Coinstar offers kiosks in retail locations (grocery stores and similar outlets) that count your loose change. Dump your change in and get a voucher to redeem for cash at the store checkout. Coinstar charges a fee of 8.9 cents per dollar counted.
The company also offers a couple of other redemption options that allow you to avoid the fee. Coin counting is free when you exchange the coins for a gift card from a variety of leading merchants (Amazon, CVS, iTunes, JCPenney, Lowes, Starbucks, etc.). Also, if you donate your change to a non-profit (option available from the machine), there’s no charge, and the machine prints a tax deduction receipt for you.
A couple of questions occur to me: why take the cash option (I wonder how many people do)? Even if you calculate the time it takes to redeem the gift card and the probability that you won’t spend it, I can’t see that costing more that 9%. Second, I guess Coinstar must have some deal on the gift cards such that they don’t pay full price. Otherwise, where does the margin come from? I wonder how much of a discount they are getting, and how it compares to the 9% they make on the cash option.
Great question on the cards. I suspect they make 15% margin on the cards. Definitely something north of the 9%. The cards, of course, are super for retailers: they get the float and the breakage... the only down side is complicated accounting.
ReplyDeleteMy guess would be they make something less than 9%. I would think it would be worth a few points not to have to maintain as much standing cash in each machine.
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