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issue: February 2007 APPLIANCE Magazine

Quick Vend

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by Erin Biesen, Associate Editor

Vending machines are bringing instant gratification to retail purchases with new cashless payment methods and the ability to sell a wider array of consumer products.

Multi-max is looking to the future of vending by heading out of the saturated conventional vending, trying to accommodate smaller offices of about 20 to 80 employees with its smaller cartridges.

Everyone gets frustrated when their bag of chips gets stuck in the snack machine—and this after they’ve dug around for the right change or reinserted a dollar into the currency slot again and again until it finally accepts the bill.
Vending machine manufacturers are trying to engineer a more enjoyable experience for customers when purchasing snacks, beverages or other goods, and with the goal of creating a system for a quick and easy exchange of money for the product. “The three big trends in the industry are the selling of non-traditional items, the changing of the architecture of the machine to make it more user-friendly and the move to cashless or contact cashless vending,” says Michael Kasavana, Ph.D., National Automatic Merchandising Association (NAMA) Professor in Hospitality Business, School of Hospitality Business Michigan State University. Contact cashless vending refers to a credit or debit card that has a radio frequency identification chip (RFID) inside so that the user does not have to swipe the card. An RFID chip simply has to come within 4 inches or less of a reader generating a broad spectrum radio seeking signal for data exchange to occur.

Plastic Payment

Fewer people carry around currency and coins than they once did, and they’re using credit cards, and even more often debit cards, as their main forms of payment. Kasavana says that in 2003 the U.S. Federal Reserve Bank reported that debit and credit card transactions outnumbered cash transactions for the first time ever in the U.S. “Young people 18 to 24 years old are now called Generation ‘P’, for Generation Plastic,” says Kasavana. “You once used credit cards to buy things with money you hadn’t made yet, but now most people use debit cards. If you look at the last 3 years of data that the Federal Reserve put out, debit cards are out pacing credit cards in how they are used.”
But there are now other cashless payment forms that can be used, though they still operate similarly to how a credit or debit card operates. Room keys at hotels or student ID cards on school campuses now allow people to purchase snacks from vending machines. Guests staying in a hotel might want a soda at night, but don’t have the change. Using their key card they can purchase it and just charge it to the room. “It makes customers happy when they don’t always need to carry coins and bills, especially for international visitors who may not have the currency of that particular country yet,” explains Stella Yoon, president and CEO of cStar Technologies, (Toronto, Ontario, Canada).
cStar Technologies manufacturers wireless communication technologies for vending machines. The machine that the company is working hard on is the Vending Genie, which allows for payment through student ID cards and hotel room keys.
Yoon explains that a hotel room key that charges vending purchases to the guest’s room bill also solves another problem that hotels have. “According to general managers of hotels, they have experienced vandalism once or twice a month. In some areas, organized groups of thieves even systematically target vending machines, moving from one hotel to the next,” says Yoon. A single incident of a vandalized machine can cost the operator as much as U.S. $1,000.
Customers will also frequent vending machines if they do not have to worry about having the proper amount of money on them at all times. “According to NAMA, a
1 percent sales increase means a 20 percent profit increase in incremental sales,” Yoon states. “Therefore, using the numbers from NAMA, if this machine gives a 40 percent sales increase in general to vending operators this means an 800 percent profit increase.”
Not only are these machines from cStar Technologies ideal for school campuses and hotels, but research laboratories use them as well for inventory control purposes. Yoon describes lab applications in which researchers use enzymes, reagents and other materials in small but expensive measures. “These labs didn’t have good systems for keeping track of who is taking what,” notes Yoon. “This machine is put outside the inventory room and allows researchers to get what they need.” These machines can hold materials worth $60,000 to $300,000 in some cases, and free employees from inventory control to move to other important areas of the company.
Keys are another cashless payment vehicle finding their way into the vending industry. The keys are plastic with an RFID chip inside. “Credit is stored in the key and you put the key in the reader and your balance comes up,” explains Andrea Montanari, Responsabile Commerciale, MicroHard S.r.l. (Cesenatica, Italy), “When the key is empty it is possible to recharge the key directly on the machine using bills and coins, or by using our recharge stations, which accept credit cards.”
There are many benefits to this system, especially in closed environments such as a hospital. Keys could be given to employees of the hospital, which would allow for them to receive discounts on snacks and beverages. Visitors at the hospital would pay the full, posted price of the product. As in hotel applications, the system reduces vandalism because less cash is kept inside the machine.

cStar Technologies has created a vending payment system that would allow consumers to use hotel room keys or student ID cards to pay for their items.

Biometrics in the Cafeteria

Cashless vending not only comes via keys and cards, but also comes with the identification that customers carry at their fingertips. Fingerprint reader technology is allowing for quicker payment in a number of applications.
In order to help schools with special school lunch programs, and to help schools solve the problem of too many students to feed in too little time, VE South/VE Global Solutions (Fort Lauderdale, Florida, U.S.) created a solution using cashless vending machines to deliver lunch to students more efficiently.
The company started with a pilot program in Florida and has worked with the United States Department of Agriculture (USDA) and Florida Department of Education Support Services to set up guidelines to create a national vending machine meal program.
“On a national average there is only about 38 percent of the population of a high school that can be served within the short time allotted for lunch, so schools are missing many of their students,” explains Joe Gilbert, vice president/general manager of Ve South. Students can typically wait in line for up to 20 minutes to be served lunch, leaving them with a very short amount of time to eat. That is not a healthy eating environment, according to Gilbert.
Using the Star Food machine from VE South/VE Global Solutions, students are registered and they deposit money into a debit account. Paying for lunch becomes a much quicker process. The program also allows for the “Free Lunch” or reimbursable meals to be accounted for. “A student punches in a pin code, places his finger on the biometric reader, presses a button, and the door opens to give the student access to the sandwich or meal of the day,” explains Gilbert.
This system enables a school to feed a child in 20 seconds, making it suitable for schools of about 750 students or more for middle and high school levels.

