MEI Vending Note Recycler

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  • Our goal of this training is to provide an in depth understanding regarding why bill recycling can drive increased same location revenue . We will analyzie the underlying factors of consumer purchase behavoir 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 it’s 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 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.
  • 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 somehting 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 mom’s 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 probablility 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 it’s capabilities to drive sales growth for the operator.
  • Bill recycling and cashless each of 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.
  • The fixed costs from cashless clearly impact the payback period negatively. Even though the cashless payback of 12mos is good, recycling’s payback of half that is what has operators so excited.
  • The higher vend price has a dramatic impact on payback period. Either solution could easily be justified and a combination solution makes perfect sense as well.
  • 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 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.
  • 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 a VNR would 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.
  • MEI Vending Note Recycler

    1. 1. VNR Value Proposition
    2. 2. Presentation Overview <ul><li>Improving the consumer payment experience with VNR </li></ul><ul><li>Translating improved consumer experience to sales lift: </li></ul><ul><ul><li>Expected long term sales lift model </li></ul></ul><ul><ul><li>Consumer adaptation </li></ul></ul><ul><ul><li>The VNR’s role in consumer adaptation. </li></ul></ul><ul><li>Note Recycling vs. Credit cards </li></ul><ul><li>Operational Considerations with VNR </li></ul><ul><ul><li>VNR Float Level </li></ul></ul><ul><ul><li>Impact on Coin Handling </li></ul></ul><ul><li>VNR Deployment Consideration: </li></ul><ul><ul><li>Vend Price, Volume, Site location </li></ul></ul><ul><li>VNR Deployment Recommendations </li></ul>
    3. 3. Why should you care about investing in bill recycling? <ul><li>You can get everything right within your control: </li></ul><ul><ul><li>Right vending machine </li></ul></ul><ul><ul><li>Right product selection in the machine </li></ul></ul><ul><ul><li>Right price points for those products </li></ul></ul><ul><ul><li>Right service strategy so the machine is always full </li></ul></ul><ul><li>… You will still miss a surprisingly large % of sales and we are going to tell you why </li></ul>
    4. 4. Sources of VNR Value <ul><li>Regardless of the consumer’s desire the for product or the attraction of the machine, the consumer has to have the means to complete the sale. </li></ul><ul><li>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. bill validators accepting $1 only and coin changers.) </li></ul><ul><li>Improved Consumer experience leads to higher customer satisfaction and sales lift. </li></ul>
    5. 5. What about your business? <ul><li>What denominations do you have enabled today? </li></ul><ul><li>Do you believe you are losing sales? </li></ul><ul><li>Do you run into changer starvation? </li></ul><ul><ul><li>A recent study showed 50% of machines were in exact change mode 1/3 of the time or more! </li></ul></ul><ul><li>How many bill breakers do you have deployed? </li></ul><ul><li>Are you using $1 coins and if so, do you pay a fee to your bank for them? </li></ul>
    6. 6. What consumers carry <ul><li>Understanding what consumers typically carry highlights the need to alter denomination acceptance: </li></ul><ul><ul><li>Over 80% carry $1 bill or the equivalent in coins </li></ul></ul><ul><ul><li>Only about 50% carry $3 in bills/coin </li></ul></ul><ul><ul><li>60% carry a $5 note </li></ul></ul><ul><ul><li>40% carry a $10 note </li></ul></ul><ul><ul><li>65% carry a $20 note </li></ul></ul><ul><li>At vend prices above $1, limiting bill acceptance to $1 notes decreases the potential customer base significantly </li></ul><ul><li>Current US bills in circulation </li></ul>Circulation $1 46% $2 4% $5 11% $10 8% $20 31%
