Vending Business with No Credit Card Swipe?

[MVS]

Does anyone here run a successful vending business with machines having no credit card swipe capability?

 

[lacanteen]

Do you use the cassette player in your car/truck?

[Southeast Treats]

Just in the few years I have been vending, cards have gone from a rarity to almost a necessity.  So many people carry no cash today, and without some type of card acceptance they are not able to buy anything.  You can't afford to put them on small accounts, but you almost have to have them for any good sized account....

[Dwall]

We installed CR on 100% of our machines within the last 2 years mainly for the telemetry capability but in doing so our sales have increased at practically all locations some as much as 60%. When I started in vending 24 years ago I never would have dreamed it was possible to have vending without tons of coins to count every day. 

[CapitalCityVendingLLC]

We do.  Or we did.  

We have just short of 100 machines out on location.  We've been around this number of machines for 10-ish years.  For the first 7.5ish years, we were CCR-free.  We set up our first CCR about 2.5 years ago, and now have 9 out there.  I agree with southeast treats that CCR can increase sales, and in some accounts, it can help sales big time.  If you have foot traffic, or a younger customer base, a CCR will definitely help sales.  The newer accounts we have been going after almost always need them.  We have used them in our sales pitches, and they help us know exactly when to service the machine.  Getting a new/big account without CCR's is harder than it used to be, and will only get harder.  We are also in a low cost of living part of the country so the need for a CCR on every machine isn't as dire as some other parts of the country (IMO).  

But to answer your question, you can definitely run a successful vending company without CCR's.  Most of our accounts are good accounts, but aren't big enough for the need for a CCR.  Most of our equipment isn't compatible to put a CCR on anyways.  Maybe if most our machines were able to put a CCR on, I'd have a different answer.  They are a huge help in bigger accounts, and are super convenient, but do you 100% absolutely need them...I don't think so.  It will be tough landing a big/new account without them however.  

[AngryChris]

I actually registered my business in 2010 but I didn't really start making money until 2011.  Having said that, I have been in the industry since 2006.  Aside from one account, I was completely cash-only until October of 2016 when one of my locations was acquired by a larger company and went from about 25 employees to about 100, with most of the addition being blue-collar.  Needless to say, my sales went up a lot (about $9,000/year).  I had a good relationship with the account and, as requested, I added card readers to 3 machines (1 snack, 1 soda, and 1 combo).  Recently, a card reader failed on me and I noticed that I was losing probably $20/week in actual sales due to the card reader being down.  People were actually going to the combo machine to get snacks and wiped it out because they had no cash.  I also bought 3 additional readers in February and added an account that included 2 more readers in May.. so I am up to something like 10 readers in total, so it's a little less than 10% of my machines being CC capable.  I can guarantee you that you can be profitable without card readers currently, but that might change.  Out of 8 readers actually on-location currently, about 3 are completely necessary due to sales and the other 5 are very useful due to telemetry.  

I have also made the decision to start removing equipment that's not worth upgrading, such as older USI machines with SM3 boards, AP 4000/5000, National 145/146, and so on.  Basically, anything that's running out of parts or looks too dated gets scrapped if it needs to be removed.  I think, within the next 5 years, I will probably have CC capability on virtually all new accounts and probably a good 25%+ of all of my equipment.  I like to add telemetry to my busiest locations within certain areas so that I know I need to service everyone in that location with the biggest account is getting low.

[CapitalCityVendingLLC]

Yea, 

We are doing similar things going forward.  Our biggest thing as we grow is that we are now in a good position to where we can be picky about the new accounts we go after.  It used to be where we would take any new account we could get.  Now we only go after/accept new accounts if we know it's going to be a great account.  Since we have very little doubt about the new accounts being good/bad, we put out brand new machines, with CC readers on them.  Six of our last seven machines we have put out have been new AMS machines with CC readers on them.  Fewer, nicer machines/accounts is our long term goal.  Slowly weed out the old equipment in the slow accounts.  Stream line everything.  

