Merchandising calling cards at supermarkets has no simple cut-and-dried method.
ut the merchandise on the sales floor where it can trigger greater impulse purchases.
Some have gone to more costly and labor-intensive point-of-purchase activation systems to activate cards sold on the floor. Others have found that live cards sold from the cash drawer are a better method.
Many expect the use of vending machines to grow as a point of distribution. Also, as the systems become more advanced, automatic teller machines may cut into the vending segment.
Executives express some differing opinions on merchandising prepaid cards at supermarkets:
Segermark: How phone cards are best merchandised at retail really depends on the store. A vending machine is the least labor intensive -- but whether a retailer finds vending advantageous depends on his labor-utilization rates and how much service he wants to have.
Capka: There are two good approaches. One is point-of-sale activation, in which the cashier has to activate the card.
However, we've found in our studies that retailers can sell more cards if they have live cards in the register drawer and treat them as cash. They are dollar-bill size. A dummy card is on the endcap. The customer hands the dummy card to the cashier. The reason more cards are sold that way is that every time the cashier opens the drawer, he or she sees phone cards with the money. He or she may remember to mention their availability to the customer. The cashier also wears a badge that promotes the phone cards.
The phone cards bear the chain's name. The retailer can post a sign, "buy our phone card and save a minimum of 60% on long distance away from home." Again, it is educating the consumer as to the value of calling cards and their ease of use.
Kaminsky: POS activation is a great way to sell phone cards. Since there is no time on it when it is picked up, the shoplifter is not stealing anything from the store except a piece of plastic.
SN: How many retailers use point-of-sale activation?
Capka: Only one of 10 grocers has POS activation today. The number will grow to prevent shrink.
Canty: Look for POS activation. Some companies offer this.
Capka: You need the cards at the checkstand and have to have signs up in the window to move these goods out the door.
Schloss: We only sell two denominations of phone cards, 30 minutes and 60 minutes. Those have been the most popular with our customers. Other retailers sell 100- and 200-minute phone cards, but right now we are sticking with the smaller denominations. We would rather have the customer come back and buy more. We would be interested in carrying rechargeable phone cards, too. We may look into those.
Eventually, as our systems become more sophisticated we will probably go to nonactivated phone cards so we can merchandise them away from the checkstands. The card can be activated at the time of purchase. POS activation may happen in the next three to six months.
SN: What's your opinion on vending prepaid phone cards as a merchandising approach?
Capka: Less than 10% of the business is done through vending machines. Vending machines are very impersonal. They have to be serviced. About half the time when I visit a store with a vending machine, it is out of phone cards, broken or the machine doesn't provide a good deal to the grocer. Vending machines generally pay around 20%. With live cards in the register drawer, the retailer can make 30% to 36% net profit with no risk.
Veres: I think selling phone cards through vending machines is great. The sign is right there. Graphics on the machine will close the sale. Some vending machines have inactive [dead] phone cards inside that are activated as they are ejected from the machine. This eliminates the need to train clerks. I have seen those vending machines in a variety of retail outlets, not so much at grocery stores, but more often at stores in airports.
The vending machine usually has $10 or $20 phone cards at a comparable price per minute compared with other phone cards sold at retail. I haven't noticed that phone cards sold from vending machines were more expensive.
I would estimate that maybe as much as 40% of phone cards are sold through vending machines.
Goldberg: Vending machines are fine for prepaid phone cards as long as it is safe for the consumer to walk up to them and take out his credit card or cash. You have to be sure the consumer feels comfortable using the vending machine. It also has to be very simple to use and easy to understand. Ads run by major long-distance companies touting how much it costs per minute to buy long-distance service have dramatically lowered the figure the consumer will give you when asked how much one minute of long distance will cost. Today, people will tell you 10 to 15 cents is what a minute should cost. When consumers walk up to a vending machine, they will want to know what they are paying per minute.
Schloss: Vending machines do well in some stores. We have them in our outlying locations such as in Nome and in rural parts of Alaska, where we don't have the kind of control as in other places, like the city. Our net profit from vending machines averages about 20%. We haven't had any breakdowns with the vending machines.
Canty: Phone cards sold through vending machines are spreading. There are automated teller machines where you can get prepaid cards and have money deducted straight from your account. One of the things that is always effective with vending machines is their proximity to phones. If you are thinking, "How will I make a long-distance call," and then see a vending machine for phone cards, that is a connected sale.
In 1995 the retail market represented probably about 30% of total prepaid phone-card volume. Vending machines are probably 30% of the 30% retail segment, or maybe less. Vending will grow as it gets lumped into ATM machines. The ATM is a really good channel of distribution for the cards. I don't have to take money out of my wallet. If you put $20 into a machine and don't get a card, that is really upsetting. An ATM is more trustworthy. Many people use ATMs. The ATM doesn't need to distribute pretty little cards; just print out a receipt with a PIN number. The plastic card just has an 800-number to call and a PIN.