    7. 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% * Note: From MEI Survey Data Lost Sales 16% (80% x 20%)
    8. 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. 9. Observations About Sales Lift <ul><li>Benefits of recycling are a strong function of vend price. </li></ul><ul><ul><li>Less consumers can be satisfied with coins and $1 bills at higher prices. </li></ul></ul><ul><ul><li>Financially, the incremental margin on the sale is higher. </li></ul></ul><ul><li>From a consumer perspective, “vend price” is scenario based. </li></ul><ul><ul><li>Consider a mother with two thirsty children that don’t want to share. </li></ul></ul><ul><ul><li>A $1.25 drink price becomes a “$2.50” vend price when she buys 2. </li></ul></ul><ul><ul><li>7 of 10 can buy both drinks without $5 bill acceptance enabled </li></ul></ul><ul><ul><li>9 of 10 can buy both drinks when $5 bill acceptance is enabled </li></ul></ul><ul><li>Recycling enables multiple vends and purchase bundling </li></ul><ul><ul><li>In the $1.25 drink example, making the second purchase is highly dependent upon higher bill denomination acceptance . The sales lift resulting from the second purchase is: </li></ul></ul>Lift From $5 acceptance 24.1% Lift from $10 acceptance 6.3% Lift from $20 acceptance 6.7%
    10. 10. <ul><li>Consumers do not carry a large % of $1 notes or coin. Therefore a significant % of vends are not enabled by coin and $1 acceptance. </li></ul><ul><li>Enabling $5 , $10, and $20 acceptance captures these lost sales by matching the retail experience </li></ul><ul><ul><li>Operators no longer are concerned with change starvation </li></ul></ul><ul><ul><li>End customers do not receive ‘cascade of coins’ </li></ul></ul>Bill Recycling Value Proposition Lost sales Expected sales lift, by unlocking the consumers 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. 11. Improving the Consumer Value Experience As a consumer, do I want to shop at a “store” where I currently can’t buy anything between one in six and one in three visits? Note recycling can greatly reduce those negative consumer experiences.
    12. 12. Sales Lift by Note and Vend Price
    13. 13. The VNR and Consumer Adaptation <ul><li>Awareness: </li></ul><ul><ul><li>The High Visibility Bezel (while an option on the VNR) was designed specifically to promote consumer awareness for recycling. </li></ul></ul><ul><ul><ul><li>Hi Viz Bezel = Higher note acceptance </li></ul></ul></ul><ul><ul><ul><li>Informs the consumer which notes are accepted. </li></ul></ul></ul><ul><li>Trust: </li></ul><ul><ul><li>The VNR is designed to reliably recycle notes of all qualities. </li></ul></ul><ul><ul><li>If a denomination is lighted on the Hi Viz bezel, the unit will accept it and make the expected change. </li></ul></ul><ul><li>Experience: </li></ul><ul><ul><li>Over time, for consumers that have used the product, the Hi Viz Bezel signals both higher denomination acceptance and the expectation of success. </li></ul></ul>
    14. 14. <ul><li>Option 1 </li></ul><ul><li>VN2700- recycler ready, $1-20 </li></ul><ul><li>price parity with VN2500 </li></ul><ul><li>Future proof investment </li></ul>MEI provides the only complete unattended payment solution for vending in the space provided. MEI Modularity <ul><li>Option 2 </li></ul><ul><li>VN2700HV- includes High Visibility Bezel </li></ul><ul><li>Option 3 </li></ul><ul><li>VN2700R- includes recycler and High Visibility Bezel </li></ul><ul><li>Option 6 </li></ul><ul><li>Buy as separate components </li></ul><ul><li>Option 5 </li></ul><ul><li>VN2700R- includes recycler and 4 in 1 cashless bezel </li></ul><ul><li>Option 4 </li></ul><ul><li>VN2700- recycler ready, $1-20 </li></ul><ul><li>4 in 1 cashless bezel </li></ul>Whatever the application MEI has a modular approach that allows the most flexibility for each situation.