[AngryChris]

59 minutes ago, CapitalCityVendingLLC said:

Yea, 

We are doing similar things going forward.  Our biggest thing as we grow is that we are now in a good position to where we can be picky about the new accounts we go after.  It used to be where we would take any new account we could get.  Now we only go after/accept new accounts if we know it's going to be a great account.  Since we have very little doubt about the new accounts being good/bad, we put out brand new machines, with CC readers on them.  Six of our last seven machines we have put out have been new AMS machines with CC readers on them.  Fewer, nicer machines/accounts is our long term goal.  Slowly weed out the old equipment in the slow accounts.  Stream line everything.  

I totally agree.  I have an AP 113 and National 157 sitting in my garage right now.  Although the 157 is MDB capable, I may consider upgrading it just for the drop sensor capability.  The AP 113 will be upgraded for sure though.  Also in my garage are 4 bottle vendors including a 501E, a Vendo 720, a 276E, and a Vendo 511.  The 501E needs the refrigeration deck repaired and the Vendo 511 needs a new board.  I may sell off the Vendo 511 but the rest of the machines are good to keep in my inventory and I could easily add 2 nice accounts with what I have, if not 3 nice accounts if I were to refurbish the AP 7600 in the back... but I think it's going to lose its snack shelves and go to the scrap yard instead lol.  It was left under an overhead AC unit and rusted on top.

[lacanteen]

What I can say about card readers is that 100% of our machines that can have a cared reader have them installed, which is 85% of our total machines on location. Cashless sales account for 24% of our total company sales, which, in an operation our size, is a lot of money not being handled, counted or stolen. Are there locations that don't pay for the cost of the reader? Sure there are, but as of tomorrow, 100% of all of the readers will be sending DEX telemetry to our Lightspeed system. We also use the card reader DEX/fill feature to send DEX to an iPad to verify inventory and automate the visit. 

[MVS]

15 minutes ago, lacanteen said:

What I can say about card readers is that 100% of our machines that can have a cared reader have them installed, which is 85% of our total machines on location. Cashless sales account for 24% of our total company sales, which, in an operation our size, is a lot of money not being handled, counted or stolen. Are there locations that don't pay for the cost of the reader? Sure there are, but as of tomorrow, 100% of all of the readers will be sending DEX telemetry to our Lightspeed system. We also use the card reader DEX/fill feature to send DEX to an iPad to verify inventory and automate the visit. 

That's interesting...one of the reasons I wanted to stay away from the card readers is because I thought the expense would all fall back on me, but you are saying most of your customers with card readers absorb that cost.  How?  Just indirectly through higher product prices, or do you invoice them somehow?

[lacanteen]

Ten cent 2-tier pricing makes up for the service fee and part of the monthly fee. The value of telemetry makes up for the slower accounts. 

[MVS]

5 minutes ago, lacanteen said:

Ten cent 2-tier pricing makes up for the service fee and part of the monthly fee. The value of telemetry makes up for the slower accounts. 

HI lacanteen:

Remember I am a total greenhorn here, so I hope I don't test your patience too much, but could you break that response down for me a bit?

1) What is "ten cent 2-tier pricing?"

2) How does the value of telemetry (whatever that is) make up for the slower accounts?

3) Having just come from the AVS website, it is dawning on me that even new machines do NOT come equipped with card readers (i.e., Apparently, this is an aftermarket part you need to buy somewhere else).  Is that correct?

[lacanteen]

2 tier pricing is charging 10 cents extra on a card vend. So on a $1 vend you get $1.10. This covers the 5.5 cent transaction fee and leaves 4.5 cents to offset the monthly service fee.

If you have a slow account that the card reader does not pay for itself, some vendors, as I do,  consider the telemetry from the card reader to be worth the cost. 

Card readers can be purchased from equipment suppliers, but you are better off dealing with the card companies direct. Some companies have lease to own deals to help defray the cost over 3 to 5 years. 

