Your SlideShare is downloading. ×
  • Like
The Case for Cash Recycling in Vending
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Now you can save presentations on your phone or tablet

Available for both IPhone and Android

Text the download link to your phone

Standard text messaging rates apply

The Case for Cash Recycling in Vending

  • 3,199 views
Published

Presented by Chuck Reed, Marketing Director - Vending Americas and SE Asia …

Presented by Chuck Reed, Marketing Director - Vending Americas and SE Asia

For more information: chuck.reed@meigroup.com

http://www.meigroup.com/usa/vending/

Published in Technology , Business
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
3,199
On SlideShare
0
From Embeds
0
Number of Embeds
3

Actions

Shares
Downloads
27
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide
  • Our goal of this training is to provide an in-depth understanding of why bill recycling can drive increased same-location revenue. We will analyze the underlying factors of consumer purchase behavior and compare cash and cashless payment options. We’ll conclude with suggestions as to where recycling could best drive higher revenue to help guide operators in their placement decisions.
  • A positive repetitive experience is what drives consumers to a retail ‘outlet’. We’ve designed the HVB to work with the VNR as a strong visual reminder that this vending machine takes higher denom bills. MEI is helping merchandise the machine and its capabilities to drive sales growth for the operator.
  • There has been a fundamental shift in vending patron demographics. Gone are the large blue collar plants where patrons carried exact change each day because they always bought the same snacks and drinks. Consumers carry less cash, and the cash they do carry is largely higher denomination bills. Machines that only accept $1 bills and coin are unable to complete the sale in a surprising large % of the time. Enabling more vends increases sales and as importantly, positions vending as a strong alternative to other retail channels such a convenience stores.
  • There has been a fundamental shift in vending patron demographics. Gone are the large blue-collar plants where patrons carried exact change each day because they always bought the same snacks and drinks. Consumers carry less cash, and the cash they do carry is largely higher denomination bills. Machines that only accept $1 bills and coin are unable to complete the sale a surprising large % of the time. Enabling more vends increases sales and as importantly, positions vending as a strong alternative to other retail channels such a convenience stores.
  • MEI research into what typical consumers carry in bill denominations shows 80% carry at least $1 in bills or coin. That percentage drops quickly when they would need $3 to make a $2.50+ vend purchase. Note that 60% or more carry at least a $5 bill or $20 bill. If your machines are unable to accept at least a $5 bill, you are missing sales.
  • The math is fairly simple in determining how much sales revenue an operator is missing by only enabling $1 acceptance. Approximately 1 in 5 customers that approach a vending machine are unable to complete a vend because they do not have the correct change. Imagine how other retail channels would respond if they knew 1 in 5 of their customers were turned away by something within their control!
  • Building upon the fact that vend price is a key driver in the benefits of recycling, we need to understand that vend price is scenario-based. 2 kids wanting a $1.25 drink creates a $2.50 vend for the mother. Maybe she has enough to make the first $1.25 vend but 3 of 10 times she won’t be able to make both purchases. By enabling $5 bill acceptance, we can ensure ourselves of making 9 of 10 moms able to make both vends. The sales lift resulting from enabling that second purchase is over 24%!
  • So we’ve established that consumers do not carry more than a few $1 bills or loose change. As we exceed a $2 vend price, the probability of a vending patron having exact change goes down quickly. At a $3 vend price, fully 1 in 3 consumers won’t have the exact change to make the purchase. We’ve all heard operators who have tried recycling experience a 15% sales lift. Our analysis confirms sales lifts of over 12% by just enabling $5 acceptance. We approach 20% sales lifts when we take up to a $20 note at a $3 vend price.
  • Consumers have choices. If a vending machine is unable to take the money they have, then people will simply switch to an alternative ‘store’ where they are confident a purchase can be made. If nothing else, enable $5 acceptance and enjoy the double-digit sales lift.
  • Sales lift is clearly a function of vend price. As price points approach $3, enabling $20 bill acceptance becomes a worthwhile consideration.
  • A positive repetitive experience is what drives consumers to a retail ‘outlet’. We’ve designed the HVB to work with the VNR as a strong visual reminder that this vending machine takes higher denom bills. MEI is helping merchandise the machine and its capabilities to drive sales growth for the operator.
  • Bill recycling and cashless each have their place in vending. While cashless does carry higher fixed costs, there are clearly site and demographic considerations that can make recycling, cashless, or both a good investment. Particularly if an operator has implemented telemetry for other reasons, the addition of cashless has a much quicker payback.
  • When comparing recycling to cashless at a $1.25 vend price, you see that both drive a similar increase. The combination of both, a unique MEI solution, drives higher sales growth but not significantly higher.
  • At a $2.50 price point, the numbers are dramatically higher. And now you know why. The consumer simply doesn’t carry enough exact change to make the purchase. Enabling both payment types is a great way to maximize capturing any payment type a consumer brings to the machine.
  • Operators often ask about recycling’s impact on machine float levels. By using consumers’ $1 notes to keep the recycler filled, operators can remove the $1 coin tubes, saving over $80/machine!
  • Current vending machines will properly report total cash in when using a recycler. The only change when using a recycler is understanding that the bills going into the recycler and coming back out will be reported as coins. The split between bill and coin upon the driver’s return requires interpretation. MDB level 4 eliminates the interpretation required. MEI recyclers will auto-detect which MDB rev is in the VMC and adjust its output.
  • Current vending machines will properly report total cash in when using a recycler. The only change when using a recycler is understanding that the bills going into the recycler and coming back out will be reported as coins. The split between bill and coin upon the drivers return requires interpretation. MDB level 4 eliminates the interpretation required. MEI recyclers will auto detect which MDB rev is in the VMC and adjust it’s output.
  • Recycling $1 bills has very little impact to an operator in terms of their operation. Field data validates that it is very rare for a VNR to require a driver re-fill. The VNR replaces any $1 coin need and drops capital deployed by over $80/machine. $5 recycling, if an operator isn’t already dispensing $1 coins, would require the operator to begin $1 coin dispensing. Although this increases their capital deployed, the low cost of capital as well as the increased sales should make the decision more focused on vend price and site demographics.
  • Open sites remain a great cashless opportunity. Closed sites might be a better fit for recycling where consumers have the chance for repeat use. MEI is unique in providing a modular solution that allows the operator to invest in the right solution for each site.
  • MEI has a recycling solution that is modular in approach, elevates vending to a retail experience, and is proven to provide high reliability in demanding sites.

