E-Scrap News Magazine: E-scrap kiosk firm feels competitive pinch

E-scrap kiosk firm feels competitive pinch

By Editorial Staff, E-Scrap News

August 6, 2015

Fewer consumers returned their e-scrap through ecoATM kiosks during the second quarter of 2015, compared to a year ago, parent company Outerwall announced. In addition, financial records show the e-scrap take-back brand continues to operate at a loss.

The decrease in transactions was primarily due to competition from wireless carriers, which are offering their own take-back deals, according to the 2015 second quarter results for ecoATM's parent, publicly traded Outerwall.

Meanwhile, ecoATM did recently hit a milestone of collecting 5 million devices since its inception. Currently, more than 2,200 automated ecoATM kiosks are accepting e-scrap at locations around the country. The company added 120 new kiosks during the second quarter, mostly at major stores. It also moved 70 underperforming kiosks from grocery stores into malls and major stores. The kiosks either purchase e-scrap or accept items as donations, depending on the item and its condition.

On July 23, 2013, Outerwall purchased ecoATM for $350 million in cash. Outerwall also owns Redbox and Coinstar, both of which operated solidly in the black during the second quarter. The ecoATM startup installed its first kiosk in 2009.

During the second quarter of 2015, competition from carriers resulted in fewer transactions and a decrease in higher-valued devices, compared with a year ago, Outerwall stated. The numbers improved over the first quarter of 2015 but were still below the company's expectations and historical seasonal trends, according to the report.

EcoATM's revenue in Q2 2015 was $26 million, and its operating loss that quarter was $7 million. For comparison, it posted a $4.5 million operating loss in Q2 2014. The operating loss increase was mainly a factor of higher expenses brought on by more kiosks, according to the report. EcoATM's revenue accounted for less than 5 percent of Outerwall's revenue.

In 2014, Outerwall reported its "New Ventures" segment – composed of ecoATM and a product sampling kiosk brand called SAMPLEit – experienced an operating loss of more than $30 million, according to the company's annual report. In September 2014, the release of the iPhone 6 prompted consumers to trade in their old phones, flooding the used phone market and driving down resale values in the secondary market to below historical levels, according to the annual report.

Competition from carriers and dimmer revenue expectations have resulted in a decrease in ecoATM's estimated value. Outerwall has remained optimistic about the e-scrap kiosk business, however. "Given its unique value proposition, we still expect ecoATM revenue growth and profitability over time as the business scales," wrote Nora Denzel, Outerwall's interim CEO.

Outerwall representatives declined to comment.

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