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Spare Change: A Closed-Loop Opportunity

By Ben Jackson
March 21, 2011
in Mercator Insights
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Consumers Cash ATM c-stores

Has Consumers' Use of Cash Increased or Decreased over the Last 12 Months?

A recent article in the New York Times shows howspare change can create an opportunity for retailers. The articledescribes how Coinstar operates 19,000 coin-counting machinesaround the country, some of which offer the option of convertingthe coins directly into a closed-loop “gift certificate.” Thisoption lets consumers redeem their coins without paying thestandard 9.8 percent service fee to receive cash vouchers.

Companies such as Starbucks, Gap, iTunes, Borders, and Amazon.comoffer gift certificates, and some have even offered bonuses,according to the Times. These retailers have paid the service feefor the consumer to lock in that spending. Read the full story athttp://www.nytimes.com/2011/03/14/business/media/14adco.html?scp=2&sq=CoinStar&st=cse.

The deal is a good one for retailers for a number of reasons.First, retailers know that gift cards are treated as a licensespend, so shoppers regularly spend more than the face value of thegift card. Second, a shopper who is collecting spare change thatwas otherwise sitting unused in a jar may take that opportunity totreat herself or himself. The money is essentially “found money”under the couch cushions, and not part of the regular budget.Third, it provides an opportunity to reach customers throughanother shopping channel.

In the article, Coinstar says it has an average coin transaction of$38, and 76 million transactions a year. By getting into theoptions menu on a Coinstar kiosk, a retailer can get a slice ofthat pie. Additionally, it would be possible to pair other offerswith the Coinstar redemption as a way to sweeten the deal and nudgeconsumers towards dedicating their spare change to a particularretailer.

The growth of card malls and virtual cards has shown thatconvenience is a large factor in the decision of where shoppers buygift cards. By making it easy for them to convert their change intoa gift card, it possible to open up entirely new channel ofdistribution and bring more traffic into stores.

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Tags: DebitMerchant AcquiringMobile PaymentsPrepaidSelf Service and ConvenienceSocial Media

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