A big highlight of the Southeastern Vending Association Convention in Destin, Fla. last week was a panel discussion on the future of vending that included representatives of three of the industry’s largest companies: Dennis Hogan, CEO of Canteen Vending Services Inc., Tom Barlow, senior vice president of vending and wholesale for Coca Cola Refreshments North America, and Brad Ellis, president of Crane Merchandising Systems.
Marc Whitener, owner of Refreshment Solutions in Norco, La., organized the panel and acted as moderator.
Whitener began the session by reviewing the fact that unit sales have declined in vending in the last decade, resulting in lower profit margins and higher levels of capital depreciation. He asked the panelists for solutions.
Barlow said his company has recognized the need to make vending relevant to consumers. He said more flexible payment options will be a big help.
Ellis said vending must differentiate itself beyond price. He said that one problem is vending is a hard service for location managers to measure. He also noted that the money paid in commissions needs to be reinvested in the service.
Ellis said he spent time with a large vending customer and learned that location commission was the number one factor in deciding what company to use.
Ellis also noted that the company was never informed by their service provider about the technology that improves the quality of service.
He further noted that the decision makers wondered among themselves why they were receiving commission to begin with. “This is a systemic issue,” Ellis said. “We as an industry are our own worst enemies.”
Hogan said another issue is the declining number of manufacturing locations in the last five years. He said manufacturing has fallen from 40 percent of the locations to 25 percent. The fact that vending has been able to adapt to this change indicates its versatility.
“How do we change the discussion from an economic one to innovation?” Hogan asked.
Much of the discussion focused on how long it will take to get the industry to adopt cashless payment technology.
Hogan said his company has added 15,000 cashless readers in the last two years. He said cashless usage rose from 18 percent to 28 percent in the last 12 months, and he does not believe the gain reflected cannibalization of cash sales.
Barlow of Coca Cola Refreshments said the Google Wallet, which will enable smart phones to buy products from vending machines and other retail outlets, will be a boost to vending. “We see that coming quickly,” he said. “To get there, we’ve got to get the basic units installed.”
Barlow also thinks interactivity has great potential. He said once purchases are made using the smart phone, it will be easier for consumers to redeem rewards from the vending machine. “We think there is a great opportunity to connect with the consumer and the Internet in a 2-way dialogue,” he said.
Whitener raised the challenge of the high cost of cashless. He asked the panelists what they consider a reasonable cost for cashless transactions.
“It’s less than it is today,” Barlow immediately responded. He noted that the total cost is currently as high as 15 percent per transaction.
Ellis, who agreed the rate of cashless adoption has been very slow in vending, said mobile payments will eventually drive competition among credit card providers, which will push the transaction costs down.
Hogan of Canteen Vending Services said one positive sign is that supplier partners are engaged in making cashless vending a reality.
Whitener then asked the panelists how they decide to deploy capital.
Barlow said Coca Cola has struggled for the last five or six years to determine how important vending is to the company overall, but has decided that vending is important due to the number of customer interactions it represents. “There is a lot of upside in this industry and a lot of organizations realize it,” he said.
Hogan of Canteen Vending Service said the fact that vending has become more capital intensive is a challenge, but one his company is committed to. “We are going to be buying more equipment, not less,” he said.
Ellis of Crane Merchandising Systems said newer equipment is improving operator profitability even as same store sales have declined. “The equipment has to be self funding, otherwise it doesn’t work,” he noted.
Whitener then asked the panelists if there will be a “tipping point” for vending technology; the point where technology is so widespread that most operators will realize they must have it to be competitive.
Hogan said he doesn’t know if there will ever be such a tipping point.
Barlow agreed and said the industry must continue to keep looking for solutions to its challenges.
Ellis said right now there is so much “buzz” about technology that it’s difficult to know what approaches will become the most common. “There are so many different approaches that it has cluttered the message,” he said. “Before we get to that tipping point, we need clarity.”
Ellis said the first step for operators is to educate themselves about technology.
Whitener agreed. “The more I learn about it, the more confused I become,” he said.
The panelists agreed that open standards among technology providers is important.
Whitener noted that the industry has had a hard time attracting bright business people and asked the panelists for suggestions.
Hogan said his company has a nationwide management training program and hired 12 recent college graduates with no vending experience for management positions.
Whitener ended by asking the panelists to comment on the industry’s future.
Ellis said his company will be providing more of a retail experience to customers and will succeed in attracting more vending users.
Barlow said the future for vending is positive.
Hogan said that vending will continue to be about convenience. “The non-traditional user is going to change,” he said.
During the question period, one listener asked when the interactive screens on display at the last National Automatic Merchandising Association OneShow will actually be available to operators.
Barlow, whose company has deployed 500 such machines, said they have not yet decided on the size of the video screen based on consumer feedback.
Ellis, whose company also showed machines with video screens at the last trade show, said pilot tests will begin soon. “Technology must be self funding,” he commented.
Asked about self checkout micro markets, Hogan said Canteen is very excited about them and expects them to grow quickly. Within the Canteen organization, he said the franchise community is taking the lead with these systems.