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Issue Date: Vol. 46, No. 9, September 2006, Posted On: 9/10/2006


UPFRONT: How Do Small Operators Survive…And Flourish?


Alicia Lavay
Alicia@vendingtimes.net

One of the pleasures of conducting our annual survey of operators for the VT Census of the Industry is the comments we receive from people responding to it. This year, one of them complained that the “little guy” too often is not recognized as playing an important role in the vending industry, or even as belonging to it.

In some businesses, like the retail grocery trade, volume of traffic and economies of scale are so critical that the players consolidate into a small group of very large organizations, an “oligopoly,” by a kind of natural law. Over the decades, it sometimes has seemed that vending was heading that way, too. I’ve heard it argued that the supply chain is fine-tuned to the point at which a large operation’s purchasing power gives it a decisive advantage over smaller competitors. Two decades ago, the argument was that consolidation and dispersion of large clients gave the largest operators, who could negotiate national contracts, a crucial edge that locals could not withstand. In the early 1960s, it was contended that the increasing complexity of vending machines – fresh-brew coffee, postmix soft drink, refrigerated food – was pricing the small operator out of the market.

All of these arguments were reasonable, but the small operator survived. There seem to be more of them than ever, nowadays, and it’s worth asking why.

For one thing, there are different kinds of small operator. Our oldest editor, Tim Sanford, gave me some historical perspective for this column. In his view, small operators occupy three somewhat diffuse categories: start-ups, hobbyists and specialists.

Most established companies began as mom-and-pop or one-person start-ups. Their founders remember storing product in the garage, servicing a few machines with the family car, and doing the accounting chores at the kitchen table. Start-ups don’t intend to stay small. If they like the business, they want to grow. The critical moment for the start-up (and not only in vending) comes when the business can’t continue to expand without hiring someone from outside the family, and perhaps buying a truck.

Hobbyists are people who don’t run their vending businesses as their primary source of income. They may have full-time jobs, or they may be retired on pensions, or they may be temporarily out of the workforce with disability benefits. They usually are sociable individuals with a flair for sales and service, and they find that they can keep busy and make some spending-money by installing vending machines in a few nearby locations too small to attract the full-time operators. They know what kind of income will make them happy, and don’t believe that more would make them happier if pursuing it threatened to turn their hobby into a full-time job.

Specialists recognize a niche opportunity, and target locations within the niche. Espresso coffee and sports drinks are among popular current specialties. Specialists have a profit goal, and a plan for attaining it with a small client base. They want to “overservice” their accounts with the personal attention that a larger operation could not provide.

I think Tim’s model works better if you divide start-ups into two groups, “experimenters” and “veterans.” Experimenters find the thought of vending attractive, but know little about it; so they set out with a few machines to learn whether it is a good business for them. Veterans either have worked for a vending company or have close relatives who do, and know what kind of business it is. Their goal often is to run their own operation in order to do things that they believe their former employer, or their extended family, should be doing but stubbornly refuses to do.

The vending, coffee service and coin-operated music and amusement businesses are fascinating because they offer such a range of opportunities to creative people. There probably are few other retailing methods that can be conducted successfully in so many  ways. The right way to run a vending company is whatever works for the owner.

The point of all this is that the established, visible vending industry emerges from a diverse and variegated seedbed. The perennial appeal of vending creates the recurrent problem of “blue sky” schemes, but also has fostered an environment in which entry into the business is easier than it ever has been. The ingenuity and imagination of small operators always has been one of the great strengths of this industry.

Why, then, is the “little guy” ignored?

Largely because the supply side of the business has changed in ways that have not been reflected on the operating side. For a long time, the majority of popular vendible products were local or regional, coexisting with a few iconic national brands. A bakery serving a metropolitan market would come up with a good vending item, and local operators would buy it. The seller knew the buyers.

Supplier consolidation has changed all that. Today, most vendible products are produced by a handful of very large companies in which goals and priorities are set by experts in a central office. At their distance from the ultimate point of sale, fine detail becomes blurry, and it is necessary to deal in fairly large market segments. “Vending” gets identified with the vending companies that place the largest orders, and sometimes even lumped together with other retail channels that deal in single-serve items for immediate consumption, like convenience stores.

The squeaky wheel gets the grease. Small operators can find a voice by joining trade associations like NAMA, NBPA, AMOA and NBVA. Over the decades, well-run regional vending companies have formed support structures like the Better Vendors Association and Vendors Purchasing Council, and more recently the Vend Marketing Institute, to simplify supplier communications and encourage cooperative ventures. A group of music and game operators has gotten together to form “Club Lucky” to cooperate in tournament sponsorship, purchasing and bidding on national business (see VT, August). Why can’t small vending companies do something similar? Collectively, they represent substantial volume; individually, they fly beneath suppliers’ radar.

And, of course, there’s nothing to stop “little guys” from telling the industry publications what they’re doing, and sharing their perceptions of the present market. I’d love to hear from you! Let’s not forget the squeaky wheel…


Topic: Upfront with the Publisher

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