Coinstar is a popular coin counting machine company that has revolutionized the way people deal with their loose change. Founded in 1991 by Jens Molbak, Coinstar has grown to become a major player in the financial services industry, with over 20,000 kiosks across the United States, Europe, and Canada. Coinstar’s success has been attributed to its innovative business model, which allows it to generate revenue from multiple sources.
In this blog post, we’ll explore how Coinstar makes money.
How does Coinstar Work
Coinstar kiosks are self-service machines that allow users to convert their loose change into cash or gift cards.
Here’s how the process works:
- Bring your coins to a Coinstar kiosk: Coinstar kiosks are typically located in grocery stores, drug stores, and other retail locations. Simply bring your coins to the kiosk and follow the on-screen instructions to get started.
- Sort your coins: Once you’ve inserted your coins into the kiosk, the machine will sort them by denomination and count them. You’ll be able to see the total value of your coins on the screen.
- Choose your payout option: After your coins have been counted, you’ll be given several options for how to receive your payout. You can choose to receive cash, a gift card to a variety of retailers, or you can donate your coins to charity.
- Cash out or get a gift card: If you choose to receive cash, the kiosk will dispense a voucher that you can take to the store’s customer service desk to exchange for cash. If you choose a gift card, the kiosk will print out the card for you to use.
- Pay the fee: Coinstar charges a fee for its coin counting and gift card exchange services. The fee varies by location and payout option but is typically around 11.9 cents per dollar for cash transactions.
In addition to coin counting and gift card exchange, Coinstar also offers other services, such as electronic payments, ATM services, and money transfers. These services are typically only available at certain locations and may have additional fees associated with them.
Overall, Coinstar’s self-service kiosks offer a convenient and efficient way for users to turn their loose change into cash or gift cards. The company’s widespread network of kiosks and multiple payout options make it a popular choice for people looking to cash in their change.
History of Coinstar
The history of Coinstar dates back to 1989 when founder Jens Molbak was looking for a way to turn his loose change into cash. Molbak realized that there was a need for a more convenient and efficient way to convert loose change into cash, and he began working on a prototype of a self-service coin counting machine.
In 1991, Molbak founded Coinstar and launched his first prototype kiosk in a Safeway grocery store in Santa Clara, California. The kiosk was an immediate success, and Molbak began expanding his business throughout California.
In 1995, Coinstar received a significant investment from Oak Investment Partners, a venture capital firm. This investment allowed the company to expand its operations nationwide and introduce new services, such as gift card exchange.
Over the next several years, Coinstar continued to expand its network of kiosks, partnering with major retailers such as Walmart, Kroger, and CVS. In 2003, Coinstar went public and began trading on the NASDAQ stock exchange under the ticker symbol CSTR.
In 2009, Coinstar acquired Redbox, a company that operates self-service DVD rental kiosks. The acquisition allowed Coinstar to expand its offerings beyond coin counting and gift card exchange and enter the entertainment industry.
In 2013, Coinstar announced that it would be selling its Redbox division to focus on its core business of coin counting and gift card exchange. The sale was completed in 2016, and Coinstar has since continued to focus on expanding its network of kiosks and introducing new services to its customers.
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Today, Coinstar operates over 20,000 kiosks in the United States, Europe, and Canada and generates revenue from multiple sources, including coin counting fees, gift card exchange, advertising partnerships, rental income, interest income, and international expansion. The company’s innovative business model and commitment to customer convenience have made it a major player in the financial services industry.
How Does Coinstar Make Money?
Coin Counting Fees
Coinstar generates revenue primarily by charging a fee for its coin counting services. Customers who use Coinstar kiosks to convert their loose change into cash are charged a fee, which varies depending on the location and the amount of change being counted. Generally, Coinstar charges a fee of around 11.9% of the total amount being counted.
For example, if a customer deposits $100 worth of coins, they will be charged a fee of $11.90. This fee may seem high, but for many people, the convenience of having their coins counted quickly and easily is worth the cost.
Gift Card Exchange
In addition to coin counting, Coinstar also generates revenue through its gift card exchange program. This service allows customers to exchange unwanted gift cards for cash or other gift cards. Coinstar partners with several major retailers, including Amazon, Starbucks, and Walmart, to offer a wide variety of gift cards.