MicroHard manufactures keys with RFID technology. These keys store money on them

Operating with Ease

Vending machines have been learning to communicate with operators as a way of making maintenance more efficient as well. Systems now allow operators to monitor the vending machines wirelessly and via the Internet. This way operators can have instant records of what is being purchased, how much money should be in the machine, and when it needs to be stocked again. Some systems even alert the operator of possible vandalism.
Mike Sansing, vice president of sales and marketing for Automated Merchandising Systems (Kearneysville, West Virginia, U.S.), sees the U.S. vending market as slow to adapt, but drastically improving, and wireless technology as taking time to catch on. He says, “Wireless technology can improve how they do business, enabling them to know each account, the location of the account, and how much product needs to be filled before the delivery person even goes there. If there is a service issue, that information can be sent back to the place of business and the operator can address it before the account calls about it.”
In Europe, too, it is taking time for people to adopt the technology that is making its way into the industry. “In Italy we have to change the mentality of the operator. Using new cashless technology can help them to improve their margins,” says Montanariof MicroHard.
CompuVend (Metairie, Louisiana, U.S.) offers a curbside data-access system called Buzz Box. “A transmitter goes in the vending machine and when the operator arrives at the account it will transmit exactly what is needed to re-stock the machines,” Mark Kronenberg, vice president of CompuVend tells APPLIANCE. “It eliminates an entire trip into the building, and allows the operator to skip an account altogether if it doesn’t need service.”
Cantaloupe Systems, Inc., located in Berkeley, California, U.S., is making strides in wireless technology for vending with its Seed monitoring platform. The platform incorporates hardware, which the company builds itself, and a web application.
They harvest data from the machine’s DEX serial port, transmitting the information wirelessly to the operator’s cellular hub. Several cellular technologies are employed to provide maximum coverage. The hub can receive DEX data from many machines and relays it to the Cantaloupe home base, located in its company headquarters. The information is then encrypted and stored in SQL databases, where it becomes accessible to the operator, who can access current and historical information. The system is designed to enable sales and inventory tracking as well as information about machine malfunctions or other problems.
“We can tell you if a door has been left open, for example,” explains Marvin Bauzon, tech support for Cantaloupe Systems. “If your ice cream vending machine temperature goes out of its preset range we send you an alert, via text message or cell phone, so you can respond.”
The company is also stressing the importance of scheduling. Using the web application, the Seed system helps the operator decide where to send its drivers, when to send them and what inventory they will need to properly service each machine.
“We run an algorithm, which gives us the ability to tell the operator where to go and what to bring,” notes Bauzon. “The operator sets parameters for each machine, such as the maximum number of days allowed between visits, the minimum dollar amount that initiates a visit, or simply by the number of vended products or empties. Then our system comes up with a schedule for you.”
The system will also tell you to bring a certain amount of extra inventory, calculating how much more product will have been vended by the time the delivery person reaches the machine.

VE South/VE Global Solutions has created a solution to the problem of high school students not having enough time to eat lunch with its new lunch vending technology. The biometric reader can access a student’s account and debit money from that account as the school year goes on.

Taking the Next Steps

The vending machine will be changing quite dramatically over the next few years. Cashless payments will become more prevalent, operators will have an easier time maintaining vending machines using wireless technology and more machines will be there to cater to smaller offices or markets.
Multi-max of Lake Forest, California, U.S. is one company that is trying to reach out to the small offices of 20 to 80 employees by offering refreshment vending services. To do so, it needed a system to allow extremely efficient vending machine servicing. “We have warehouse-prepared, pre-loaded cartridges that enable drivers to service up to 40 to 50 stops a day, while conventional vending drivers typically service 11 stops a day” says Mark Bentley, vice president of Multi-max. “We let our computer software do as much as we can. All the packers have to do in the centralized warehouses is scan and pack from a software generated plan-o-gram that is displayed on an LCD.”
The system is also easy for the route driver, who inserts his Smart Card key into the vending machine to download all of the sales information, and then exchanges the depleted cartridge for a pre-loaded cartridge. It takes less than 5 minutes to service a snack, soda and coffee vendor at each location. “When the driver returns to the warehouse, he downloads the information from his Smart Card and software reports all the sales data, including how much money and product should be returned. It systematically goes through a process of determining how fast the products sold at the last service; it reviews gross margins, what didn’t sell and what new products are available. It then custom-generates a new menu for each location for the next service,” explains Bentley.
This smaller market is where Bentley sees the future of vending growth. Large companies are continuing to downsize. “Big vending is saturated and it has become cutthroat, with operators lowering their margins while gas prices, product cost, wages, and other operating cost are continually on the rise,” says Bentley.
Bauzon of Cantaloupe feels that there is much more to come in terms of wireless technology. “Down the road there is going to be two-way wireless communication between the machine and the operator,” he says. “I think vending machines will be able to stream video, change advertising or run security devices. The operator will control all of this from the comfort of their office or home.”
Vending machines are also making a big move to non-traditional merchandise. “We have machines selling customers clothing items and hats,” Kasavana tells APPLIANCE. “Macy’s has signed a contract with Zoom systems to put iPod vending machines in their stores. It’s Macy’s way of trying to attract younger shoppers.
“Selling merchandise like electronics, DVDs and cell phones will continue changing the configuration of the vending machine,”
he says.
Selling such higher-margin products also changes the nature of the business for the vending operator. Generation P will become an increasingly powerful market force, expecting cashless, effortless product purchases. Vending machines will need to evolve rapidly and intelligently to keep them satisfied.


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