$$$ Ka-Ching: Profit From Cash Drawer Sales
Two industry executives share advice on how you can maximize cash drawer sales margins.
Cash drawers don't drive point of sale (POS) system sales. No one is ever going to purchase a POS system based primarily on the cash drawer - no matter how many bells and whistles (or coin slots) the drawer contains. But that's not to say that cash drawers should be last on the list of POS components. After all, where else in the POS system are you going to put the cash, coins, checks, coupons, gift certificates, and credit/debit card receipts?
"VARs can profit from cash drawer sales," says Bruce Mann, VP of marketing for APG Cash Drawer (Minneapolis). "The profits, however, are small in comparison to the total system price. The maximum margin on a cash drawer is about 20%, and that is on a low- feature system." There are ancillary means of generating cash drawer sale profits. "Sell more accessories, such as extra tills and till covers, and write service contracts for the drawers," Mann advised. APG Cash Drawer is a division of Upper Midwest Industries, which has sales in excess of $40 million. The privately held cash drawer manufacturer has 100 employees. Mann added that there are other ways VARs can boost profits from cash drawer sales.
VARs can also partner to reduce the cost of stocking cash drawers. "Most VARs can't afford to stock cash drawer inventory, due to the thinner margins," added Paul Masson, president of M-S Cash Drawer (Pasadena, CA). He recommends VARs rely on distributors to stock and ship products for them. M-S Cash Drawer, founded in 1946, is a specialty manufacturer of POS cash drawers. The company is also a wholesale distributor of POS cash drawers and peripherals.
Current Market Trends Include Drawer Size And Color
According to Masson, one market trend is toward more compact cash drawers, such as those measuring 16 inches by 16 inches, including storage for checks and rolled coins. "Retailers are demanding smaller cash drawers in order to maximize counter space for selling products," said Masson. "Charcoal gray is becoming popular as more peripherals, such as printers, touch screens, and magnetic stripe readers, are available in that color.
Today's drawers are more fully featured and cost less than cash drawers of five years ago, according to Mann. "You have a more versatile product. You have more flexibility where the cash drawer sits and fewer integration issues. Cash drawer manufacturers are responding to VARs' need for drivers to make integration easier."
Mann pointed out that standards groups like ARTS (Association for Retail Technology Standards) are impacting the market. In particular, the group advocates the use of the USB (universal serial bus) interface. "The ease of integration of the USB interface is the driving force behind its adoption," said Mann. (To learn more about ARTS and its standards adoption visit www.nrf-arts.org.) "As standards come into play, it will be easier for VARs to create solutions and overcome objections when selling an open architecture system."
Sacrifice In Quality = Sacrifice In Profits
Masson advises VARs to avoid the price trap when it comes to purchasing cash drawers for their customers. "It is worth paying a little more for a cash drawer you know will work for many years," said Masson. "Service calls can be costly and will cut into your profits very quickly. By including a reliable cash drawer in the point of sale (POS) system, you eliminate one potential problem. If you are forced to ship a replacement drawer overnight to your customer, it could eat up your profit on that one drawer."
Flexibility is a key factor in cash drawer selection, added Masson. "Will you have to replace the drawer if your client changes components or configurations?"
Reliability is also an important feature. "Most cash drawers today have mean cycles before failure (MCBF) rates of 1 million cycles or more," explained Mann. "Higher-reliability products have an MCBF of 4 million cycles or more."Questions about this article? E-mail the author at LisaK@corrypub.com.