Spare Change



2431 Broadway, New York, NY, 10024

Neighborhood: Upper West Side

It’s 10:20 p.m. on a Tuesday, and the air is filled with the unmistakable sound of coins hitting metal. The multi-colored machine generating all the noise stands almost six feet tall and looks like a cross between an oversized Lego kit and something that toddlers would be crawling over at Playspace. The high tech liquid crystal display on the front of the machine is displaying a rolling tally… $3.38… $6.97… $12.19… the amount just keeps climbing as Alexandra Krukofsky, a 29-year-old social worker, looks on. $17.68… $24.72… Where will it stop? Ms. Krukofsky guesses somewhere in the $30 to $40 range. $28.76… Is this machine one of the 3,500 slot machines in the Sultan’s Palace room in Atlantic City’s Trump Taj Mahal? Or could it be the brand new Totem Pole slot machine at Foxwoods, the Pequot Indian Tribe’s resort and casino complex in Connecticut? $34.74… $45.40… Once the tally breaks through the $40 barrier, Krukofsky grows excited, purring, “Ooooh, money, money, money!”

Something in this scene, though, is amiss. Ms. Krukofsky, rather than winning at the slots, is actually putting money into this machine, which is in Food Emporium supermarket on Broadway and 90th Street. The machine runs on the Windows 2000 system, and is linked by Windows NT to a headquarters in Bellevue, Washington where the company that owns it was ranked the third fastest growing technology company in the state, showing an increase in revenue of 14,568% over the past five years. The company has a 100% market share in its field.

The company is eight-year-old Coinstar, and the machine, a self-service coin counting device, is the latest addition to New York’s ever-growing landscape of electronic consumer kiosks, joining the MoviePhone ticket dispensers, MetroCard dispensers and the ubiquitous ATM machine. Coinstar machines have been turning up around Manhattan for the past year as part of the quickly growing Coinstar Network, which now numbers more than 7,000 throughout the United States.

Last year, the U.S. Department of Commerce announced that the national savings rate had fallen to just over 1% in 1998, the lowest since the end of World War II. But according to Jens Molbak, Chairman & Founder of San Francisco based Coinstar, the study missed a big chunk of change, the estimated $7.7 billion in pennies, nickels, dimes and quarters that Americans have stashed in their homes. A study conducted by Coinstar found that 73% of Americans have between $30 and $50 in coins, twice the amount that the owners had assumed. The study also showed that only 21% of Americans roll their coins and take them to the bank to exchange for paper currency, the rest letting the change accumulate rather than use, storing it in bottles, jugs, coffee cans, cookie tins, bowls, buckets, baskets, drawers, plastic bags, boxes, ash trays, cigar boxes, fish tanks, car, socks and of course, piggy banks.

Molbak, who conceived of the idea after growing tired of lugging the heaps of coins he had amassed from one city to the next every time he moved, installed the first Coinstar machine in San Francisco eight years ago. Studies by the U.S. Treasury Department estimating the amount of coins in circulation at $8 billion, only 3% of which are actually used to maintain the economy on a daily basis, seem to support the conclusions of Coinstar.

Using a two-fold strategy, Coinstar, which offered shares to the public in July 1997 (NASDAQ: CSTR), has convinced 10% of the nation’s 30,000 supermarkets along with thousands of Wal-Marts to install its machine. Coinstar estimates that consumers who use its machines, numbering 66 million so far who have returned more than $2 billion worth of coins, spend between 30% to 40% of their redeemed amount in that store, which also receives one cent for every dollar redeemed, making it one of the most profitable products on a square-foot basis in the entire store. Additionally, Coinstar machines save the supermarkets themselves tremendous labor costs if used to count their own coins. Maintenance and support of the machines are handled entirely by Coinstar.

Initially, Coinstar employed armored courier services to transport the coins, but realizing that it was unlikely that anyone would try to steal a five hundred pound container of coins, the company switched to more traditional and far cheaper delivery companies (besides, the thieves would be too tempted to bring the stolen coins right back to the machine to have it count it for them and redeem it for paper currency).

The machine itself, which is capable of counting 600 coins a minute, has four patented devices in it, one of which is the sorting tray that allows the consumer to dump in all the change without worrying about non-coins fouling the machine, which filters them out by using an ingenious grid system. Through 1999, Coinstar had processed coins weighing an estimated 114,000 tons, the equivalent of 730 Statues of Liberty, which is made of copper and steel, the same alloys found in U.S. coins.

The U.S. Mint actually welcomes Coinstar’s help in turning over the nation’s coin supply. In 1999, the Mint began a ten-year initiative called the “Fifty-State Quarters Program,” which calls for the Mint to introduce five new quarters a year for ten years, each honoring a different state. Because of the introduction of 50 new quarters in the next decade, the Mint and the Federal Reserve, which actually pays for and distributes the nation’s currency, can use all the help they can get, especially since American coins have a projected life span of 30 years. The coin usage and production patterns in America seem to be in Coinstar’s favor. In the last 30 years, the U.S. Mint has produced more than 300 billion coins worth more than $15 billion, and continues to produce 14 billion to 20 billion coins a year at its mints in Philadelphia and Denver.

