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Issue Date: Vol. 44, No. 6, June 2004, Posted On: 6/7/2004


The Forest And The Trees


Tim Sanford
Editor@vendingtimes.net

Today's vending operators, like most other retailers of consumer packaged goods, have learned over the past decade that technology can be applied to maximizing per-machine sales. Automatic transaction recording and retrieval can produce detailed histories of customer behavior between machine services. Reports can be designed to sort all the items withdrawn from inventory using the number of turns as the sort key, so the two or four slowest-moving products appear at the top (or the bottom), easy to identify and to earmark for replacement by other items that may turn more rapidly.

This approach seems to have been developed, in different ways, by route distribution businesses (soft drink bottlers, coffee roasters, breweries, bakeries) that stocked the shelves for their smaller retail customers on the one hand, and by supermarkets on the other. One of the principal contributors to Wal-Mart's remarkable success was its early recognition of all the implications of knowing, quickly and with high resolution, the velocity or turn rate of each "stock-keeping unit." Those implications, in the event, shortened the distribution pipeline, made possible new relationships with suppliers, simplified the addition of new lines of merchandise and came close to resolving the ancient dilemmas of inventory control. The end of this process is not yet in sight, but as the revolution goes forward, it may be valuable to keep some things in mind.

The first, simply, is that you don't know how quickly an item will turn if you don't give people the opportunity to buy it. We see this in supermarkets all the time. A particular dessert, let's say, is introduced in vanilla, chocolate and strawberry. The supermarket offers all three and tracks the turns of each flavor. If vanilla turns most slowly, it's dropped. Then the supplier adds banana, butterscotch and tutti-frutti, and offers shelf allowances for facing each. So the three new ones are offered - and, say, banana comes in last. It, in turn, is dropped.

After awhile, people are buying the available flavors who never have tried the rejected ones, and may not know they exist. What would happen if vanilla reappeared, not perhaps on every order cycle, but from time to time?

The vending industry identified core and rotating items back in the days of nine-column candy machines, and has never quite forgotten that system for keeping patron interest up. We think it's a better approach than the unimaginative devil-take-the-hindmost implementation of "category management" by too many large retailers.

Vendors have had more reason than most retailers to develop such methods. A vending machine, however versatile and flexible, imposes real limits on the variety of items it can offer. Over the years, many operators who not only watch the sales histories but also observe their customers, have found attractive items that sell well when they're not offered all the time. Others have built volume and maintained customer interest by periodically offering and promoting unusual products, sometimes themed to a major current event, on a one-time basis.

What the vending industry has lacked , and the vending industry is not alone in this , is information that goes beyond the spreadsheeted histories of what people have bought, and explains why they bought it. Knowing that might suggest other things people would buy from vending machines, if those things were offered. It also might gauge the dissatisfaction, conscious or otherwise, that arises when a desired item never is available.

We suspect there is a long-term dimension to retailing that increasingly is being overlooked by sellers who focus exclusively on the events occurring between reorders. Might a slower-moving item justify its greater carrying cost if it brought people to the vending area who otherwise would not have come, and who will buy other things once there? Might it strengthen customer loyalty, ultimately helping protect the location against a less thoughtful competitor? Then it might be worth offering, whatever the logic of sales analysis might dictate.

We'd like to see a concerted, professional effort to look at vending transactions from the perspective of the patron and not the coin box.

 


Topic: Editorial: Vending

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  • Market Research As A Byproduct
  • We Need To Talk, And Listen
  • Perils Of Infighting Outweigh The Fun

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