Transcript

  • 1.  
  • 2. Presentation Overview
    • Improving the consumer payment experience with VNR
    • Translating improved consumer experience into sales lift
    • Note recycling vs. credit cards
    • Operational considerations with VNR
    • VNR deployment considerations
    • VNR deployment recommendations
  • 3. Investing in Bill Recycling Why you should care
    • You can get everything within your control:
      • Right vending machine
      • Right product selection in the machine
      • Right price points for those products
      • Right service strategy so the machine is always full
    • … you’ll still miss out on a large percentage of sales… here’s why –
  • 4. Sources of VNR Value
    • Regardless of the consumer’s desire for product or the attraction of the machine, the consumer has to have the means to complete the sale.
    • The value proposition for the VNR is to improve the consumer experience by enabling vends that otherwise can’t be made with traditional vending payment systems (e.g., coin changers and bill validators that accept only $1 bills).
    • Improved consumer experience leads to higher customer satisfaction and sales lift.
  • 5. What about your business?
    • What denominations do you have enabled today?
    • Do you believe you are losing sales?
    • Do you run into changer starvation?
      • – A recent study showed 50% of machines were in exact change mode 33% of the time or more!
    • How many bill breakers do you have deployed?
    • Are you using $1 coins and, if so, do you pay a fee to your bank for them?
  • 6. What Consumers Carry
    • Understanding what consumers typically carry highlights the need to alter denomination acceptance:
      • – Over 80% carry a $1 bill or the equivalent in coins
      • – Only about 50% carry $3 in bills/coins
      • – 60% carry a $5 note
      • – 40% carry a $10 note
      • – 65% carry a $20 note
    • At vend prices above $1, limiting bill acceptance to $1 notes significantly decreases the potential customer base
    • Current US bills in circulation
    Circulation $1 46% $2 4% $5 11% $10 8% $20 31%
  • 7. Enabling Vends Simple example at $1 vend price To enable a vend at $1, the consumer must either possess: $1 in Coins OR $1 Note Probability Of Success * 20% 80% Probability Of Failure 80% AND 20% *From MEI Survey Data Lost Sales 16% (80% x 20%)
  • 8. Bill Recycling Value to vending patrons Current Bill Acceptance and Change $2.00 Vend Price $5 inserted Increase sales by allowing consumers more payment options. $2.00 Future Bill Acceptance and Change… Bills In Bills Out $5 inserted $20 inserted
  • 9. Observations About Sales Lift
    • The benefits of recycling are a strong function of vend price.
    • From a consumer perspective, “vend price” is scenario-based.
    • Recycling enables multiple vends and purchase bundling.
    Lift from $5 acceptance 24.1% Lift from $10 acceptance 6.3% Lift from $20 acceptance 6.7%
  • 10.
    • Consumers do not carry a large % of $1 notes or coin. Therefore a significant % of vends are not enabled by coin and $1 acceptance.
    • Enabling $5 , $10, and $20 acceptance captures these lost sales by matching the retail experience.
    Bill Recycling Value Proposition Lost sales The expected sales lift experienced by unlocking the consumer’s wallet has been confirmed in field trials. Note: using $1.25 price 15.7% 23.0% 33.6% As price increases consumers ability to make a purchase decreases Lift from $5 acceptance 12.4% Lift from $10 acceptance 3.2% Lift from $20 acceptance 3.5%
  • 11. Improving the Value Experience
  • 12. Sales Lift by Note and Vend Price
  • 13. VNR & Consumer Adaptation
    • Awareness:
      • – The High Visibility Bezel option on the VNR was designed specifically to promote consumer awareness of recycling.
    • Trust:
      • – Designed to reliably recycle notes of all qualities.
      • – If a denomination is lighted on the Hi Vis bezel, the unit will accept it and make the expected change.
    • Experience:
      • – Over time, for consumers that have used the product, the Hi Vis Bezel signals both higher denomination acceptance and the expectation of success.
  • 14.
    • Option 1
    • VN2700 recycler- ready, $1-$20
    • price parity with VN2500
    • Future-proof investment
    MEI Modularity
  • 15.
    • Option 3
    • VN2700R includes recycler and High Visibility Bezel
    MEI Modularity
    • Option 2
    • VN2700HV includes High Visibility Bezel
  • 16.
    • Option 4
    • VN2700 recycler- ready, $1-$20
    • 4-in-1 cashless bezel
    MEI Modularity
    • Option 5
    • VN2700R includes recycler and 4-in-1 cashless bezel
  • 17.
    • Option 6
