Distributors Take a Realistic Look at Business Conditions
By Matt Harding
Once again, RePlay surveyed a group of industry businesses to get a sense of how they’ve dealt with Covid-19 and the economic recession that has accompanied it. Fitting to this month’s theme, we elicited responses from cashless and software companies.
Like operators, manufacturers and distributors, the picture isn’t ideal overall. In answering perhaps the most important business question, “When do you think sales will return to a healthy, profitable level for your company?” responses were fairly split. About 33% said Q3 2021; another 33% said Q4 2021. The remaining responses were either a bit more optimistic, suggesting Q2 2021, or pessimistic, saying 2022 or beyond. One anonymous respondent said they DON’T have to wait until 2021 for profit, noting, “Our sales are stronger than ever.”
The respondents were more pessimistic for the industry as a whole, saying a healthy, profitable level shouldn’t be expected until Q3 2021 or 2022 or beyond (the vote was split – 43% each). The remaining 14% suggested it’d be recovered to pre-Covid levels by Q2 2021.
Scott Drummond, president of Party Center Software and one of the respondents who said 2022 or beyond, added: “In reality, we expect that the industry will have a 30-50% compression over the next 6-12 months and will only be delayed by temporary government financial intervention. From there, we don’t expect the industry to get back to pre-Covid facility counts and revenue until late 2022 or even 2023. There most likely will be a recession that lasts a few years. The hopeful side is that those still open may do decent business and remain profitable.”
Companies are hanging on and doing the best they can – and will likely be in that mode for the foreseeable future. According to our survey respondents, most of them were able to do that without laying off any employees during this tough time. About 86% did not have any layoffs and only 14% had to lay off some employees.
Sales, of course, have slumped for a majority as well. Again, 86% say they’ve only been selling “a little,” while the remainder say they’ve sold “a lot.” But a couple of respondents noted the need for cashless, especially during times of Covid-19. “Customers are seeking touch-free payment,” one said. “We’ve launched several features related to Covid-19.”
Let’s take a look now into the individual situations of some of the cashless companies that took part in our survey.
Party Center Software’s Scott Drummond says the company still gets about 60-80% of their usual busy call volume, adding, “But the reasons have drastically changed. They all want to find ways to adapt and change the system to allow them to move forward and open.”
With reopening safely first and foremost on operators’ minds, Drummond said PCS’s webinars have been highly focused lately. “All our education has been focused on getting people back open and how they can do it safely and quickly.” He also mentioned that the company is adding several new features for free such as contactless payments for both online and in-house POS and event/party sales.
Despite economic difficulties across the country, Drummond suggested that people still need to be entertained, and will be doing so in their own communities.
“With the seemingly long sabbatical on travel and big vacations, we should see a great uptick in local and even regional spending at FECs and water parks,” he said. “People are hungry for normalcy and fun, and they cannot (or won’t) go to Europe on their vacation nor really anywhere that requires long travel. If we position ourselves correctly and readjust our marketing efforts, we could capture a large portion of this new customer base looking to create great memories for their families.”
Bepin Jose, president of Semnox Solutions, was one of the respondents who projected a late 2021 “return to normal” of sorts for his business and the industry. The company was able to keep all its employees on with a PPP loan. “We were advised by an industry veteran, and so the process was relatively smooth,” Jose said.
Like others, Semnox has worked to make sure its products are even more relevant during the pandemic. The company’s Parafait system allows venues to manage access to their attractions by capacity and schedule, ensuring physical distancing requirements or guidelines. To help other businesses, Semnox also has a 0%, 12-month financing plan underway.
Sacoa CEO Sebastian Mochkovsky also predicted a late 2021 recovery for his business, though a later 2022 timeframe for the industry overall. They, too, were able to keep all employees on the payroll, thanks in part to a government plan in Argentina that covered 50% of salaries.
Usual business has slowed, but Sacoa has been proactive by offering Covid-related webinar content, social distancing signs for operators and other tools.
A long-term change for Sacoa will be employing video conferencing more often. “We learned that home offices worked well, and we may give working days from home as a bonus,” Mochkovsky said. “We used to do a lot of Skype before, and we will continue with it.”
Nate McQuillen, director of sales and marketing at SMART Software, said the company furloughed a handful of staff, but fortunately they only had to do that for two weeks. And they’ve still been making sales. “Several companies came on board in spite of the current situation,” he said. “They leveraged their free time that they normally would not have to implement their new SMART Software system.”
Calls to customer service have also been frequent. McQuillen added, “On top of the new clients, we have many existing clients that called requesting to learn new parts of the system while experiencing downtime.”
McQuillen said the SMART Software system was already Covid-ready since it can “allow your operation to work in a contactless environment, and also work from home effectively.” The company has noted that in current marketing campaigns, he noted.
Santiago Barbero, international sales manager at Coin Tech, noted that amusements and tourism are two of the most affected industries in the world right now, but expects a Q3 2021 return to healthy, profitable levels for both Coin Tech and the industry overall.
Barbero said the Coin Tech team continues to work from home and already had “vast experience with remote procedures.” He added, “During this period at Coin Tech, we were working hard with all our customers, performing maintenance tasks, system upgrades, training, software development and other tasks coordinated by our technical support team.”
Like so many other companies, Coin Tech has had to shift its thinking and how they do business. “The world has changed and has forced us to rethink plans, projections and forecasts for the rest of the year, requiring us to reinvent our business model, create new game rules and design a new beginning,” Barbero explained. “We continue working for the operator, developing new technologies that will meet their current needs.”
The Show Story: What Cashless & Software Providers Are Thinking About Amusement Expo
IAAPA set Sept. 4 as the date when they’d decide whether or not there will be an Expo in Orlando this November, so by the time the Post Office gets this edition of RePlay in your hands, you might already know. As of press time, cashless companies that responded to our survey weren’t too sure either way. Some had already scaled back booth space, and some were ready to go as they usually do.
Regarding Amusement Expo 2021, Sacoa and Coin Tech both said it’s too early to tell what their plan will be for the show. Semnox said it’s planning for a normal return. Party Center Software’s Scott Drummond said, “As long as things are somewhat coming back, we will expect to do our normal 10×20 booth at the show.”
Finally, SMART Software’s Nathan McQuillen noted the spring trade show’s importance to their company, saying: “Amusement Expo is one show we’ll never scale back on. We have such a broad clientele base that attends, and we leave with great sales leads every year. Even this past year that was slower than normal, we gained new leads that turned into new clients.”