    15. 15. <ul><li>A modular approach allows customers the most flexibility to configure devices to meet the needs of each location </li></ul>Whatever the application MEI has a modular approach that allows the most flexibility for each situation. MEI provides the only complete unattended payment solution for vending in the space provided. MEI Modularity
    16. 16. <ul><li>Both larger note acceptance and credit card acceptance improve the consumers ability to purchase </li></ul><ul><ul><li>credit cards provide roughly the same benefit as $5 and $10 acceptance </li></ul></ul><ul><li>Credit cards have a higher cost structure to achieve this similar benefit including incremental capital and transaction costs </li></ul><ul><li>Credit card acceptance has advantages to note recycling when: </li></ul><ul><ul><li>Site demographics ensure high % of credit card holders (e.g. offices, airports) </li></ul></ul><ul><ul><li>Telemetry is implemented for other reasons. </li></ul></ul><ul><ul><li>High value machines are in less secure locations. </li></ul></ul><ul><li>Only MEI can offer note recycling and credit card acceptance in one device. </li></ul>Compared to coins and $1 bill acceptance Bill Recycling vs Credit Card
    17. 17. Sales Lift Results 2 Case a Week Machine at $1.25 Vend Price MEI Company Confidential
    18. 18. Sales Lift Results 2 Case a Week Machine at $2.50 Vend Price MEI Company Confidential
    19. 19. Business Case - Bottling Analysis at $1.25 Vend See Details Category Cash Only Cashless Recycling Cashless and Recycling Hardware Costs   $375 $223 $598 Monthly Fees   $9.95   $9.95 Cashless Fees   5%   5% Increase to Sales   16% 15% 20% Annual VPO Cases 104 121 120 125 Cases per Week 2.0 2.3 2.3 2.4 Cost per case   $3.10 $1.86 $4.80 Cost per unit   $0.13 $0.08 $0.20 % of business cash 100% 77% 100% 90% % of business cashless 0% 23% 0% 10% Payback Period (months) 46 11 42 Annual Sales Lift $507 $470 $615 Annual Margin Lift $98 $235 $172
    20. 20. See Details Business Case - Bottling Analysis at $2.50 Vend Category Cash Only Cashless Recycling Cashless and Recycling Hardware Costs   $375 $223 $598 Monthly Fees   $9.95   $9.95 Cashless Fees   5%   5% Increase to Sales   32% 30% 38% Annual VPO Cases 104 137 135 143 Cases per Week 2.0 2.6 2.6 2.8 Cost per case   $2.74 $1.65 $4.18 Cost per unit   $0.11 $0.07 $0.17 % of business cash 100% 61% 100% 87% % of business cashless 0% 39% 0% 13% Payback Period (months) 6 3 7 Annual Sales Lift $1,970 $1,859 $2,349 Annual Margin Lift $745 $929 $1,015
    21. 21. Recycling Affect on Machine Float <ul><li>Recycling reduces total machine float with higher bill acceptance . </li></ul>Float reduction plus increase in sales by accepting higher denomination bills creates a great value proposition. $84 difference in machine float
    22. 22. Recycling Affect on coin funds <ul><li>In a normal scenario at $1.25 vend price, accepting $1 bills and coins, there is a positive coin ratio of $0.21. </li></ul><ul><ul><li>Customers will insert more coins than will be paid out </li></ul></ul><ul><ul><li>Incidences of exact change result from unique circumstances and not from an expected coin depletion scenario- a machine should not run out of change </li></ul></ul><ul><li>Bill recycling enables the acceptance of higher denomination bills without a concern for coin starvation. </li></ul><ul><ul><li>The percentage of $5 and $10 notes that could be used for the purchase is calculated to be 15% of the total inserted. </li></ul></ul><ul><ul><li>This results in a coin positive balance of $0.10 </li></ul></ul><ul><li>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. </li></ul>
    23. 23. Higher denom impact on coin funds w/o bill recycling <ul><li>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. </li></ul><ul><ul><li>Even when using $$QQN tube config, the changer will still go coin negative. There is simply too many coins going out for the 15% $5 and $10 bill usage. </li></ul></ul><ul><ul><li>The 15% incidence of $5 or $10 usage results in a $0.62 negative coin ratio limiting maximum vends. </li></ul></ul><ul><ul><ul><li>QQQQN tube config: $5 acceptance 142 vends $5 & $10 acceptance 239 vends </li></ul></ul></ul><ul><ul><ul><li>NQQ$$ tube config: $5 acceptance 298 vends $5 & $10 acceptance 500 vends </li></ul></ul></ul><ul><li>Conclusion; the addition of dollar tubes absorbs large capital investment ($138) and doubles maximum # of vends until exact change. </li></ul><ul><li>Only bill recycling eliminates exact change scenarios when enabling higher bill denominations. </li></ul>
