Can software make your vending machine business more successful?

So you are looking to start a vending machine business because you’d like to break free from the 9 to 5, Monday to Friday rat race, or you would want to be your own boss and answer to no one but yourself; maybe you find the growth of the vending machine industry pretty lucrative or know and can negotiate a location or two of proven performance and traffic. Whatever the reason might be, there’s a very well-trodden path that newbies in the vending machine game need to walk to successfully launch a new vending business.

A few of the items on this list such as securing initial capital, defining goals, and estimating profitability pertain to starting any type of business. Others are very much tied to the essence of what the vending business is all about and include taking steps such as structuring your new company, obtaining the necessary licenses, permits and paperwork to be able to operate in your area, choosing the right vending machine equipment, selecting and securing great locations for your machines, maintaining the right product mix to maximize revenue, and minimizing operational costs while providing outstanding customer service.

A quick search on the internet will produce a ton of articles written on the topic, some more helpful than others. That’s why the idea of this post is not to keep going on about the same thing over and over again like a scratch record but rather add a different perspective by seeing things through the prism of technology.

Why talk technology in such a traditional business as the vending machine one?

Because technology is permeating any industry, not just the digital ones, for a very good reason: it does help organizations stay ahead of the curve by optimizing operations, offering better customer service and eventually improving the bottom line. Technology and software, in particular, have started playing a major role as a differentiator in the vending business according to the 2017 Annual Report on the State of the Vending Industry. The constantly increasing use of technology by vending business owners is driving the overall industry’s growth which has soared to a $21.6 billion in revenue end of 2016. For example, the percentage of vending machines that accept any form of cashless payments, such as credit cards, debit cards, or mobile wallets reached 31% in 2017, while vending management software (VMS) has ranked as the number 2 most valuable investment, closely followed by pre-kitting.

According to the report, there’s been a noticeable change in how the industry looks at technology. You might think that these trends mostly relate to larger vending business operators, however, the striving for better operational efficiency, higher sales, and better profits is a characteristic of all vending shops, regardless of their size. Let’s take a look at how vending management software can improve your bottom line even if you own just a couple of vending machines.

Starting a vending machine business? See how software affects each step of the process.

1. Financing your new business

As you have likely realized by now, there are three essential ways to get yourself in the vending machine business: you can start from scratch by purchasing your own (new or used) vending machines; there’s the option to buy a franchise; finally, if you have done your homework, you might be able to purchase a viable existing vending route. While all three options can put you on the path to success, vending experts usually favor the last one as it not only offers a quick way to profitability in the business, but it also provides a lot more transparency into whether you will be successful down the road (provided that you’ve done your due diligence). If it’s the third option that you are after, be sure to ask the seller whether they are using any vending machine software. Getting access to their VMS will greatly aid your research and give you a very good idea of how the business has been performing. No need to wade through heaps of notepads, folders and excel files, which data needs to be reconciled to be able to get a vague idea what the state of the state is. In the vending management software, it’s all a click away, available in the form of easy to comprehend charts and diagrams.

2. Choosing the right vending machines

Again, there’s a wide variety of stock that you can offer through your vending machines, from bulk candy, through the most mainstream soda and snacks ones, to the rising star of the healthy snacks and fresh meals type of machines. This all makes it difficult for the vending business rookie to decide what type of machines to purchase. Whatever the final choice, adding a cashless option to your machines will give you access to real-time purchasing data; it will widen your possibilities to get more purchases (an increasing number of prospects don’t carry cash), and at the same time the telemetry software can help you analyze the performance of each type of machine at a glance and compare the results.

3. Securing the most profitable locations

If you’ve started searching the internet for advice on how to get started on the right foot with the vending business, you’ve probably read a hundred times already that location is KING. While it’s definitely not the only prerequisite for the success of your new venture, we have to agree that it’s rather important to secure a spot that offers high-volume, high-quality traffic. Clearly, you can never be 100% sure that the location you managed to contract for your machines is as profitable as promised. If you are solely relying on what you manage to jot down in your notepad or excel table, it might take ages before you realize that the spot that was advertised as very good quality, actually brings in half of what you expected. Here comes vending software again to help you out: if you implemented a VMS when starting your business, now you’d be able to see at a glance whether a certain location is profitable.

