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Published: October 29, 2009
Weak and strong companies alike are forced to
adapt or die during a recession. Usually, this means finding new
and creative ways to save money and keep the lights on.
Unfortunately, most businesses resort to lay-offs during tough
times. But in service-oriented business like retail, banking and
entertainment, someone still needs to provide customer service
and support.
That’s where the machines come in...
Retail, hospitality and health
care businesses spent $2.8 billion
on self-service technology last
year, according to VDC Research
Group. This spending is expected to
grow +15% annually over the next
four years.
It’s no surprise that businesses
would turn to automated help during
tough times. Transactions made using
an automated system such as a ticket
booth or automated teller machine
cost a tenth of what the very same
transaction would cost if it
involved a human employee, according
to The Economist.
Small-cap standout Coinstar Inc.
(NASDAQ: CSTR) is an obvious
choice in this sector. If you’ve set
foot inside a grocery store or fast
food restaurant in the past few
years, you’ve probably seen one of
Coinstar’s machines.
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The company’s namesake machine automatically converts your
spare change into cash or gift certificates to various popular
stores, keeping several cents for every dollar in the
transaction. But the company also owns Redbox, the self-service
movie rental kiosk found in fast-food restaurants and other
retail locations.
Coinstar’s purchase of the Redbox brand fits in beautifully with
its business model. After all, the kiosk rental market looks
very strong right now. It’s a niche in the automated services
industry that has the ability to perform very well during almost
any economic climate.
DVD sales are down double-digits this year as consumers continue
to tighten spending habits. But rental revenue is up more than
+8% across the industry. After all, spending $1 a night on a DVD
rental from a kiosk is an easy choice compared with what a
consumer would spend buying or going to a theater.
Coinstar enjoys fat margins and growing profitability because it
can employ a lean technical support staff. Fewer salaries, and
in these days of rocketing insurance costs, fewer benefit
expenses can go a long way.
Providing a meaningful, convenient machine-based service can
also strengthen customer loyalty. An impressive 85% of customers
prefer brands that offer self-service technology, according to
The Economist. The last thing anyone wants to do is wait
in a long line. Fast, reliable kiosk service isn’t just a way to
save money -- it’s a better way to cultivate satisfied
customers.
-- Greg Guenthner
Contributer
Penny
Sleuth
Editor's Note: This
article originally appeared in
Penny Sleuth. |
