phones, allowing them to be used with classic merchant terminals and a variety of systems). And smaller, more agile developers are entering the field all the time. It is not at all unrealistic to predict that payment capability will soon appear in the "wearable" technologies now under development, and first seen in the Apple Watch.

From the seller's perspective, a major benefit of cashless systems is that they allow data to be collected and insights to be adduced from that data. Many also lend themselves to promotion by greatly simplifying "couponing" and the management of loyalty rewards programs. These capabilities also can be applied to integration with inventory management, building brand partnerships and customer communication, including not only social media, but also chatting with customers about likes and dislikes.

A development that may be especially valuable to many vending operators is the iBeacon, Embry said. Demonstrated by Apple two years ago, this is a low-powered transmitter using Bluetooth LE (low energy) to send messages that can be received by a smartphone that's running a compatible application. Thus, a vending machine equipped with an iBeacon could alert a potential patron that it is nearby, make a promotional offer and even handle a mobile payment. And growing interest in such biometrics as thumbprints and retinal scans as verifiers of identity increases the likelihood that cashless payment systems will be built around them.

Apriva's Ron Spinella (Scottsdale, AZ) observed that today's retailers must manage several kinds of transaction, not simply payments. These include loyalty programs and coupons, and today's wireless networks provide a favorable environment for the growth and proliferation of digital promotional tools. For this reason, and others, the payment industry veteran foresees a trend away from "open" to "closed" systems.

He observed that cash is an open loop, negotiable without the need for any sort of administration or exchange of information. Another way to conceive it is "horizontal." But the first widely used card-based cashless instrument, the Diners Club charge card of the early 1950s, was "vertical." It could only be used by subscribers within a closed loop of selected establishments. By contrast, today's credit cards can be used for all kinds of payments, as can mobile payment media like Apple Pay and Google Wallet.

Spinella pointed out that we presently are witnessing a resurgence in closed-loop systems; Avanti's market card, USA Technologies' prepaid "More" instrument and PayRange's Android app that effects transactions through a Bluetooth link all are vertical. These provide the issuer and the merchant with much greater control, the speaker noted, and he expects this trend to continue.

A key to success with cashless systems is to build loyalty, Spinella said; well-run loyalty programs can attract new customers while retaining existing ones. Loyalty programs make offers and award redeemable points to purchasers who accept an offer. Today's transaction processing systems can accomplish all of these steps digitally, which is much more economical and straightforward than the means used to administer conventional rewards programs.

"The Starbucks program is a closed loop, but it's all over the country," the speaker instanced. Smartphone users enrolled in My Starbucks Rewards can use its mobile app to order as they approach the store, and the whole process of earning "stars" and enjoying the benefits is seamless.

Spinella predicted that the vending industry would see new closed-loop technology entering the market, starting with micromarkets. "Micromarket operators reach out and touch consumers," he said. "Consumers will be able to reach back with comments." This will encourage the development of large promotional campaigns, and an objective should be to extend micromarket loyalty programs to the vending side of the business. He believes this can be a win-win for all stakeholders, as consumers, operators and product suppliers all stand to benefit from it.

Lori Marshall of Byndl, which is now part of Avanti Markets (Tukwila, WA), observed that today's consumer is, for the most part, anonymous, and this makes "demand generation" virtually impossible. It's therefore necessary to create "360-degree interactivity," she said. Pursuing that also requires the recognition that customers' experiences go home with them, so it's essential to make those experiences pleasant.

When someone makes a purchase from a vending machine, it's important to capture data that allows the operator to understand the particular consumer's preferences. That requires a system that works with every payment system, cash and cashless, to record what is bought, when and where the purchase is made and what else was bought in the transaction. This provides information that's valuable in connecting with brands because they can use it in their own outreach programs; Coca-Cola's My Coke Rewards, which dates back to 2006, is an example.

Multimedia customer support is important. Marshall observed that consumers will accept advertising if it's tailored to their needs -- if it isn't, it's spam. "But serve them and the sales will come," she said.

"Starbucks is awesome; it has proven its model for mobile payments," she continued. These amount to $2.5 billion a year. The reason for this success is that the mobile payment program is integrated into customers' positive experiences. In designing an immersive interactive program, it is essential to make it inclusive and accessible, to accommodate patrons who have impaired vision or hearing, the speaker emphasized.