The tally is still rising… $50.46… A passerby, Adele Munisteri, a thirty-year-old spinning instructor at the Reebok Sports Club, stops to see what Ms. Krukofsky’s “take” is, as she puts it. Munisteri is a Coinstar veteran, having redeemed $42.32 in February of 1999. She offers some friendly words of advice to Krukofsky, the Coinstar rookie, saying, “One warning: try not to run into co-workers while cashing in your change, because it can be pretty embarrassing to be caught wheeling years worth of pennies into the grocery store.” Just how long did it take Munisteri to accumulate her coins? “Some of those pennies I’ve had since way before I moved. I didn’t know what to do with them, so I put them in Tupperware and taped the top and moved them with my stuff from Brooklyn to Manhattan where they sat under my couch for two years, so about four years in total.” Krukofsky, who estimates that she dragged over about five years worth of coins, has Munisteri beat on both total dollar amount and length of time needed to accumulate. The conversation is taking on dimensions that one could imagine taking place between the home run sluggers Mark McGwire and Sammy Sosa, needling each other over trotting style when going yard.

The two young women, finding a common ground, start to talk about their means of storing and transporting their coins. Munisteri says that, “Some were in Tupperware and some were in one-quart Stonyfield farm yogurt containers,” which she found conducive when using the machine. $58.13… Munisteri tells Krukofsky how lucky she is that she didn’t have to wait to use the machine, recalling, “It took so long for the guy in front of me with a piggy bank and a narrow neck bottle to finish.” Lending more advice, she says, “It is much faster if you use yogurt containers.” $61.94… but the end seems to be drawing near.

At this point, Angie Lopez, the store manager, passes the two woman, and plays the role of the Sultan of Swat, Babe Ruth incarnate, putting them in their place by saying, “We had this one guy who came in with coins stuffed in jars, bags, socks, and a backpack.” She places his total take at $260. When his boss is out of earshot, Angel, a name tag-less Food Emporium employee who would speak on the condition that only his first name would be used, tells the women, “It was definitely more than $500.”

$65.24, but the trickle is audibly slowing… By the time Ms. Krukofsky is finished, the screen reads $68.59.

Coinstar charges a processing fee of 8.9%, which in this case comes to $6.10, so her net amount is $62.49. Many might consider this fee exorbitant. But rather than view this glass as half-empty, Krukofsky sees it as 91.1% full. “Besides,” she adds, “if I buy a TV, I pay eight and a quarter percent as sales tax, so what’s the difference–why should I care whose pocket it goes to as long as I get my loot?” Another way to look at it would be to compare the 8.9% Coinstar processing fee with the fees charged by ATM networks and banks. Someone who pays the $1 ATM fee in addition to paying a $1 transaction charge to their own bank, is basically paying a 10% fee on a $20 withdrawal, or 5% on a $40 withdrawal.

The machine even provided a breakdown of the coins: 2 quarters, 334 dimes, 438 nickels and 1,273 pennies. Before bringing in her coins, Krukofsky had strategized in a manner fitting of Henry V commanding the French at Agincourt in 1415, hoping to keep her most treasured assets–her armored cavalry (quarters)–in the rear as reserves while the more expendable archers (dimes), pikemen (nickels) and infantrymen (pennies) do the dirty work. She is proud of how, “thorough,” she was at home pulling out the quarters, which she refers to as the, “good change,” that she needs to, “dip into daily for bus fare and laundry.” What the machine doesn’t identify and therefore rejects, are three Spanish coins worth five Pesetas each, a fair amount of paper clips and a previously lost earring of Ms. Krukofsky’s.

When Krukofsky takes the voucher issued by the machine to the checkout counter to get her cash, Janique, the checkout girl, adds her two cents to the growing fish-like story of the store record, recalling it at, “$800, at least.” Whatever the truth is, “A man who brought $8,105 worth of coins into a Ralph’s supermarket in Southern California holds the actual Coinstar Network record”, says Michael Parks, Coinstar’s Vice President of Field Operations.

By 10:33 p.m., only thirteen minutes after her arrival, Ms. Krukofsky, hands dirty and smelling of copper, is leaving with $62 in paper currency.

Americans dislike coins for a number of reasons. Twelve percent of 1,000 adults polled by Coinstar won’t pick up a coin lying on the street facing heads down because they believe it to be unlucky. Another 7% responded that they are too embarrassed to pick up a coin from the street. Three percent of them admitted to throwing their loose change away. Now that someone has finally found a way to get rid of all this dreaded loose change, the federal government, as it is want to do, is rearing its intrusive head to make sure that we all still have enough to keep the economy running and our couches well-stocked. In January the U.S. Mint began to distribute the first batch of 500 million new Golden Dollar “Sacagawea” coins. Don’t want any more coins? Never liked the Susan B. Anthony silver dollar in the first place? Tough luck, because the Mint is going to some extraordinary lengths to ensure that you use them, even going so far as to randomly hide 5,000 of them in boxes of Cheerios (sounds like a wrongful death suit in the making). The 207-year-old U.S. Mint and eight-year-old Coinstar have even formed an unholy alliance of sorts. In 1999, for the first time Americans returned more coins to the U.S. economy (15,838,542,632 through the Coinstar Network) than the U.S. Mint produced (15,814,482,000). To promote both the Golden Dollar and the Coinstar Network, the two organizations have begun a promotion enabling anyone who processes at least $20 worth of change through a Coinstar machine to receive, by submitting a mail-in rebate type form, two of the new Golden Dollars. Since the machines have recently been updated to accept the new Golden Dollar coins, the promotional coins received can serve as the seeds of a new stockpile.

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