Self checkout markets ride growing retail trend

A recent Wall Street Journal article on these new devices claims that smart phones will eventually incorporate these capabilities.

The vending industry must now take advantage of what I call self checkout vend markets (SCVMs). I have adopted this term since these applications function without any personnel on-site. In contrast, the kiosk applications at retail sites have staff available to assist the consumer. SCVMs process involves purchases without any support from on-site personnel. They are truly part of the vending industry.

Self checkout emerges for vending

Automatic Merchandiser Magazine first reported on SCVMs in its March 2006 issue (although the article did not use the term SCVM).

In 2010 at the NAMA OneShow, there were no companies displaying SCVMs. At this year’s OneShow in Chicago, there were three companies showing SCVMs: Avanti Markets, 365 Retail Markets and Microtronic US. In addition, vending operators using the two more established of these SCVMs, Avanti Markets and 365 Retail Markets, made a joint presentation at the 2011 OneShow. More SCVMs have entered the market, such as Company Kitchen, operated by Treat America Food Services Inc. in Merriam, Kan., and Breakroom Provisions Co., based in Hickory, N.C.

One of the most interesting things about the evolution of the SCVMs is that vending operators have been the key developers of these systems.

At the present time, the vending industry is using this concept to change and improve its offerings to vending locations.

In anticipation of this development, Kraft Vending & OCS engaged Vending Consultants Co. to conduct a survey of the two more established SCVMs. The survey specifically examined what is being sold and what is the return on investment (ROI) for the SCVMs. Vending Consultants obtained sales data for a 2-month period, December 2010 and January 2011, from six SCVMs, three from Avanti and three from 365.

The major and most dramatic difference from vending is the number of stock keeping units (SKUs) available to satisfy the consumer. The six SCVMs had an average of 272 SKUs available for sale, sold 4,304 units each month, and averaged $6,888 in monthly sales, $1.60 per unit sold. Vending Consultants analyzed the monthly sales by the following product categories: cold beverages, candy, food, pastry, snacks and sundries.

Food, for the purpose of this analysis, included all refrigerated and frozen products as well as ambient products such as Kraft’s Mac ‘n Cheese, single-serve cereals and soup.

Cold beverages and food comprised 50 percent of the SKUs (127) generating 60 percent of the monthly units sold (2,541), and 70 percent of the monthly dollars sold ($4,740). The average unit selling price for cold beverages was $1.50; $2.52 for food, $1.31 for candy and $1.19 for snacks.

Any experienced vending operator can see these averages are higher than typical vending prices. But more importantly, the gross dollar profitability is higher as well. In terms of gross profit, cold beverage and food products delivered the best results, in the 70 percent to 75 percent range.

More diverse payment options

How consumers pay is also critical to understanding SCVMs. There is a key difference between the two systems; the 365 accepts cash in addition to card payment while the Avanti system only accepts card payment. The Avanti system does allow cash for reloading the stored value card at the payment kiosk, but it does not offer cash purchases.

At the three Avanti SCVMs, credit and debit cards payments averaged 28 percent and the stored value account card was 72 percent.

Stored value account cards are debit cards controlled by the Avanti system. The significant advantages to the stored value cards are: 1) there are no fees associated with the cards, and 2) the operator has access to data about the consumers to create special promotions.

The monthly sales breakout for 365 were: 37 percent for credit and debit cards, 14 percent for the stored value cards, and 49 percent for cash.

More importantly, consumers now have a full range of products to select. Traditional vending operations only provide products that can be vended. This restriction now no longer exists. The SCVM operator can provide any product.