Mobile Payment Expansion

Marshall concluded by observing that the adoption of mobile payment instruments by American consumers has not been as rapid as some had expected, simply because classic payment cards are so quick and easy to use. But the pace has been picking up, and new developments like Samsung's LoopPay will accelerate it further.

Operators should keep these factors in mind when choosing a technology partner, the speaker emphasized. Of particular importance are the ability to integrate payments into tools for assembling customer profiles -- and very tight security, complying strictly with the latest standards.

Alan Munson, ParLevel Systems (San Antonio, TX), recalled that, as an operator himself, he had paid close attention to the development of vending management systems. These have been changing dramatically over the past decade, and the pace of change is increasing. When shopping for a VMS, the must-haves are hardware compatibility and supplier support.

Today, Munson said, the right VMS will be one that allows the operator to take advantage of the flexibility and capacity of "the cloud" and is tailored to the specific needs of the operation. Good support and training must be part of a process that involves ongoing communication with the supplier.

"When you shop, ask what fits well with your business? Then sit down with your chosen supplier to schedule the rollout," the industry veteran recommended. "Work with the supplier in studying your business, and choose the team that will install the system."

Careful planning is important to make sure that the changeover to the new VMS from whatever is presently in use will be smooth, Munson emphasized. This requires good communication throughout the implementation process, so everyone will know what the system does, and will be confident in their abilities to run it. This is why training is so important. And supplier support must continue as and after the system first goes live.

The process of shifting to a new VMS -- or installing a growing operation's first one -- takes work, the speaker summed up; but the benefits will outweigh the cost and the effort, if the task is handled correctly. Effective computerized management will improve efficiency and increase revenues, he said -- "You'll save time and make money, if the job is done correctly."

Bryan Godwin of Crane Merchandising Systems (Williston, SC) reported that today's increasingly sophisticated customer interfaces give operators the opportunity to increase their sales by attracting and enticing consumers in ways never possible before. An important one is the "shopping cart," which allows the machine to behave like an e-commerce website.

"As vending machines transition from buttons to touchscreens, they provide much greater flexibility in making transactions," Godwin pointed out. "It becomes a good deal easier to make multiple purchases, for example." A great many opportunities are presented by a truly interactive graphical selection method, and everyone is learning as those opportunities are explored.

An often-unremarked change that this system has effected is the shift from the traditional "pay-first" vending purchase procedure to the more common "shop-first" process, the Crane executive instanced. This simplifies life for customers, who can make their choice or choices, let the machine tell them the price, and then either modify the order or complete the purchase. Crane's studies have found that when people have the ability to do this, multi-vends triple and dollar sales increase by an average of 12%. And the patron's greater level of comfort with the shop-then-pay sequence encourages the use of a cashless payment option, if one is present -- which, in turn, facilitates buying several items in a single transaction. The graphical selector also simplifies purchasing an advertised product.

Another discovery that has been made through testing touchscreen customer interfaces is that the "shopping cart" made popular by e-commerce websites gives consumers a better shopping experience. It simplifies adding to or modifying the order, Godwin concluded; and this has led to an average increase in same-store sales of 30%

Cantaloupe Systems' Anant Agrawal (San Francisco) emphasized that the value of today's payment and remote machine monitoring technologies certainly is important to large operating companies, but it is perhaps more valuable to small ones making the transition from part-time hobbyists to fulltime professional vendors.

"Many people have started out with one machine, and have run it as a sideline," Agrawal pointed out. "They find that they can make money with it, so they buy another, and another. At some point, they quit their day jobs and become independent vending operators."

As a small operation grows, however, it usually encounters difficult periods. As long as one person can service all the machines with the family car, the revenue is good and the costs are low. But an operator who does not want to stop at that point has to grapple with buying a truck and hiring a route driver. That represents a very considerable expense with no additional sales, so it is necessary to add locations. "It's not uncommon for someone who's going through that process to have 950 machines in the field generating $3 million in annual revenue -- but to be taking home just a little more money than he or she could have made as an employee. Costs go up; prices go up; operating costs and taxes go up. You can keep on adding locations and equipment, but the relationships among machines, sales and costs don't change. You need tools that allow you to change them."

