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UPFRONT: A Large Pie Means Everyone's Slice Is Bigger!

Posted On: 8/15/2008

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With the National Automatic Merchandising Association (NAMA) National Expo and the National Association of Convenience Stores (NACS) shows coming up, I've been thinking about the similarities and differences between merchandise vending and convenience stores. I've often wondered why the two industries don't cooperate more closely. A little history will explain my curiosity. (The problem I have is that I am surrounded by people who don't know what "a little history" is!)

 Vending and convenience stores both were "niche" industries when they began, and were ideally positioned to meet the fast-changing needs of the American public during the two-decade boom that followed World War II.

The dramatic growth of full-line vending that began in the late 1950s created a demand for single-serve packages for immediate consumption. Well into the 1970s, consumers' price expectations were formed by supermarket packaging. It was up to the vending industry to educate patrons about the increased value of a portioned item offered when and where it was wanted. Full-line vendors also persuaded patrons of the value of microwave ovens in the kitchen, which took about a decade.

Convenience stores took advantage of the popularity of portion packs, and of those newly mainstreamed microwave ovens. In return, they helped to change consumers' value perceptions to establish (of course) convenience as something worth paying for. Like vending, convenience stores had more difficulty adopting automated data capture and cashless payment systems. And, because both industries sell products in similar packages, a number of suppliers designate the same sales team to serve both.

Vendors long have recognized that convenience stores represent a competitive challenge. It has become commonplace in vending that c-stores want the food-away-from-home (FAFH) crowd to stop by on their way to and from work to pick up something to eat and drink, while vending operators want them to go straight to work and purchase their refreshments when they arrive. Recognizing this competitive dimension, many operators use convenience store pricing as a negotiating tool when drafting proposals.

Industry observers, including Brad Bachtelle and Paul Schlossberg, have urged vendors to study how c-stores market products during their presentations at NAMA educational programs.  Some operators have responded by attending the annual NACS convention, and have been impressed by the focus on merchandising that they've found there. (The next NACS show is set for Chicago from October 4 through 7.)

Why are convenience stores more receptive than vending operators to new marketing ideas? One reason, of course, is that c-stores have a much easier time with point-of-sale merchandising. Changing a price, up or down, is fast and simple. Perhaps more importantly, they always have been able to do odd-cent pricing and to bundle multiple items as a single transaction, shifting consumer focus away from the actual unit price. But times are changing, and the development of practical cashless payment systems for vending gives operators the means to do these things too. As more and more vending operators adopt cashless payment solutions, additional opportunities arise. This being so, is there not an opportunity for cooperation?

To some extent, certainly, this cooperation already exists. I have spoken with many coffee service operators who provide the coffee programs for c-stores, and a conversation with an OCS supplier inspired this column. I have also spoken with vendors whose commissaries supply fresh sandwiches and salads to c-stores. I imagine that in many convenience stores, vending might resolve labor, waste and storage issues associated with selling fresh food, and perhaps other issues as well. A pioneer in trying this is Kosher Vending Industries (see VT, June).

In much of the country, the usual convenience store is a gas station with a mini-mart. The challenge for this kind of facility is to get customers out of their cars (or away from the pump island) and into the store. If you put a bank of vending machines on the pump island, you could capture the sales without inconveniencing the patron.

Colleges that issue the modern, multifunction equivalent of "meal cards" for use in the dining hall, the vending installations and the bookstore have had some success in encouraging local merchants to accept these instruments. I can't think of any reason why vendors and c-store operators might not devise promotions, based on either a physical or a virtual coupon, that would drive traffic for both of them. Since both types of retailer are ideally suited to encouraging trial of new products, it appears likely that suppliers would welcome the wider scope of their introductory promotions.

Surely, vending operations and c-stores must recognize that, no matter what they do, nearly all the people who patronize one are going to patronize the other. We can't persuade someone not to stop into a c-store on the way to work, to buy a newspaper and a cup of coffee and review the previous night's ballgame with the clerk. The c-store can't persuade someone not to buy a drink and a snack from the vending machine at work, especially when it's raining or snowing (and gasoline costs $4 a gallon).

It might be argued that neither party is eager to participate in a collaboration that involves sharing the profit from the sale. But isn't a share better than no sale at all?

A model here is the relationship between vending and mobile catering. These, too, were shaped by the same social and economic forces and served a similar demographic. In the 1960s, there was a good deal of hostility; in the 1970s, there were some attempts at merger. The fact was, and remains, that vending has been unable to get any kind of practical food program into small locations, while mobile caterers have no way of providing round-the-clock availability. But mobile caterers who have concentrated on food production have found a valuable role in selling food to full-line vendors, to the benefit of both parties. Operators attending the NAMA Spring Expo had the opportunity to learn more about this from a past-president of the Convenience Caterers & Food Manufacturers Association (see VT, June).

I think there is a market opportunity here.  A larger pie means everyone's slice is bigger, and everyone who sells the value of convenience has a real stake in working together to reinforce public recognition of this fact.