Pay-as-you-go products show great promise with budget-conscious consumers, writes Mike Skinner, general manager of Coinstar E-Payment Services.
It’s no secret what’s on everyone’s minds these days — skyrocketing fuel prices, increasing food costs and a slacking housing market, all wrapped up with rocky consumer confidence. Just about everyone’s experiencing it and talking about it.
And the outlook for convenience retailers hasn’t been rosy either. We hear news of increasing price sensitivity driving consumers to bargain shop, buy in bulk and turn to private label products — for many shoppers, convenience is no longer as important as value. But there are things retailers can do to turn this gloomy picture into an opportunity to build traffic and revenue.
According to The Nielsen Company, just about half of US consumers are reducing overall spending to make up for rising fuel prices. And more than one-third of those is planning to reduce by a “great degree.” The Coinstar National Currency Poll conducted in June found 52% of Americans plan to spend less during the upcoming holidays than they did last year. And according to an IRI Times and Trends Special report, 53% of consumers are cooking meals from scratch now more than they were six months ago.
When consumers talk about trimming their spending, they’re really saying, “I need to budget more effectively,” or more likely, “I need to develop a budget.” And there is a product category out there designed to help any consumer budget more effectively, or budget for the first time: pay-as-you-go products.
The pay-as-you-go category includes prepaid wireless, long distance, Visa- and MasterCard-branded debit cards and more. This category has traditionally grown through what’s known as the “underserved” population of the market — those who are unbanked (no banking relationship), under-banked (low/no credit score) as well as first generation immigrants. Some of these consumers are already your shoppers, and this segment of the population continues to be a focus for the category.
But now, the convenience and budgeting control benefits of pay-as-you-go products make them appealing to a wider range of consumers looking to control their spending or budget more effectively — which is just about anyone during these challenging economic times.
Not only is there a clear consumer benefit, this category is already high growth and poised for even more explosive growth in the future. According to the Aite Group, prepaid debit card transactions will amount to $150bn in 2009, up from almost $13bn in 2004. And prepaid wireless sales are expected to reach over $30bn by 2010, compared with $8bn in 2005, according to Atlantic-ACM.
Savvy convenience retailers can take advantage of this trend by making a few easy adjustments to the inventory, marketing and merchandising of pay-as-you-go products. Alternatively, it may be time to add this product category to your store if you don’t already offer it.
Pay-as-you-go products are all about control — buying only the wireless airtime needed versus paying a monthly fee for potentially unused minutes; calling internationally at great rates; and having a MasterCard or Visa debit card where the only money spent is the amount loaded on the card.
These products keep costs in line for the consumer — they spend only what they can afford or need. Best of all, these products bring the consumer back to the store to refill their wireless airtime or load more money on their prepaid debit card. Repeat store visits, all year long, are a key benefit when consumers are reducing shopping trips.
It’s also important for retailers to understand the value of proactively managing a pay-as-you-go product line or working with a supplier that can manage it. While this category has a lot of potential for the convenience retailer, it needs to be properly merchandised, managed and promoted to maximise revenue potential.
Matching product selection with store demographics and paying attention to seasonal opportunities are just two ways a pay-as-you-go product line can produce sales. And best of all, you don’t have to pay for or keep track of any inventory — another plus in today’s cost-sensitive retail environment.
Take this opportunity to revitalise your pay-as-you-go programme and become a destination for budget-conscious consumers.
This article appeared in the November issue of NACS Magazine. For more information about subscribing, please visit http://www.nacsmagazine.com