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Issue Date: Vol. 46, No. 11, November 2006, Posted On: 11/17/2006


UPFRONT: An Industry In Decline, Or Untapped Opportunity?


Alicia Lavay
Alicia@vendingtimes.net

Like many of you, I’ve recently returned from the NAMA National Expo in Orlando. The how was informative and entertaining, and it’s always great to catch up with old friends and sample the new products at the exhibits.

I thought about devoting this space to kudos to NAMA for a job well done, but I’d be remiss not to mention that the exhibit was smaller this year, and there were fewer machine manufacturers, since machine manufacturers are disappearing. Let’s face it; this was the talk of the show. Those who did exhibit had a good show, from all I’ve heard, and the new format proved popular and successful. But the decline in supplier and manufacturer participation needs to be addressed.

I ran into one exhibitor who said that we really don’t need two trade shows a year. This is not the first time I’ve heard this argument, and I’m told that during the major industry restructuring that took place in the late ‘70s and early ‘80s, there were those who wanted one show every two years.

Those who advocate fewer shows would be right if we accept that this is an industry in decline, but I’m not ready to pack it in just yet. Are you?

In fact, the volume of products sold through vending machines never has been higher. The challenge is that today’s typical locations are smaller. Operators can’t justify the expense of new machines to meet the needs of many of these accounts, and there is a lot of good-working used equipment available. We still run into an operator, here and there, who recognizes that buying new equipment confers real advantages in terms of preparing impressive sales proposals and minimizing maintenance expenseS, but not everyone can do this, and not everyone wants to.

The marketplace also has changed in other ways. Forty years ago, consumer choices were much less diverse and tastes were more predictable. Our industry recognized blue-collar manufacturing workers as its primary customer base, and that population could be satisfied with a limited selection of hot and cold beverages, candy and food. And the conventional wisdom held that factory workers equated value with low price.

The contemporary customer base has far more choices, not only of products but also of places to purchase them. Thus, a vending machine has to offer a much wider selection – and every potential customer must find something that he or she wants to buy. If there are 1,000 people in a location and half of them never use the vending machines, the location still will be worthwhile. The picture is quite different with a population of 75. The combination of smaller workplaces, wider “outside” product availability and the need to address a broader range of tastes has produced a challenging new situation.

Operators can adapt to this situation, and the NAMA convention was a very good place to learn how. Highlights of the educational program included a half-day seminar on category management, led by Brad Bachtelle of Bachtelle & Associates (Tustin, CA) and sponsored by The Hershey Co. This was based on Brad’s very popular presentations at last year’s National and this year’s Spring Expos (see VT, November 2005 and April, 2006), and outlined a comprehensive strategy for assigning space in glassfront machines to each category, then allocating the number of selections in each category on the basis of location preference. We’ll cover the seminar in detail next month.

I heard from Hershey’s Don Lear that many operators who had attended one or both of Brad’s earlier seminars paid the separate registration fee for postgraduate study at this one. This speaks well for the willingness of the operator community, at any rate, to make the necessary adjustments to today’s difficult market.

Two issues are closely interrelated here. Operators serving the vending industry’s present market, from workplaces and institutions to highway rest stops and recreational venues, have to become more competitive by offering the products people want. Today, this mix includes items that command prices higher than the rather indefinite ceiling of a dollar or so that’s usually assumed to constrain glassfront machine menus. People willing to buy something in a convenience store for a certain price usually will be willing to buy it from a vending machine at that price.

If they’re not, it often is because they are unwilling or unable to meet the machine’s requirement for coins and bills of certain denominations. More flexible currency validating and change-giving systems can alleviate this problem, as can cashless vending.

It also is essential, in a market fragmenting into a larger number of smaller sites, to handle the restocking and collecting tasks as efficiently as possible. There are a number of ways to approach this, from computer forecasting to telemetry. All of them also will yield the sales information needed for the most profitable menuing.

The second issue is, simply, that as the vending industry perfects its ability to do these things, it can seek to widen its location base by meeting the growing demand for convenient refreshments away from home, at any hour of the day or night.

I hope I don’t sound like a broken record, because I know I’ve touched on this topic several times in my column. Change always involves some level of risk, and risk makes most people uncomfortable – with good reason! But this industry needs to develop new thought processes and new ways of doing business, if it is to survive. Some operating and manufacturing companies are well on their way to making those adjustments. In fact, in this issue you’ll find a success story about the 75-year-old Wittern Group and how it has responded to the changes in the marketplace. And relatively new entrants into the manufacturing segment are breaking new ground, too.

This industry was built from the ground up by pioneers who spent decades inventing and improving operating methods that give consumers immediate access to the products they want, 24 hours a day, seven days a week.

Who will collect the return on this long investment of imagination and effort? Make no mistake: the sale of products through robotic retailing equipment will be higher in a decade. The question is, who will be running that equipment?

We can sit back and complain and let someone else reap the rewards, or we can adapt, improve profitability and explore new market opportunities.

Topic: Upfront with the Publisher

Articles:
  • The Next Big Thing Has Arrived
  • To See His Monument, Look Around You
  • Prepare To Engage
  • Work Smarter, Not Harder
  • Are Cup Soft Drinks The Next Real Thing?

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