4. Selecting the products that will bring in maximum revenue

Once you’ve contracted some good locations for your vending machines, it’s time to decide on the mix you’ll be offering at each location and with each machine. Having insight in the taste and preferences of your potential customers will definitely help so be sure to ask the vending business seller and/or the location managers/owners. Nothing can beat hard data, however, can it? While the vending management system cannot really help with your initial order of stock, it can make a real difference when the time comes to reorder. Since all purchase data will be stored in the VMS, you can easily slice and dice the stats to see sales by product, vending machine and location, best-performing stock and items you should get rid of, profit by product, and so on. This way you can base your decisions on data rather than count on the goodwill of location managers and sellers alike. Features like pre-kitting give you the ability to identify the items operators should include in locations rather than relying on gut instinct or the route driver.

5. Continuously optimize inventory

This one sounds pretty straightforward, doesn’t it? The less stock on hand, the fewer costs you will incur. Less stock = fewer taxes, avoiding obsolescence, less insurance, labor, and transportation costs. If you solely rely on the almighty excel file, though, it might be a bit tough to monitor product critical levels (real-time!), keep track of product levels at each machine at all times, and identify low performing stock so that you get rid of it and never re-order again. The good news is that this is all perfectly doable with a VMS!

6. Servicing your machines

Once you get up and running with your new vending business, a big chunk of your everyday tasks will include inspecting and restocking each vending machine that you own. Hence, defining the optimal machine servicing schedule is quite important right from the start if you don’t want to waste precious time and resources (fuel!). More often than not, however, vending business owners would visit a machine/location only to find out that no items need replenishment or vice versa – all the stock is gone and there have been a ton of sale opportunities missed (and a number of unhappy customers collected too).

Reducing service schedule was trend # 4 in 2017 according to the annual report on the state of the industry that we quoted a while earlier. This trend has been greatly aided by vending management software and telemetry systems.

7. Reducing the number of expired products

“Operators should also be keeping a close eye on food sales since spoilage is higher. The VMS is an important tool vending owners used in 2016 to decrease expired products that needed to be thrown away and increase the variety on a location-specific basis”, concludes the report.

8. Calculate taxes and commissions that need to be paid

Before cashing in the profits of your vending business, you’ll need to pay commission to the location owner/manager, and the electricity bills to operate your machines. It’s common to pay the property owner 10 to 25% of the revenue from your machines, depending on the location type and quality of traffic. Seasoned vending business owners tend to offer a higher commission in exchange for exclusivity – their machines will face no competition at the location. Regardless of your approach, if you have placed machines at several locations, it’s quite likely that you’ll have to calculate different commission rates for each proprietor. This is where vending management software can come handy again. It offers you the ability to assign various types of commissions to each machine or per location. Also, you can easily calculate the total amount due to the location owner. On top of it, you can easily see reports on profit and loss, sales tax, cash flow, etc.

9. Stay in business

Unsurprisingly, just like in any other business, if you want to stay afloat, you need to keep your customers happy by providing amazing customer service. When your support (both technical and sales) matches the expectations, the word of mouth effect will help you expand your business.

Not only are you expected to offer a great mix of products that closely match the preferences of each location’s traffic, but you should also be able to foresee shifts in behavior too. Show your clients that you’re constantly thinking about by optimizing the products in your machines. Experiment with different brands, placements within the machine, types of food or drinks, etc.

Needless to say, machine maintenance is essential. The last thing you want is a vending machine that’s been out of service for a while which a) creates unhappy customers and b) cost you sales. Vending machine software steps in again to lend you a helping hand in proactively maintaining your business. VMS will automatically calculate and schedule the next service date for each location. It will maximize service intervals and will reduce machine downtime.

As we already saw, VMS and telemetry have been quickly evolving in the past few years. The number of vending machines connected to the internet has increased. The information helps vending operators create more efficient operations. In fact, nearly 70 percent of operators are using some form of technology, from telemeters to handhelds to iPads, in order to gather sales data from their vending machines. That data can then be used by a VMS to save time servicing machines, eliminate unprofitable routes, pre-kit and increase other money-saving processes, not to mention delivering better cash accountability and sales analysis. The percentage of operators using a VMS increased to 65.3 percent in 2016 compared to 54 percent a year before.

The conclusion? No matter how new you are to the vending business, it’s never too early to implement a VMS to start reaping the above-mentioned benefits. Better yet, the earlier you start using vending management software the better: it’s much more time-consuming to implement VMS once you have more machines with history and a ton of inventory that all need to be entered in the VMS before it becomes operational! The software will grow as you grow.

If you want to stay competitive, waste no time. Start your free trial of VendSoft VMS today.

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