Location, Customer Service, Optimization

The Holy Trinity Of The Successful Vending Machine Business

The vending machine business dates back to the third century B.C. At that time, the coin-operated holy water dispensing machine, designed by the Greek inventor Heron of Alexandria, was used in Egyptian temples to dispense water for ritual washing. Worshippers would place a coin into the machine and receive holy water to bathe themselves with before entering the temple. In the 19th century, Heron’s invention inspired a fully coin-operated restaurant, launched by the food service company Horn & Hardart in Philadelphia.

Nowadays, this $40+ billion-a-year, 24+ century-old industry is growing globally by 3% and the incremental growth till 2022 is expected to hit $332 million. These figures might make you feel enthusiastic about entering this seemingly lucrative business, but what are the key success factors behind these numbers?

One might think a great vending machine is the answer, mind you, however, the machines are just the means. A great machine won’t do you any good if it is not in a great location. Like they say in the FMCG industry, the most important thing is

Location, location, location!

In reality, you are not in business until you secure a good location for your vending machine. Don’t buy more than one machine to start with. Get one, but place it at the most profitable location that you are able to select and negotiate. This way, you are going to secure yourself a good start to your vending machine business. And remember: get the location first, then buy the machine. Not the other way round. Getting a good location has been, is, and will always be the hardest part of the vending machine business, and using your personal network is the most effective source for great locations. Reach out to all founders, office managers, HRs and all types of C-level managers that you know. People work with people they know, people they like and trust. Start with locations with high traffic, such as:

• large offices or multi-business office parks
• manufacturing companies
• schools and universities
• hospitals and medical centers
• airports, bus and train stations
• waiting rooms, lunch rooms, and break rooms
• grocery stores and shopping malls
• hotels/motels and jails
• gas stations, repair shops, and laundromats
• cinemas and theatres
• residential complexes

Don’t forget, a vending machine might fail in a mall with a strong food-court, but that same machine could flourish in a business center. When assessing a vending machine location some of the questions to ask are:

• What is the location’s daily food traffic estimation?
• Are there currently provided vending services? Are there any other food services (restaurants, micro-markets, etc.)?
• Do the location’s renters or owners have a contract with a vendor?
• Are they happy with their current vendor?
• Do they receive additional services or commission from their current vendor? How big is this commission?

If you can’t rely on a good personal network, then your second option is to use a vending locator company. As they are not all equal in their service quality, however, we strongly recommend doing your best in networking first.

Once you manage to contract a location, and you have placed your vending machine there, you might think the job is done and the time for passive income has come, but you will be wrong – the second key ingredient of the successful vending machine business is to keep the location and there is only one sustainable way to do so - through

Great customer service

In the era of similar product mixes and freebies, comparable margins and commissions, remarkable customer service is the ultimate differentiator that will prevent your competitor from stealing away your profitable location. While vending machines are everywhere, good customer service is not yet a commodity, and every savvy business owner knows that only mutually beneficial businesses will last in time. In other words, it’s all about showing your customers how their business matters to you and how willing and responsive you are to accommodate and satisfy their requests on very short notice. Just like many other location-based businesses, the vending operators are dependent on personal connections and on word of mouth referrals. That’s why we recommend that you invest your time in building strong relationships with business owners, let them know you, let them like you, let them trust you. Otherwise, another vendor with a slightly better offering will take your location sooner or later. Here are some tips on how to enhance your customer service:

• Take care of your vending machines by performing preventive maintenance in order to eliminate downtime, and enjoy long-lasting equipment. In the long run, you will not only save money – you will also build a good reputation.
• Provide multi-channel customer support: No matter what channel the customer is using to log a service call – phone, email, web or social media – be well prepared to not just view the service request, but also to promptly respond and even more importantly, to resolve the request within 24 to 48 hours. Provide your top customers with a direct 24/7 service line and treat them like they are a business partner.
• Over-perform on deadlines: delivering at the deadline is expected (and every competitor will do so), though delivering ahead of is how you will stand out. Equip your vending machines with software that can help you manage inventory by tracking purchases, critical levels of product items and product expiry dates.
• Don’t just do the bare minimum by taking notes only on your customer product/brand/pack sizes preferences, but start taking notes on their personal choice.

And last but not least, the vending machine business, like any other business can’t go without

Optimization

What does it mean to optimize your vending operations? Every single location is unique featuring different traffic patterns, customer demographics, and product mix requirements – and must be treated as such. Optimization is essential in providing great customer service, though, it is a process which spans over several different areas and each one requires hundreds or thousands of decisions to be made. This complex process includes but is not limited to:

• Managing vending machine inventory - knowing what and where sells so the product items are replenished before the machine runs out of stock. Time matters and often it is a question of just one day that can make the difference to your customer and to impact the quality of your service.
• Maximizing vending route efficiency and keeping your operating costs low, thus improving your bottom line. This also includes planning vending machine maintenance in order to prevent potential machine breakdowns.
• Keeping leaner warehouse – how to maximize stock rotation and keep your dead stock low.

Perhaps this is easier said than done, though thinking about optimization it is all about identifying your biggest opportunity and taking advantage of it, so to bring a positive impact to your bottom line. Is it to say:

Optimization = Revenue Maximization

Trying to optimize your vending machine business, at the end of the day means managing a big amount of data unless you own just a couple of vending machines. Once you have half a dozen of them you will need a solution to manage all the data you will be collecting over time and it is the right time to invest in a vending machine management software (VMS). As a vending machine owner, your ultimate goal is knowing how to use data to make your business more profitable, lower costs and satisfy customers.

Using vending machine software will automate all the decisions you have to take on a daily basis. It will reduce uncertainty and will help you rely on data to manage inventory, identify consumer trends, manage routes, and keep cash accountability. And all that while sitting comfortably in your armchair! Tracking each vending machine’s performance by implementing a vending machine software solution will allow you to improve your operational efficiency, reduce cost and boost profitability.

Eager to learn more about how VendSoft can help you maximize your vending machine performance? Start your free 14-day trial now