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Are 'Hybrid' Stores the Wave of the Future? (Part 1)

Paul Partyka |

CHICAGO — When constructing a self-service laundry, many difficult decisions need to be made. What type of equipment mix do you favor? Does the layout have the proper customer flow? Do you want a coin or cashless store?To many owners, the coin/cashless question offered no middle ground. However, other payment options are now available. Can a “hybrid” system work for your laundry?Representatives from companies offering hybrid systems share their views.BENEFITS TO CONSIDER“From talking with laundry owners and distributors across the country, most of the distributors feel [a store can only be coin or totally cashless],” says Mike Oliver, IDX Inc. “Operators are looking for alternatives to offer their customer base and increase cash flow.”Oliver says there are several hybrid systems, the oldest being tokens and coins. “There is also a prepaid card system that when the RFID card is presented to a reader, it will debit the base start value, and it can add incremental value for upselling. This system also has a built-in loyalty program that rewards the customer with a free vend from the soap dispenser or a free dryer cycle.“One of the other systems adds credit-card readers (VISA/MasterCard) to each machine. This allows multipricing levels as well.”A hybrid system offers many owner benefits, Oliver believes. “The first is an owner will be able to offer his customers the benefit of a card system without forcing his customers to change. The hybrid system allows the laundry owner to slowly migrate to a cashless store as his customers become comfortable with cards. And if it does not work as a cashless store, the owner can reinstall the coin acceptors without extra cost.“There are many people who don’t want to purchase a card for various reasons, such as tight budgets. These customers cannot afford to have extra cash tied up on a laundry card. There are also customers who only go to the laundry once or twice a year to wash large items; they don’t want to carry a card with a balance on it.”Most hybrid systems do not need an expensive back-end computer system to operate it, nor does a system require cables to be run between the computer and machines. “If one of the hybrid readers goes down, the machine still accepts cash and washes clothes. In the back-end card system, if communication is lost between the reader and the computer, that machine, or maybe a whole bank of washers and dryers, can go down.”A hybrid option also avoids a costly makeover, he says. “The owner can convert just a few machines at a time. There is less cost in installing and maintaining hybrid systems. Plus, owners have reduced demand on bill changers and the need to refill the coin hoppers as often.”If you adopt a hybrid system, you still have to collect some coins, and lack the ability to monitor your machines or make price changes from a remote location, Oliver says.Are there a minimum number of machines that should utilize this equipment in order for an owner to benefit? “The efficiency point will depend on the manufacturer of the system. One system can be set up with as few as one or two machines; another system can be set up with six to 10 machines. However, if an owner is looking at maximizing his investment, I would suggest that he first install the readers on his high-value washers and those washers that wash-and-fold personnel use, along with an equal number of dryers.”A hybrid system also benefits the owner who decides to go totally cashless or returns to coin, he says. “If an owner wants to revert back to coins only, the cost is just a little labor to remove a reader and a small plate to cover the holes. The same holds true for going cashless; there is little labor to remove a coin acceptor and add a small plate to cover the coin holes.”Oliver has compiled reports from owners who have gone to hybrid (card/coin) stores. “These owners report that 35 to 50 percent of their revenue migrates to cards within the first six months, and after the first year, it was 60 to 65 percent.”He is still surprised that more owners haven’t gone totally cashless. However, after talking with dealers who installed many of the first card-only stores, he sees a different picture. “Many people in the South had a bad experience with cashless stores. Revenues dropped as much as 50 percent or more. When they switched back to coins, their revenue rose. These same dealers will not offer a hybrid or cashless alternative to their laundry owners.”Oliver sees hybrid systems outnumbering totally cashless systems in the future. “In today’s economy, a laundry must offer all kinds of payment solutions to make and increase profits. And with a hybrid system, owners don’t have to put in the full investment up front, since they can add [equipment] as cash flow increases.”SOCIETAL CHANGE A KEY FACTORPerceptions are changing when it comes to the coin/cashless/hybrid system debate, says Michael Schantz, Setomatic Systems Inc. “More operators like offering multiple payment options,” he says.Schantz believes owners should allow customers to pay with coin, credit card, debit card, or loyalty card. “Customers already carry a lot of cards. We don’t want customers forced to buy a card that is used only at a specific laundry.”Society is dictating industry changes, he believes. “People live from debit cards. People manage finances online with debit cards.“When you put in credit, debit and coin acceptance, coins will be used by most at first, but then, based on experience, credit-card usage will grow every month [regardless of the market].”There are some demographics that cater more to hybrid systems, but even in low-income areas, there is more debit-card usage, he says. “College towns are the best for credit-card usage. With parents paying the bills, students don’t pay cash for anything.”While operators don’t need every machine fitted with a hybrid system, Schantz says you won’t take advantage of any system unless you have enough machines using it. “Have all your big machines [on the system], along with some of the smaller washers, plus the dryers.” It doesn’t make sense to have payment options available for the washers but not the dryers, he adds.Schantz isn’t surprised that totally cashless card stores haven’t made more of an impact. “When you convert a coin store to cashless, operators will see upset customers. You will lose business. Lower- to middle-income customers don’t want to put $20 on a card that is only used in your store.” Plus, seasonal/vacationing customers won’t patronize totally cashless card stores, he says.Even if the cost for cashless card-only stores drops, don’t expect to see more of them in the future. “In fact, I see less of [the cashless card-only stores] in the future. Operators have to buy a lot of cards every month; this comes as a big surprise.“Hybrid stores will surpass totally cashless stores. With a hybrid system, you can get everyone. We want customers’ money — any way they want to give it. Don’t eliminate their options!”Check back Friday for Part 2 of this story.

About the author

Paul Partyka

American Coin-Op

Paul Partyka was editor of American Coin-Op from 1997 through May 2011.

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