Customers who use Coinstar’s gift card exchange program are charged a fee for the service, which varies depending on the retailer and the value of the gift card being exchanged. Generally, the fee is around 5-7% of the value of the gift card.
For example, if a customer exchanges a $50 Walmart gift card for cash, they may be charged a fee of $2.50-$3.50. While this fee may seem small, it can add up quickly for customers who are exchanging multiple gift cards.
Coinstar also generates revenue through advertising. The company partners with various brands and retailers to promote their products and services through its kiosks. This includes displaying ads on the kiosks themselves, as well as offering promotional deals and discounts to customers who use the kiosks.
For example, a grocery store may partner with Coinstar to offer customers a discount on their next purchase if they use a Coinstar kiosk to deposit their loose change. In exchange for these advertising partnerships, Coinstar receives a fee or commission from the brands and retailers.
Other Revenue Sources
In addition to the above revenue streams, Coinstar also generates revenue from other sources. These include:
- Rental income: Coinstar rents space in retail locations to operate its kiosks. This rental income can be a significant source of revenue for the company.
- Interest income: Coinstar earns interest on the cash that is deposited into its kiosks. While this may not be a significant source of revenue on its own, it can add up over time.
- International expansion: Coinstar has been expanding its operations internationally, particularly in Europe and Canada. This expansion has opened up new revenue streams for the company.
Funding, Revenue & Valuation
Coinstar has been successful in raising significant funding throughout its history. In 1995, the company received $1 million in funding from venture capital firm Oak Investment Partners. Over the years, Coinstar has raised additional capital through private equity investments and public offerings.
In 2003, Coinstar went public and raised $64 million through its initial public offering (IPO) on the NASDAQ stock exchange. The company’s stock price rose rapidly in the years following its IPO, peaking at over $70 per share in 2012.
Coinstar’s revenue has also grown significantly over the years, driven by the expansion of its network of kiosks and the introduction of new services. In 2020, Coinstar reported revenue of $421 million, up from $407 million in 2019. The company’s revenue is generated from multiple sources, including coin counting fees, gift card exchange, advertising partnerships, rental income, interest income, and international expansion.
Coinstar’s valuation has fluctuated over the years, but the company has consistently been valued at several billion dollars. In 2013, the company was acquired by Outerwall, a company that also owned Redbox and other self-service kiosk businesses, for $1.6 billion. Outerwall was subsequently acquired by private equity firm Apollo Global Management in 2016 for $1.6 billion.
Today, Coinstar is owned by Galileo Global Equity Advisors, a private equity firm that acquired the company from Apollo in 2019. While Coinstar’s exact valuation is not publicly disclosed, the company’s significant revenue and market position make it a valuable asset in the financial services industry.
Coinstar faces competition from several companies in the financial services industry, including:
- Banks and Credit Unions: Many banks and credit unions offer free coin counting services to their customers. While these services are often limited to account holders, they can be a convenient and cost-effective option for people looking to cash in their change.
- Local Coin Counting Services: Some cities and towns have local businesses that specialize in coin counting and currency exchange. These businesses may offer competitive rates and personalized service, but they may be less convenient to access than Coinstar kiosks.
- Other Self-Service Kiosk Companies: Coinstar’s parent company, Outerwall, also owns Redbox, a company that operates self-service DVD rental kiosks. Other companies, such as ecoATM and Gazelle, offer self-service kiosks for buying and selling used electronics. While these companies may not directly compete with Coinstar, they do offer similar self-service solutions for consumers.
- Digital Payment Services: With the rise of digital payment services like PayPal and Venmo, consumers may be less likely to rely on physical coins and cash. However, some of these services do offer options for converting digital currency back into physical cash, which could compete with Coinstar’s coin counting services.
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Coinstar’s innovative business model has allowed it to generate revenue from multiple sources. While the company is best known for its coin counting services, it also generates revenue through gift card exchanges, advertising partnerships, rental income, interest income, and international expansion. As a result, Coinstar has become a major player in the financial services industry, with a presence in thousands of retail locations across multiple countries.
While some may argue that the fees charged by Coinstar are too high, it’s important to consider the convenience and time savings that the company offers. For many people, the ability to quickly and easily convert their loose change into cash or gift cards is well worth the cost.
Overall, Coinstar’s success can be attributed to its ability to innovate and adapt to changing market conditions. As technology continues to evolve, it will be interesting to see how Coinstar continues to evolve its business model to stay ahead of the curve.