While more than half of operators reported absorbing extra costs, slightly more operators chose to remove unprofitable accounts compared to 2011, where rearranging accounts was the third most used strategy reported, shown in chart 6. The number of operators postponing part or equipment buys in 2012 dropped slightly, decreasing from the sixth most used strategy, to the eighth. This is supported by operators claiming 2012 into 2013 is when they are investing in technology and new growth opportunities.
Interestingly, vendors adjusting their product mix to reduce service frequency dropped last year to a level seen prior to 2010, indicated in chart 8A. For those that did reduce their mix, the candy, snack and confection category saw the greatest contraction, although again, the 2012 percentages in chart 8B will not directly relate to the prior year’s because operators were asked to choose all the segments that applied.
Another way vendors reacted in 2012 was to expand into new services. Fiscal 2012 witnessed the largest percent increase for this in the last five years. One new service reported was micro markets, which was broken out as its own segment for the first time in 2012 and showed more than half the growth, see chart 9B. More operators also began offering water service in 2012 than in 2011 as a way to compete with both other operators and water companies approaching locations with add-on vending. Operators also reported it as a way to increase same site sales and replace a declining bottled water business.
While office coffee service has been a big area of expansion, 2012 saw a drop in operators adding OCS, indicating the market is saturated. Most vending operators now offer OCS to locations. However, while the number adding OCS has declined, operators report that the revenue for OCS is increasing, covered in chart 12. The real surprise in 2012 was the number of operators reentering the bulk vending business. Operators reported investing in bulk for a number of reasons. Some did it to eliminate these machines from existing locations. Others used bulk as an add-on service that produces more revenue especially at a location the provider already visits. Many reported it was just a way to utilize every potential opportunity for revenue.
Technology shows huge increases
Operators embraced payment technology at an accelerated rate in 2012, as more vendors recognized the changing need of the consumer. The number of bill recyclers increased slightly, following a 4-year upward trend, as indicated in chart 10A. Operators continued to give recyclers mixed reviews. Some consider them a more affordable option than cashless readers, while others think they increase service calls. The other payment technology added in 2012 was cashless readers, which jumped 3 percent. The projected number of machines that accept a cashless form of payment is nearly 375,000. Most systems are ‘open’ compared to a closed system which only accepts a system specific prepaid card. The number of closed systems has been declining over the last few years, especially among vending operations outside of prisons and schools.
The increase in cashless payment acceptance is a result of higher product price points, increased acceptance of debit and credit in retail for smaller purchases, Gen X and Y/millennials joining the workforce to become vending consumers and the growing research about how the systems increase sales. One of the larger cashless suppliers recently reported that after 12 months of having a cashless reader installed, sales per vending machine increased an average of 28 percent, including a 17 percent increase in cash sales.
Transaction and connectivity fees continue to be the biggest hurdle for cashless, although a small percent of operators are experimenting with charging between 10 and 25 cents for purchases made with a credit or debit card as opposed to cash. Operators reported mixed reviews from locations with this two-tier pricing. Some receive resistance, while others have no comments. The higher price is commonly the posted price and a sign is added that details the amount discounted for using cash.
Remote machine monitoring (RMM), sometimes referred to a machine being wireless, increased 8 percent in 2012, see chart 10A. While this increase represents machines with RMM capabilities, operators reported adding RMM even if they just added the hardware, but weren’t yet using the wireless monitoring capabilities to deliver greater operating efficiencies. Based on operator reports, there are at least 80,000 machines with RMM capability.