    24. 24. Operational Considerations: Reconciliation <ul><li>Note recycling with current MDB requires interpretation in the reconciliation process: </li></ul><ul><ul><li>When recycling $1 notes, for DEX audit purposes, $1 notes are reported as $1 coins when accepted into the recycler or when dispensed for change. </li></ul></ul><ul><ul><li>$1 notes that are stacked in the bill acceptor magazine are reported normally. </li></ul></ul><ul><ul><li>As long as the companion coin changer is set up to accept any $1 coins to the cash-box, the resulting DEX audit data is unambiguous. It simply requires interpretation. </li></ul></ul><ul><ul><li>Recycling $5 notes is reported similarly: as $5 “coins” in the recycler and as $5 notes when stacked in the magazine. </li></ul></ul><ul><li>MDB ver 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 ver 4. </li></ul><ul><li>The VNR is designed to auto-detect whether a VMC is MDB ver 4 compliant at start-up and dynamically adapt its reporting standards. </li></ul>
    25. 25. Operational Considerations: <ul><li>Bill breakers- adding recyclers to a bank can eliminate bill breakers </li></ul><ul><ul><li>The impact to capital deployed can be significant </li></ul></ul><ul><ul><ul><li>Removal of bill breakers costing $1200 or more; plus $400 float ;plus $400 in cash room for each = improved profitability AND customer satisfaction </li></ul></ul></ul><ul><li>We recommend that at least 60% of the machines in a bank have a recycler </li></ul><ul><ul><li>Too few recyclers could overwhelm capacity </li></ul></ul><ul><ul><li>Placing machines in force vend can also avoid recyclers being used as changers only </li></ul></ul><ul><li>Increasing vend prices thru recycling </li></ul><ul><ul><li>No longer faced with changer starvation concerns, increasing vend prices is now more easily accomplished. MEI CashFlow coin mechs make it easy to alter tube configurations as you adjust UP your vend prices </li></ul></ul>
    26. 26. Operational Considerations: Summary <ul><li>Accepting $1, $5 & $10 while recycling $1s has few significant operational consequences. </li></ul><ul><li>By comparison, accepting $1, $5, $10 & $20 while recycling $5s has operational consequences to consider: </li></ul><ul><ul><li>Need to refill $5’s and $1 coins </li></ul></ul><ul><ul><li>As much as $383 in working capital increase in machine </li></ul></ul><ul><li>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 c ash handling costs (particularly for $1 coins) and added operational controls </li></ul><ul><li>If a site is already using $1 coins, then $20 acceptance / $5 recycling should be implemented. </li></ul><ul><ul><li>A two case a week machine at a $2 vend price and a 6% expected lift from $5 recycling acceptance yields almost $300 per year in incremental high margin sales. </li></ul></ul>
    27. 27. Deploying Recycling: Site Factors <ul><li>Open Site vs. Closed Site: </li></ul><ul><ul><li>In early deployments of recycling, closed sites will produce superior returns to open sites: </li></ul></ul><ul><ul><ul><li>Superior awareness of recycling via repeat use. </li></ul></ul></ul><ul><ul><ul><li>Closed site experience leads to open site experience </li></ul></ul></ul><ul><ul><ul><li>Importance of the High Visibility Bezel to “connect the dots” between the closed and open site use. </li></ul></ul></ul><ul><li>Multiple vend possible Sites: </li></ul><ul><ul><li>In environments with family experiences that could lead to bundled vend opportunities, recycling will help unlock the potential of the machine. </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><li>Site Security: </li></ul><ul><ul><li>While $1 recycling doesn’t dramatically change total “cash in machine”, $5 recycling decided ly does. In less secure sites, credit card acceptance is better. </li></ul></ul>
    28. 28. Conclusions: Key Takeaways <ul><li>Consumer Satisfaction: </li></ul><ul><ul><li>Note recycling first and foremost is a technology to improve customer satisfaction. </li></ul></ul><ul><ul><li>Enables a retail experience for vend patrons </li></ul></ul><ul><li>Sales Lift: </li></ul><ul><ul><li>The improved customer experience translates directly to sales lifts of 15% or more! </li></ul></ul><ul><li>VNR and Consumer Adaptation: </li></ul><ul><ul><li>The VNR and the High Visibility Bezel build consumer awareness, trust and experience to accelerate adaptation. </li></ul></ul><ul><li>VNR Modularity: </li></ul><ul><ul><li>Enables vend operator to maximize investment ROI </li></ul></ul><ul><li>VNR Deployment considerations: </li></ul><ul><ul><li>Vend Price is the strongest driver, followed by volume and site considerations. </li></ul></ul>

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