This year, the report separated “open” cashless installations from “closed” installations, indicated in chart 10b. The “closed” systems, only accept prepaid cards and do not accept credit and debit cards.
The report found that “closed’ cashless systems, which have existed for many years and are mainly found in prisons and schools, declined while “open” cashless systems increased.
Cashless installations increased in 2011 despite a setback posed by the Durbin Amendment to the Dodd-Frank financial overhaul. Financial institutions raised rates on small ticket debit card transactions in October 2011 to make up for rates limiting what they could charge for larger transactions.
Some debit card processors temporarily stopped accepting debit cards in vending machines. In some cases, vending operators, worried about excessive transactions costs, notified customers they were not accepting debit cards.
Eventually, card processors won an agreement from Visa, the most popular debit card used in vending, to limit its interchange fee for small ticket transactions.
The issue created a public relations problem for some vending operators, some of which put their cashless programs on hold.
The setback was temporary, however, as operators recognized consumers were moving to cashless buying. Operators also noticed that cashless acceptance reduced customer price resistance on higher ticket items, and it also reduced costs associated with handling cash.
Some operators addressed the debit card fee by placing notices on their machines saying that only credit, not debit, cards were accepted.
Operators noticed that in many locations, it took time – sometimes several months – before customers began using card readers.
The report indicated more investment in remote machine monitoring (RMM) hardware and software. However, this investment does not reflect the number of machines actually reporting data via telemetry.
The survey asked operators if they added RMM hardware and/or software in 2011. Automatic Merchandiser discovered that respondents answered “yes” if they invested in hardware and/or software that will eventually give them RMM capability.
In the meantime, many operators believe they can utilize machine level electronic data to pre-kit their routes. Operators can gain efficiencies from pre-kitting without RMM. However, pre-kitting in conjunction with remote machine monitoring (RMM), once this occurs, can deliver even greater efficiencies; it can allow operators to schedule deliveries on an as-needed basis.
2011: Micro markets emerge
Perhaps the most dramatic development of all in 2011 was the surge of self checkout micro markets. A handful of vending operators have operated micro markets since 2006. Since then, more systems have been introduced and tested. In 2011, more companies offered micro markets.
Automatic Merchandiser estimated slightly less than 1,000 micro markets were in operation by the end of 2011. While the number was not significant enough to impact aggregate industry sales, the growth of these systems was undeniable.
Micro markets provide a much larger product variety than vending machines. Most operators using micro markets estimated the markets at least doubled the sales of vending banks for the same upfront cost.
Operators also noted there is less price sensitivity in micro markets than vending machines.
In addition, because the systems have cashless readers, they are able to offer more flexible pricing than vending machines, which require nickel increments.
Micro markets also carry a larger percentage of food than vending banks. Operators estimated food accounted for between 30 and 40 percent of all products sold in micro markets. Hence, the micro markets allowed operators to reclaim a big product segment they lost in the last decade – food. Operators lost much of their food business over the years due to account downsizing and competition from other retail channels.
Because micro markets were so new, operators using them experienced a learning curve. Operators needed to educate customers in using the micro markets.
Operators also encountered reluctance on the part of customers who fear micro markets will encourage theft.