[AngryChris]

To answer you about telemetry... first understand this: the card reader is an add-on device that requires an internet connection usually in the form of a cell signal just like a cell phone.  With that connection, which you must pay for, the reader can send and receive data such as software updates, card or cash transactions, or reported errors on the machine.  The "telemeter" is basically the modem and it is the most crucial part of the reader. The card bezel is the part you see on the outside that lets you swipe your card. Even without that bezel, the telemeter is still functional as long as the signal is there.  So, if you only use the reader for telemetry, you could decide to check the sales remotely from a specific account to see if it really needs servicing.  

If the sales numbers indicate it isn't too empty, then you could wait on it for some other day. Maybe you will be driving past it in two days anyway.  Furthermore, in a perfect situation, the telemeter can effectively tell you exactly what sold in the machine as long as you are setup for that.  So, you could pre-kit a tote full of snacks and a few mixed cases of soda and fill the machine exactly as needed and cone back with nothing more than cash and empty containers.  That is a benefit of telemetry. But, again, you must pay for the signal at about $8/month.  This is really only feasible if you have good accounts.

[MidStateVending]

I have nearly 60 machines in service... none have cc readers. I have run the numbers and it seems that the increase volume does not offset the cost of running those readers, plus I would have to visit the location more often. In the same breath I could be wrong and I am currently looking for a good deal.

[vendcobros]

We have card readers on every machine and use a custom programmed set of excel sheets to import data from USA tech that tells us what to add to the machines, when to service them, top selling items etc all automated. Creates a big list of what's due every day and we prepack exactly what we need for the machines.

First 4.5 years we were cash only. The benefits of the data and the huge increase in sales was well worth it. We use 10 cent two tier on every machine and have around 40% credit 60% cash. Most our accounts make enough off the two tier to cover the monthly telemetry fees.

[AngryChris]

47 minutes ago, MidStateVending said:

I have nearly 60 machines in service... none have cc readers. I have run the numbers and it seems that the increase volume does not offset the cost of running those readers, plus I would have to visit the location more often. In the same breath I could be wrong and I am currently looking for a good deal.

I'm not trying to convince you to get CC readers, but I would like to tell you that your mindset does sound wrong!!  

First off, let me tell you two reasons why you wouldn't want to add card readers: 1) the cost of the reader, especially if it requires upgrading equipment to MDB or replacing machines.  2) the monthly service fees.  Slow accounts that do say.. $2500/year or less.. they don't NORMALLY warrant card readers.  There is still value in them, but if it's an older blue-collar account, they might be used to using cash and you won't see much of an increase in sales.  However, if it's an account with young demographics or perhaps a larger office where people don't carry much cash, then a card reader may increase sales significantly.  Don't expect sales to double (it's possible though) but you might see 20-40% increases.  I have an account right now with people who seem to be 30 or less and I think they are a prime location to add a reader.. they currently do about $3,000/year.  The snack machine is not MDB capable yet so it will be a significantly cost to upgrade the machine if I do so.

Secondly, when you say you have run the numbers and it doesn't seem to offset the costs.. I have to ask you.. what are your numbers?  Again, with slower accounts, the numbers generally won't add up, but with larger accounts, they can.  Here's an example.  Assuming I did not have to upgrade the snack machine, figure $600 for 2 readers.  On top of that, figure $16/month in connection fees for 2 readers.  If you spread that $600 in readers over the course of 60 months, which I think is fair, you now add $10/month for both readers to that $16/month in connection fees (connection fees never go away).  So, for 5 years, you spend $26/month for TWO readers.  Let's say that $5,000/year account increases sales by 20% and two-tier pricing covers all processing fees.  That $5,000/year account now does an additional $1,000/year in sales.  Now let's say you profit about 25% after all operating expenses.  That $1,000/year is really $250/year or almost $20/month.  So, for the first 5 years, you will pay an average of $26/month but gain $20/month, but that doesn't account for the fact that the increase in sales with 2-tier pricing might actually offset that even more and possibly turn a profit.  That's only the first 5 years.  After that, you start earning an additional profit.  Does it add a significant increase with the example? No, but it is an increase!

