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Issue Date: Vol. 44, No. 12, December 2004, Posted On: 12/14/2004


Market Shifts Accelerate Demand For Away-From-Home Refreshment


Tim Sanford
Editor@vendingtimes.net

U.S.A. - The vending, foodservice and coffee service industry continues to confront a seeming paradox as it enters the new year. Continuing economic strength is reinforcing demand for away-from-home refreshments, but ongoing structural change is eroding the traditional large workplaces that today's full-line vending method was designed to serve.

Despite nearly two years of recovery, employers generally have not rebuilt their workforces to pre-2001 levels. However, unemployment remained low by historical standards during much of 2004, and continues to decrease. Thus, people are finding work, but in more (and so smaller) places.

According to a fact sheet on the U.S. economy prepared by the State Department, some 19.6 million Americans work for companies employing fewer than 20 workers. Another 18.4 million work for firms employing between 20 and 99 workers, and 14.6 million work for firms with 100 to 499 workers. And 47.7 million Americans work for firms with workforces of 500 or more. Of course, the latter seldom have all their employees working under one roof.

In short, decentralization and outsourcing have expanded the workplace market while making it less amenable to service methods developed for establishments performing mass production of heavy industrial goods.

This situation has accounted for the odd combination of robust product purchases with less frequent new-equipment acquisition that has characterized the past few years. Most operators have more than survived by redeploying the equipment they already have, and upgrading it when appropriate, in order to maximize the return from each piece.

At the same time, the classic "total refreshment service" or single-source concept has become increasingly central to contemporary operating doctrine. A location populated by well-compensated employees working long hours and given flexible access to the break area may be profitable for an operator providing not only vending, but also coffee and pure water service. Such a stop might be marginal, or unprofitable, as a vending-only location.

The evolution of the workplace market toward a larger number of smaller locations also has put a premium on management efficiency. Accurate sales analysis and forecasting are the keys to route productivity, and tight controls are required to protect profits. Keeping out-of-stocks and out-of-orders to the irreducible minimum has never been more important.

For these reasons, operators are adopting modern information technology with a speed surprising to some long-time observers. Automatic data capture by machines complying with the vending industry data transfer standard ("DEX"), and automatic retrieval with handheld route computers or a central computer linked to machines in a wide-area network, helps route drivers make the most productive use of their time and resources, and can alert managers to impending problems before they impact collections. And fast line-item sales reporting holds the promise of optimizing each machine for the specific preferences of its clientele.

"DEX"-enabled machines also can benefit from time-savers like curbside polling to determine machine inventories in real time in order to pick just the merchandise required.

These technologies have been discussed,  tested and improved extensively over the past 10 years, and operators are finding that they not only reduce costs and protect profits, but also build customer confidence and thus enhance sales.

In a dispersed market populated by smaller but better-compensated groups of potential customers, increasing the value of the average sale also is a key to maximizing return. A hot beverage machine that can command a $1 vend price need only sell half as many cups as another vender priced at 50˘ to yield the same gross profit.

Packaged cold beverages have been in the forefront of efforts to increase the "check average" of the vending installation. For that reason, the category also is leading the long-predicted move toward cashless vending.

An important milestone was passed last year, when the total of retail transactions made with credit and bank debit cards exceeded total cash transactions for the first time. Fast-food restaurants were among the last retailers to hold out against "plastic," but they now have yielded to the desire of their customers to enjoy the convenience of cashless purchases.

Thus, next year is likely to see substantial deployment of vending machines that allow credit card use. The vanguard rolled out this year, primarily in public locations  like hotels, tourist venues, highway rest stops and movie theaters. In all these places, the clientele expects to make cashless purchases, and the operator benefits by removing money from the machines. Patrons are likely to make multiple purchases, if they can do so easily with a card; and the  vend price is high enough to offset the transaction processing cost.

Vending machines in business and industry locations are likely to require a longer transition period, since most purchases are made for individual immediate consumption, and the availability of change is often seen as an advantage. Increasingly cost-effective and appealing prepaid media, working together with traditional coin and note validators, may bridge the gap between the two markets. For all these reasons, 2005 is shaping up as a pivotal year for vending.


Topic: Vending Features

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