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Issue Date: Vol. 43, No. 3 / March 25, 2003 - April 24, 2003 , Posted On: 3/25/2003


Underground?


Tim Sanford
Editor@vendingtimes.net

An interesting exchange took place during the recent National Automatic Merchandising Association Spring Expo in Las Vegas. During a discussion of NAMA's plans to introduce a certification program for members, an operator asked whether anything can be done to suppress what she called "the underground industry," and defined as very small companies "placing 1970s machines at 1970s prices."

Her point is worth considering. One of the consequences of the great surge in vending that began in the immediate postwar years has been that large quantities of used equipment have been available, at least since the 1950s. This has had a number of consequences.

One is that it has facilitated entry into the vending business. A success story that we heard often in the late 1960s from pioneering full-line operators who had built strong companies during that decade was, "I graduated from college in 1958, and I had $500 in the bank and a beat-up old station wagon. So I bought two used cigarette machines and some inventory, and set out to place and service them. One thing led to another..."

It is a good story, and we've heard others very much like it from a number of operators in each succeeding decade. We expect to continue to hear it. Vending is a business that rewards effective salesmanship, the ability to build close personal relationships, hard work performed over long hours, and a sense for what is and is not profitable. Given those skills, it is relatively easy for an individual to start and run a vending business that may stay small, or may grow into a large company, depending in large part on what the owner chooses to do. Quite a few prefer to remain family-operated, and are content to make a decent living while avoiding the make-or-break challenge that arises when it becomes necessary to buy another truck and hire a driver. A small "mom-and-pop" operation can provide profitable service to locations too small to attract the attention of the strong local, regional and national vending companies in its area.

Another consequence is that the anticipated development of a "cooperative service" vending segment in the United States never really materialized. While operators here and there have been successful at designing and selling programs under which they install and maintain equipment, while location personnel fill and collect, Europe has seen a much greater development of mainstream small-location vending technology and operational doctrine. One reason for this almost certainly is that prospective clients in the United States have had access to some sort of vending provided by those very small operators, and thus have seen no reason to pay for something that they could get for free, or to become involved in servicing vending equipment when all they want is the ability to buy things from it.

The complaint voiced at the NAMA Spring Expo identifies a problem found at the margin. The complainant, operating modern equipment and charging contemporary prices, could not meet return-on-investment goals if that equipment were placed in a location with (say) 30 people. A retiree running two dozen old vending machines in a very local market area can make money, and does. The "underground" operator would not submit a proposal to serve a new 300-employee manufacturing facility; it would require products and services that a one-person business could not provide. But things become difficult at a certain staffing and compensation level, when a prospective location is not quite so big as to exceed the capabilities of the little guy, but not quite so small as to be uninteresting to a larger operator.

That's the point at which it becomes necessary to educate the prospect. Installing a new machine may reduce the percentage of commission to be paid, but that machine, stocked with fresh, branded products at prices competitive with other retail outlets, will sell more, and contribute more substantially to workforce morale. So the dollars may come out the same, or better, and the location is getting a service that meets its personnel and productivity objectives.

There is no way to stop anyone who wants to own and operate a vending machine from doing so; nor should there be. Large companies usually start as small companies. What's needed is for the industry to do an effective job of educating the public about vending. That was the answer given at the NAMA Expo, and it is the right answer.


Topic: Editorial: Vending

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

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