AUTOMATED SELLERS

JOEL ELSON

Selling prepaid phone cards from a vending machine is a mixed bag at supermarkets, said buyers.

While security is the biggest advantage, the main shortcoming of vending phone cards is still that it goes unseen by many customers, said merchandisers.

And although the labor-saving aspect is a strong reason some retailers opt for a vending approach, they were quick to point out some customers are still intimidated by automated machines, including automatic teller machines.

At Churchill's Super Markets, Sylvania, Ohio, selling phone cards from a vending machine "is definitely the way to go. It's our silent salesman and without any downside," said Chuck Townsend, assistant store manager.

The retailer has sold prepaid telephone cards from a vending machine for the past two years, based on its more efficient approach and ease of handling.

"We decided against selling them from the registers because as a busy store that would slow down people even more," said Townsend.

Churchill's phone card vending units are placed at the front end near the courtesy counter where the ATM and instant lottery machines are also found.

"We take a profit from the $10, $15 and $20 cards sold from the vending machines, which do not require any store labor," he said.

Although John C. Groub Co., Seymour, Ind., continues to explore the field for a phone-card program, it maintains selling them from a vending machine "is a clean approach," said Tom Bollinger, vice president for promotions.

Merchandising phone cards from a vending station, however, "tends to carry higher retails, and as much as 50% more than loose cards, which can outprice you in the market," Bollinger said.

He said margins on cards offered from a vending program can be reduced to be more competitive in the highly charged prepaid phone card market. "But at present our thoughts are if we got into that it has to be something we can live with. We want to meet our expectations and not drop below that."

At this stage, Groub is actually more concerned about security in handling a live-card program. The chain has looked at displaying cards loose that are later activated. "So we're exploring the options until a fail-safe system is on the market that we can be competitive with," added Bollinger.

Harold Friedman Inc., Butler, Pa., makes a point of placing its vending machine for prepaid phone cards close to the checkouts, "so that customers are able to see them as they exit the store," said Dean Weiland, a store co-manager.

Friedman has found prepaid phone cards sold from a vending machine "are profitable, only as long they are close to the checkouts."

Weiland said the vending units were first introduced by the courtesy counter, 20 feet from the checkstands. But moving them closer to checkout lanes made a real difference. "Sales shot up 40% to 50% due to the increased visibility and store traffic," he said. Friedman carries phone cards in $5 to $50 denominations.

Selling phone cards from a vending unit doesn't require customers to line up behind other customers purchasing lottery tickets or cashing checks at the courtesy booth, added Weiland. The six-unit retailer sells about $3,000 per week companywide in phone cards, working on 20% margins.

Margins would be the same sold either loose from behind a courtesy counter or in a vending machine, he said, adding "it's pure profit without any labor expended using a vending machine."

More user-friendly vending machines would garner higher phone-card sales and attract people usually turned off by automated dispensers, according to Charles Yahn, vice president of general merchandise at Associated Wholesalers, Robesonia, Pa.

Although accessing a phone-card vending machine is as easy as using an ATM,"many consumers still don't know how to buy a phone card from a vending machine," said the wholesaler.

Yahn said the downside of a vending machine is it is a turn-off for people in a hurry, or those intimidated by automated vending machines.

"A lot of consumers also won't take the time to use a vending machine, preferring to walk up to a service counter and ask for a 30- or 40-minute card instead," Yahn said.

According to the wholesaler, vending sales would reach higher levels with nonlive cards displayed at various strategic locations and activated at a dispensing machine at the time of purchase.

"For my money, this is the only way to go. This approach would apply mainly to higher-volume retailers, and replace a traditional phone-card vending machine. Smaller stores, however, would continue using vending machines," added Yahn.

Strack & Van Til Supermarkets, Schererville, Ind., sells prepaid phone cards both ways. But it sells three times as many cards loose at nine stores than at the two units with vending machines, said Andy Raab, vice president.

A customer-service attendant at stores with loose cards brings live phone cards to checkers when customers buy one. "This avoids having loose live cards in cash tills -- especially in stores with 25 checkouts -- or activated cards in shippers," said Raab.

As an effective selling tool, a phone-card vending machine must be easily seen by incoming traffic, according to Cyndy Bartelli, store manager at Carl's Grocery Co., Mission, Texas.

The phone-card vending unit was obscured when merchandised as one of many products sold in the foyer along with a toy vending machine, a postage stamp machine and other vending devices at Bartelli's store. But that's changed with new placement just inside the front door, she said.

"The phone-card machine wasn't noticed when it was set up with the postage stamp dispenser. It's by the service center or greeting card department in other stores.

"[Saving labor] was the big issue for a vending machine. It's in line with our goal of trying to remove as many services from the service center to keep our labor costs down," she said. According to Bartelli, potential sales are also probably lost from people who are intimidated by machines. "These customers may go to stores that sell phone cards from a service center," she said.