We believe strongly that our holistic system of arcade management organized by purchasing, game management, merchandising and controls is key to maximizing efficiency. Our industry is amid an unprecedented shock to cash flow, locations are severely limited in investment capital, especially in games and attractions. We recommend focusing on areas we can increase efficiency and save money now.
Controls, merchandising, and purchasing of redemption products is the best place to focus. In fact, survival for many will require it. With fixed costs upwards of 55% of sales in a typical high-volume FEC there are only a few places to look. The big variable costs are payroll and cost of sales. Payroll is typically 25% or so (higher in lower sales facilities). There will be only so much you can do there given sanitation requirements.
Cost of Sales is about 18% in our clients FEC’s and the second highest controllable expense. That includes Food & Beverage costs- we don’t claim to be f&b cost experts, but I’d take a close look at my suppliers, cost, and menu engineering.
That leaves FEC cost of sales, where we are experts.
Here are the steps we believe should be taken to make sure FEC Cost of Sales are optimized (not simply minimized).
Ensure Payout Management is Controlled
Monitor your Intercard or other system reports weekly to track the payout by game, not just the overall payout. Averages can be deceiving, if you have your head in an oven and feet in a freezer your average temperature may be good- but you are going to die.
Games optimize sales at the payout percentage they were designed for.
Ensure you are not overpaying for product
Some vendors market “free” services that are simply built into an already higher price. Make sure you understand those costs.
There is an Opportunity to Save Significantly on Product
Since choosing Rhode Island Novelty (RINCO) we’ve run numerous item comparisons that show the cost of these “free” services are astronomical compared to RINCO, routinely 25%, and up to 40%, higher on a like-item comparison.
Vendors Can’t Manage Redemption Better
Some vendors sell that they help use technology to manage inventory and redemption merchandising. There are some nice tools that vendors- including RINCO- offer like planograms and cart generation, however it is essential that staff manage the merchandising and purchasing process.
Savings on Product can Pay for Expertise
Rather than spend extra money on product to have an outside company manage your redemption program we suggest you task an hourly employee to focus on redemption. You’ll have a better result with a net savings.
Product Presentations Must be Retail Quality
Our industry has largely evolved to a high-quality offering. The dingy arcade of the 1980’s is now a family, corporate, adult attraction. Snack bars have become restaurants. A redemption counter or store should look like a retail store in terms of organization, cleanliness, and attention to detail. This must be done through your staff; no vendor can do this for you.
In 2019 we switched our preferred redemption supplier to Rhode Island Novelty (RINCO) because we believe they are the best redemption solution in the industry including the lowest cost and widest array of products. As we have worked with them over the last year, we are more convinced than ever that this is true. The price savings are greater than we thought and their ability to provide the technology and tools the other companies offer is available.
As the table below shows they win on features – and they do it with consistently and substantially lower pricing, the best selection, and excellent quality of product!
As we all struggle to get back to business we feel compelled to make sure all of our friends and colleagues understand that Rhode Island Novelty is here, open for business, and ready to help you cut costs and improve your redemption prize selection. We also know they embody the other key ingredients you want in a vendor- integrity, reliability, and customer-first philosophy. RINCO has all of this and more. Especially now, in these challenging times, you can’t afford to be wasting expense dollars.
We strongly recommend that you contact Rhode Island Novelty (RINCO).