An operator with one machine, or even 10, can keep track of each one's performance. This is impossible for one person to do with a thousand machines -- except through the use of appropriate tools. "You need to run your business with certainty," Agrawal pointed out.

Today's pervasive wireless network and the widespread familiarity with mobile devices work in favor of the operator, the Cantaloupe cofounder observed. "Your drivers in the field should have experience with smartphones," he said. "Servicing a machine by interacting with a smartphone is not unlike playing Angry Birds."

The components involved in knitting a growing operation into a highly visible and controllable fabric are mobile devices, the "cloud" in which data and application programs reside, telemetry equipment installed in each machine to report sales, inventory and functional status, software capable of performing analytics on those reports, and cashless payment capability that can support open and closed systems.

"Where do you start? Try connecting the machine, to get much better control right away," Agrawal advised. "Then move on to the warehouse; then manage commissions and taxes. Maintain tight accountability." From there, it's possible to add maintenance and repair scheduling and tracking, and many other tasks that can be done much more quickly and satisfactorily, at lower cost, through effective data communications and processing. "Once the driver knows where to go, when to go there and what to take along, you're off to a good start," the speaker pointed out.

The Bottom Line

"Will this make more money? Yes, it will," he concluded. "You reduce your service costs by making more efficient use of drivers' time." The ability to design planograms and get detailed, day-by-day information on the performance of each selection allows optimizing menus to maximize sales. The ability to "prekit" route orders accurately in the warehouse, based on reliable forecasting fine-tuned by the machines' inventory reports, allows drivers to work more rapidly. In aggregate, the effect is to increase sales dollars, while increasing efficiency to reduce costs.

It is not unusual for thorough application of these procedures to save enough time to permit consolidating 10 routes into six. This eliminates the expense of four trucks, for starters. "The six drivers who remain deserve a raise, and you have to add two people in the warehouse; but you do come out ahead," Agrawal reported. Responsive planogramming increases sales, while the virtual elimination of sold-outs and dramatic reduction in shrinkage and spoilage reduces costs.

Mike Lawlor, USA Technologies (Malvern, PA), explained that there is every reason to believe that 2015 will be "the year of Apple Pay." The Apple iPhone 6, with its NFC transceiver that enables Apple Pay transactions, is selling at a tremendous rate. More than 74 million are in use, and two out of every three cashless purchases made with a contactless instrument are made with Apple Pay.

"And I'm not talking about sales by big-box retailers," Lawlor said. "Consumers want to use Apple Pay for small items." At present, of all transactions made with Apple Pay and competing mobile wallet systems, 43% are for small purchases, 41% for medium ones (clothing and the like) and 16% for big-ticket items.

Apple Pay works by storing the user's credit-card information securely, and tokenizing it for transmission; card data themselves are never moved. It is a very secure system, and it is recognized as such, so that confidence has spurred acceptance and use, including by vending patrons.

NFC is compatible with the transceivers used in vending machine readers that can accommodate contactless smartcards, such as USAT's ePort. "At present, there are some 200,000 machines in the field that accept Apple Pay payments," the USAT executive reported. "You boost the industry's image by displaying the Apple Pay logo."

Doing so also spurs sales, according to the steadily expanding knowledge base maintained by USAT. Lawlor reported that the average vending transaction value made with cash at present is $1.16; a noncash transaction made with a card is $1.56; and the average Apple Pay mobile transaction is $1.79. Cashless-payment customers buy more items, and more high-ticket ones; "These are sales you will lose without cashless acceptance."

NAMA has found that operators get an average 21% sales lift by adding cashless payment capability, the speaker said. And it's increasingly important that cashless acceptance include the ability to accommodate mobile payments, he emphasized. "Without card and mobile capability, you're two systems behind your patrons."

USA Technologies began marketing its solutions for cashless "micropayments" a decade and a half ago, and the past 10 years have seen a dramatic upswing in consumer demand for the ability to make small purchases without cash. "It's not just Staples and Whole Foods," Lawlor. "It's Panera Bread and McDonald's -- and you!"