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Gauging New Technology's Impact Is Tough In Down Economy

by Dave Levine
Posted On: 2/24/2010

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vending, vending machine, vending operator, vending route, coin-op news, vending news, vending machine technology, automatic retailing, foodservice, cashless vending, telemetry, Dave Levine, MB Media Brokers

With all the new technology coming out for vending, it is important to have a process for evaluating new products and ideas. However, I have encountered a unique challenge when it comes to assessing the worth of new technologies.

Typically, when you look at the idea of adding remote monitoring or cashless or some other innovation, you look at the cash-on-cash return. Just as in placing a piece of equipment, you have a certain threshold where you feel that the equipment qualifies as a good investment. For a lot of operators, this involves doing month-over-month or year-over-year comparisons to determine whether the new technology does in fact make a positive difference to profitability.

Unfortunately, the economy (and sometimes other factors) can throw a monkey wrench into your ability to make this determination. When I call operators, many of them tell me about how the economy has affected their business. I think it is fair to say that the economy has affected everyone's business.

During the holiday season, it is natural for a person to reflect on where his or her business is, and to consider trying new things, but again, holiday sales are typically affected by our clients' tendency to have office parties or similar events which will affect our sales during this time period. So if we accept the idea that this recession began in October of 2007 and is still going strong two years later, we see how hard it is to quickly evaluate new products, because the data will always be skewed -- typically to the downside.

I think that this is a frustration that is shared by operators and equipment manufacturers alike. If a manufacturer convinces you to evaluate his product and then, after the test period, you come back with a negative number, then typically the manufacturer has nowhere to go and you continue doing business the way you always did.

However, in times like these, it could very well be that the product did indeed perform well, but the positive results got washed away by the recessionary tide. It is extremely difficult to accept the argument that you should be satisfied with a product that gives results that are relatively better -- but still lousy. However, smart operators who are able to look through this fog will be better prepared when the economy does finally recover.

When I set up my product testing, I recommend that the operator choose a few "control" accounts -- locations that do not already contain the new product under test. If the control accounts exhibit a negative sales trend, then perhaps the results of the test accounts should be weighted to compensate for economic factors.

I think that operators should consider this question very carefully, because they have a real, vested interest in any testing -- and knowing the true value of a product is more important than producing numbers that "look good." I would argue that before you test anything, you should have this discussion with the representative and agree on how you will deal with this issue if it arises. It makes no sense for either or both parties to waste their time creating data that is either meaningless or indecipherable.

The payoff, of course, is that you will have a system in place for seeking out the productivity and sales gains that this industry needs right now. That is why having tight inventory controls is becoming so important. In a business measured in nickels and dimes, and where most operators do their business essentially the same way, your entire edge will consist of the things that you can do differently and better. As much as I hate to say this, when the present economic fog lifts, the companies that have done this effectively will be the ones that survive.

On a more positive note, I think that once we get through this, the economy probably won't be this bad for another 30 to 35 years. There is a very recognizable pattern to these downturns; they happen on a cycle of a little more than three decades. Some of them are worse than others (the Great Depression was two generations ago). This economy may be at least as bad as, and perhaps worse than, the doldrums of the early to mid-1970s. So we are somewhere between a mild depression and a severe recession.

At least when I look at where we are now, I try to imagine the way the economy was in the mid-1970s. Those times were tough, but if you knew how to position yourself in order to hold on long enough to make it into the next several decades, there was a lot of money to be made.

Especially in our industry, where we are just at the beginning of the "application revolution" I see coming for our industry, there is no reason to believe that vending won't do the exact thing that the PC industry did. If you doubt me, just go to the next NAMA show and look over the exhibits -- especially on the software and hardware side.

Everything is going toward an operating system for vending machines with applications that run off of that operating system. Thirty years from now, when almost every vending machine is on a wireless network, we will look back on 2009 as a pivotal year. Our industry is being forced to evolve, and in the end we will be better off.

DAVID LEVINE is a former financial advisor and vending company owner. He now runs MB Media Brokers (Phoenix), which specializes in low-cost wireless retrofittable signage for vending machines. Founded in 2005, MB Media Brokers was born out of Levine's conclusion that the vending industry's potential is impaired by the current perception of vending. He believes that this problem can be addressed while providing additional revenue to operators. His solution is to use digital signage to convert the existing machine base into a massive network of digital billboards, capable of both broadcasting and advertising.