Now, you said that you would have to service the account more often.  That was the biggest thing that caught me off guard.  Why would you ever NOT want to service an account more often IF it needed it?  I mean, unless you literally don't like vending then you should WANT to service a machine more often because sales increased.  It's kind of like saying you don't want an account doing $8,000 year because you have to service it every week but you like accounts doing $4,000/year because you can service them every other week.  I'd rather take the larger accounts where stales become less problematic and margins are typically higher... plus you can afford better equipment because the sales are better.  You should WANT to have to service the machines more often because of increased sales.  I can't think of any other reason as to why you would have said you would need to service it more often except for increased sales.

I think what you are guilty of is thinking that you have to pay for the reader, pay wireless fees, and pay transaction fees and "for what?"  The thing to keep in mind is that the transaction fees can be covered by 2-tier pricing.  In fact, with just an extra $30/month in additional revenue, the 2-tier pricing should cover transaction fees + wireless connection.  It just won't necessarily cover the price of the reader itself.  But there is something that you may not have considered at all.  When you have telemetry, you can find out, by the next day, if a machine is down for some reason because the report will show that sales stopped.  It takes a bit of discipline to check these reports regularly but how many times have you arrived at a location to find out that it's been down for the last 3 days and no one called?  Maybe you lost $20 in revenue because the machine was down.  That $20 may have been covered with a card reader or simply driving to the location and fixing the machine.  One of my machines does about $20-$25/day in sales and I check the reports every morning to see what it did the previous day.  From that report, I can deduce if it needs to be serviced earlier or if I need to take a quick trip there to fix any potential problem before they call.  Another account is about 40 minutes away and it's a dealership with 7 machines spread across 4 buildings.  I only have card readers in the best location, but I know how long I can wait until it all needs serviced.  So, if they had a crazy couple weeks, I might go there in a 2-week service cycle, but maybe I will go in a 4-week service cycle in January when sales are down.  I save a lot of fuel by doing this because I only go when it's necessary.  And if you get worried about fuel, keep in mind that I try to service every account in that area when the biggest account needs to be serviced.  That way, I get my money's worth for the fuel expense.

The biggest reason I can think of for you to not get involved with readers right now is because your accounts are too slow.  If machines need to be upgraded, then that's obviously expensive to do, but if your accounts are good, they will justify the upgrades not just for card technology but for $5 acceptance, drop sensors, etc...  I'm not going to add readers on all accounts over the next 5 years or so, rather, I am going to slowly cancel the slower accounts and add better accounts.  Ultimately, I will only have card readers on accounts that actually justify it, but as lacanteen said, there is also a benefit in telemetry so even if a good account doesn't do much in card sales, I will eat the wireless fee if I can ultimately pre-kit everything.  And I can promise you... if you could pre-kit everything, you would save a lot of money because you would easily be out there for maybe 30% less time on the routes and you may need as much as 50% less space in your vehicle.  You may be able to easily do 50% more accounts in a day with this method, and the fuel savings would add up too because there's no more backtracking because you forgot something.  It's VERY expensive to get to that level because all of your equipment needs to have CC technology and you really need to invest in software too, but you could find yourself being in a dream-like situation where you collect something like $2,000+ each day in gross sales with less labor than you ever thought it would take.  Oh.. and I forgot to mention, because of telemetry, you can easily find out what the best sellers are and double up on those items.  I know I sound like a credit card salesman here but I would hate to see you miss out on something because you think it has no upside.  Get good accounts and add card technology from the very beginning.  You will see.

[MidStateVending]

Ok... how can I refute that! I will look into buying 6 readers to start.... Someone today said USA Technologies are good. 

[AngryChris]

I recommend starting with just two at your best account before you spend a lot.  Just make sure they are MDB machines.