    • Buy as separate components
    MEI Modularity
  • 18.
    • A modular approach allows customers the most flexibility to configure devices to meet the needs of each location
    MEI Modularity
  • 19.
    • Both larger note acceptance and credit card acceptance improve the consumer’s ability to purchase.
    • Credit cards have a higher cost structure to achieve this similar benefit including incremental capital and transaction cost.
    • Credit card acceptance has advantages to note recycling.
    • Only MEI can offer note recycling and credit card acceptance in one device.
    Compared to coins and $1 bill acceptance Bill Recycling vs. Credit Card
  • 20. Sales Lift Results 2 Case a Week Machine at $1.25 Vend Price
  • 21. Sales Lift Results 2 Case a Week Machine at $2.50 Vend Price
  • 22. Recycling Effect on Machine Float Recycling reduces total machine float with higher bill acceptance. $84 difference in machine float
  • 23. Recycling Effect on Coin Funds
    • In a normal scenario at $1.25 vend price, accepting $1 bills and coins, there is a positive coin ratio of $0.21.
    • Bill recycling enables the acceptance of higher denomination bills without a concern for coin starvation.
    • Conclusion: Coin starvation is not a concern when using bill recycling to enable higher denomination acceptance. Bill recycling leverages customer provided bill float and protects coin levels allowing an unlimited number of vends until next scheduled service.
  • 24.
    • Using the same scenario of a $1.25 vend price, accepting $1-$10 bills and coins, but without recycling, the coin ratio now goes negative.
    • Conclusion; the addition of dollar tubes absorbs large capital investment ($138) and doubles the maximum # of vends until exact change.
    • Only bill recycling eliminates exact-change scenarios while enabling higher bill denominations.
    Higher Denomination Impact on Coin Funds Without Recycling
  • 25.
    • Note recycling with current MDB requires interpretation in the reconciliation process.
    • MDB Version 4 is designed to accommodate note recycling to allow proper reporting of note balances without interpretation. Both the note recycler and the VMC must be designed to work with MDB Version 4.
    • The VNR is designed to auto-detect whether a VMC is MDB Version 4 compliant at start-up and dynamically adapt its reporting standards.
    Operational Considerations: Reconciliation
  • 26. Operational Considerations
    • Adding recyclers to a bank can eliminate bill breakers
    • We recommend that at least 60% of the machines in a bank have a recycler
    • Increase vend prices through recycling
  • 27.
    • Accepting $1, $5 & $10 while recycling $1s has few significant operational consequences.
    • By comparison, accepting $1, $5, $10 & $20 while recycling $5s has operational consequences to consider.
    • While the $383 in working capital could be reduced in many machines, at a cost of capital of 10%, it is only $38.30 in annual opportunity cost.
    • There may be more relevant costs including cash-handling costs (particularly for $1 coins) and added operational controls.
    • If a site is already using $1 coins, then $20 acceptance and $5 recycling should be implemented.
    Operational Considerations: Summary
  • 28.
    • Open Site vs. Closed Site:
      • – In early deployments of recycling, closed sites will produce returns superior to open sites.
    • Multiple Vend Sites:
      • – In environments with family experiences that could lead to bundled vend opportunities, recycling will help unlock the potential of the machine.
      • – The “entertainment” category in a recent trial produced the highest results: 29% lift for $5 acceptance, 4% lift for $10 acceptance at vend price range of $2.50 to $3.25.
    • Site Security:
      • – While $1 recycling doesn’t dramatically change total “cash in machine,” $5 recycling decidedly does. In less secure sites, credit card acceptance is better.
    Deploying Recycling: Site Factors
  • 29. Conclusions: Key Takeaways
    • Consumer Satisfaction:
      • – Note recycling first and foremost is a technology to improve customer satisfaction.
      • – It enables a positive retail experience for vend patrons.
    • Sales Lift:
      • – The improved customer experience translates directly to sales lifts of 15% or more!
    • VNR and Consumer Adaptation:
      • – The VNR and the High Visibility Bezel build consumer awareness, trust and experience to accelerate adaptation.
    • VNR Modularity:
      • – Enables vend operators to maximize investment ROI.
    • VNR Deployment Considerations:
      • – Vend Price is the strongest driver, followed by volume and site considerations.