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September 22, 2008

US retailers get helping hand from Coinstar

US coin-counting kiosk operator Coinstar ispromoting its prepaid card distribution services to US retailers by offering a turnkeypackage including staff training, merchandisingand POS systems integration. Its message is that retailers can use prepaid to improveprofits in a difficult economic climate.

By Verdict Staff

US coin-counting kiosk operator Coinstar is promoting its prepaid card distribution services to US retailers by offering a ‘turnkey’ package including staff training, merchandising and POS systems integration. Its message is that retailers can use prepaid to improve profits in a difficult economic climate.

Coinstar entered the prepaid card market in 2004 through its Coinstar E-Payment Services subsidiary. It competes with market leader Safeway’s prepaid card distributor Blackhawk Network.

“While Coinstar has to work hard to catch up with Blackhawk, which has its cards in all Safeway stores, its coin-counting kiosks give it a competitive advantage,” US payment research consultancy TowerGroup analyst Brian Riley said. “These kiosks are installed in a lot of stores.”

Coinstar’s primary prepaid market is convenience stores, but it also works with drugstores such as Walgreens and supermarkets. It offers retailers a choice of installing a stand-alone POS terminal for selling prepaid; using their existing POS system with software that integrates with the Coinstar platform; or self-service kiosks that issue prepaid cards. As of 30 June 2008, Coinstar had 10,900 kiosks installed which are able to convert coin deposits to prepaid cards, up from 8,900 a year earlier.

Mike Skinner, Coinstar E-Payment Services’ general manager, sees prepaid cards as a high-margin, low-cost product that is easy to sell.

“We tell retailers they need to become known as a destination for prepaid, and this will bring customers to their stores and improve their overall sales,” he said. “The way to do this is through effective prepaid category management: getting the right mix of products, matching the right products to the retailer’s different customer segments, and exploiting seasonal opportunities.”

As part of its product category management service, Coinstar handles sourcing.

“We put together the prepaid wireless cards from telcos such as AT&T on behalf of the retailer, and we bring prepaid reloadable debit cards from Green Dot and NetSpend as well as non-reloadable gift cards,” Skinner said.

Coinstar finds out what types of customer visit the retailer’s stores, then puts together an appropriate mix of products.

“We stock the products, supply the shelves and the displays, and plan the layout of the prepaid cards in the display cabinets for the best sales,” Skinner added.

Coinstar provides staff training in all the products it distributes.

“To sell prepaid cards, you need to train the staff, and this will be even more important with the growth of financial services in convenience stores such as money transfers and bill payments,” Skinner said.

Coinstar, which since 2006 has bought two remittance firms, GroupEx Financial and Travelex Money Transfer, is developing a money transfer product specifically for convenience stores.

Skinner cited recent promotions as evidence that Coinstar’s strategy pays off. For its promotions, Coinstar supplies all the display material at no cost to the retailer.

For Father’s Day 2008, Coinstar ran a promotion for the Bass Pro fisherman gift card. Anyone who bought a Bass Pro card during the promotion was given a free tackle box. Skinner says total Bass Pro card transactions rose by 27 percent, and also helped to improve overall gift card sales at the 2,000 retailers which took part.

Robin Arnfield

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