How a vending machine can add value to your business
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Vending machines are now common in public areas, waiting rooms and many other locations.
Modern equipment can be stylish, reliable and effective at providing products that meet customers' needs and wants, particularly where shop opening hours are restricted or staff and/or facilities are not available. This article is a guide to help you decide whether installing a vending machine in your establishment will work for you.
Any one or more of the following may or may not apply to your establishment. You need to have a clear idea of those that do apply so your expectations are met.
Hospitality
Are my customers waiting in an area for periods of say, more than five minutes? Will providing vended products save my customers time, help them relax and/or enhance their experience in my establishment?
Convenience
Am I often asked where the nearest convenience store is? Are there no outlets nearby that meet my customers' needs and wants?
Competition
My competitors either do or do not provide for customer's needs and wants. Should I match my competitors or steal a march by providing a service customers don't get elsewhere?
Profit
Provided you have no doubt that there is ample demand for vended products in your location, why not use it as a revenue stream?
Cost of ownership
Purchase costs vary depending on type, size, country of origin and whether equipment is new or used. As with most businesses, there are plenty of suppliers offering cheap deals on flashy plastic equipment. Although an offer may seem attractive, when it comes to service or back-up, such suppliers are often nowhere to be found or the equipment is "discontinued" or "uneconomic to repair".
Some suppliers may offer equipment at "no cost" provided you use their proprietary consumables forever. In other words, high margins on consumables are used to offset the cost of the equipment.
Installation costs should not be overlooked.
• Will you need to have plumbing and/or electrical work performed prior to installation?
• Will you need stands, tables or cupboards to store products?
Running costs
Apart from electricity, there are three main running costs to consider.
1. The cost of consumables - related to the turnover and shelf life of products (if applicable).
2. The cost of staff time to restock and perform basic maintenance and cleaning
3. The cost of technical service and out-of-warranty repairs.
It would be wise to ask potential suppliers to provide these details in writing.
Return on investment Depending on the rationale for installing equipment, return on investment may result in a profit, break even or loss. Since actual turnover can only be speculated prior to installation, operators are advised to prepare a spreadsheet model that calculates income from sales versus expenditure on capital and operating costs. Adjusting the number of sales in such a spreadsheet model should give a reasonable idea of the break- even point. Experienced suppliers should be able to provide you with details such as average cost of dispense for their particular machine types.
Other considerations
Health & Safety – For vending machines that dispense food and/or drink products, keeping the equipment clean is essential to avoid potential adverse health effects on consumers. Also, in the author's experience, maintenance and repair costs can be minimised by operators who follow supplier's instructions. A few minutes each day keeping equipment clean can save expensive repair bills later. If you allocate staff to carry out these duties, make sure they are managed and that provision is made if the staff leaves or goes on holiday.
Consumable supply – In populated areas there are companies who can be contracted to restock the machine for you. In more remote sites, other arrangements will have to be made. Often this means doing it yourself, requiring you to store items for restocking. Some items may need to be kept in a refrigerator and used before their expiry date.
Security – In some situations, equipment fitted with coin mechanisms or change-givers can be a security risk, particularly if out of sight of staff or security cameras. Your supplier may be able to provide vandal-proof enclosures or alternatively, equipment may be able to be fitted with card readers for credit-card and/or EFTPOS transactions.
Selecting a supplier – This aspect is important since well- designed machinery will provide you with many years of service. Apart from inconvenience to customers, if the equipment is a revenue stream, downtime means loss of income. Key considerations include:
• A physical address
• Years in business
• Responds to communication in a timely manner
• Extent of service network (local, regional or nationwide)
• Availability of spare parts
• Sale, upgrade and financing options
• Written warranties on equipment and service
