Micromarket May Outperform Vending In Low-Traffic Spots

by Mike Ferguson
Posted On: 1/6/2020

  • Printer Friendly Version
  • Decrease Text SizeIncrease Text Size
  • PDF


It seems that every story you read about in this industry is about micromarkets these days. And why shouldn’t it be? Micromarkets are the newest thing since glassfront snack machines came out in the early ‘70s. Sure, vending machines have better and more technology added to them, but micromarkets have been out for less than 10 years. If you asked most operators as recently as the early 2000s whether they would ever consider open shelving and cooler concepts, they would have told you that you were crazy. Many times, when route drivers would accidentally leave the vending machine unlocked, it was like winning a free game. The money and the products inside would be stolen.

 Fast forward to today. Micromarkets represent the fastest-growing segment of the convenience services industry. All open coolers and open shelving – who would ever have thought?

 Many operators are still hesitant to take on micromarkets. Typically, it’s because they are scared of theft, or just don’t understand how to sell the market and which kiosk and fixtures to buy. Most grocery stores and many retail stores have moved to self-checkout. There is a reason why micromarkets are growing so popular with end consumers.

 The next growing trend is smaller customer locations, as few as 40 employees. Most operators will not be interested in serving these smaller accounts with micromarkets because, typically, they have old vending machines lying around in their warehouse, or they don’t want to spend the money on kiosks and fixtures for such a small location. The old-school thinking process is “I have an older snack and drink machine; I will just put those into a small location.” So, let’s put the costs into perspective on this thought process.

 An older snack machine and drink machine would be valued at or around $1,000 each, depending on make, model, age, etc. Let’s say that smaller account may do $60 to $70 per week in sales. Most operators wouldn’t even put credit card readers on those machines because “it’s not worth it.” Now, with the lower costs of fixtures, coolers and kiosks, you can spend around the same and have higher sales due to the open market concept. Your drink and snack selections will have a larger variety, thus leading to higher sales. You can put in a cooler, a small fixture set and either a phone appbased self-checkout system or a tablet-style kiosk for around the same investment as the old vending machines. If your hesitation is theft, work out a program with the client that if theft is less than 2%, there will be no charge; if it goes over that then you bill the customer, or you put vending machines back in or just pull out altogether. Get an agreement in place and be prepared to show the reports on shrinkage.

“Micromarkets are here to stay, but the larger locations have already been approached,” said Michael Johnson of Yoke Payments. “With Yoke’s smaller and more affordable solution, a VMS-integrated terminal and smartphone app, operators have been able to make micromarkets their lead product at locations of any size. We offer the ability to reap the benefits of a micromarket, with startup costs lower than vending, maximizing growth potential.”

Most operators who provide micromarkets started in vending. If someone wanted to start a business today from scratch, they wouldn’t even  need to buy a vending machine anymore. They just need to find the right fixtures, kiosks and coolers.

MARKET FIXTURES

There are so many variables today when it comes to micromarket fixtures. Below are some examples of fixtures available today that operators are using. Some of these are made for a low-cost entry and for smaller customer locations; others are made for the largest customers who want micromarkets.

Grid-style fixtures.These are non-wood based. Some are built to hang on the customers’ walls with wall anchors; others are free-standing grids with feet or legs to support the weight. These are easy to install.

“We’ve concentrated on making opening a market simple,” said Kyle Reifert, president of FrameWorks Designs (Muscatine, IN). “We offer affordable, basic merchandising fixtures that not only makes selecting fixtures easy, but also saves time to get markets running quickly. While this is helpful in large markets, it is especially important when reaching the huge opportunity still available in small ones. Strong steel fixtures that are quickly assembled and offer maximum product display space, make efficient use of the operator’s resources, and the location’s available space.”

Reifert added that expensive and bulky wood fixtures, while desired by some clients, typically use a lot of non-selling space, which often isn’t available in a break area. Also, a much higher cost, heavier weight, and increased assembly time can be something that operators want to consider when deciding between steel and wood.

“Years as market operators have helped us look for what’s important to others,” he noted.

Gondola shelving. This is typically what you see at retail, discount and smaller grocery stores. They have shelving and pegs to hang products from. Some operators buy these used and put them in customer lunchrooms. Although not the optimal fixtures for all lunchrooms, they may be okay for smaller locations and you can typically buy these cheap, used, on sites such as Craig’s List. These will require some effort on the installation process.

Metal shelving.The large advantage of these is that they come in various pre-assembled units which will save you on labor and time to install. They generally are lightweight, reusable and easy to install.

“A customer in Texas had several traditional particle board markets completely flooded out, which ruined every stand,” said Sandra Faulkenberry of All State Manufacturing (Terre Haute, IN). “He replaced them with our all-metal stands and said the next time that happens, he’ll just hose them down and keep right on using them.”

Particle board fixtures. These are made from particle board then laminated over. They generally require two or more installers to assemble due to the weight and size. Most operators must put these together inside the lunchroom, because they are too heavy to assemble at the warehouse and then move. There are multiple manufacturers of these products available. They generally are customizable and come in several colors.

Plywood fixtures. These are generally made from lightweight plywood then laminated over with a tough plastic liner. These go together without any tools. They come in smaller sizes for smaller micromarkets as well as in sizes for large accounts. They are customizable and can be reused repeatedly due to the durability.

“When investing in a micromarket, it’s important to ask yourself: ‘How long will this last?’ ‘How easy is it to modify?’ ‘If something breaks can it be repaired?’” said Robert Liva of Graphics That Pop (Lewisville, TX). “You’ll be pleased to know that we have addressed and developed for every one of those issues and more. These revolutionary solutions add increased functionality and durability to an already incredible product.”

Slat wall fixtures. Slat walls can be purchased from various distributors and they simply attach to the customer’s walls. You can buy pegs, hooks and shelving to insert in the slats for a customizable look. You will see these in retail outlets lining the walls. This method is one of the least expensive means to installing a smaller micromarket.

KIOSKS

In order to enter into a smaller micromarket, otherwise known as “nano” markets, you have means available to keep
your costs down.

App-only systems. No kiosk required. The end consumer must download a payment app (of your choice per market) in order to purchase products in your micromarket. There is no cash option and no kiosk for any visitors to use. For smaller locations, this makes it much more affordable to enter into the market. Many of the major kiosk providers have an app payment system available.

Tablet systems. Some providers use an iPad or other brand to use as a kiosk, but without the cost of a traditional kiosk. “Nano” kiosk– or smaller kiosk. These are generally smaller in size than the traditional kiosks but do generally offer more options than an app or tablet.

DRINK COOLERS

Drink coolers come from various manufacturers. Remember, if you put food in a drink cooler, you should make sure the system has a health timer in case the power goes down. The health lock will lock the cooler until someone gets there to unlock it and check the stock for any issues that need to be resolved.

Bottler-provided coolers are generally provided by Coke, Pepsi, Dr Pepper or others. The upside is there is generally no cost for these coolers, thus lowering your market costs. They generally allow you to only put in their provided drinks brands. So, realize that your variety will be limited and that you will be held accountable for this.

In general, if you are a first-time operator going into micromarkets, remember: this is not vending. Don’t treat it as vending. Go in with higher c-store pricing plus taxes, and expand the variety to beyond what is in a vending machine. Don’t offer any commissions, and always watch your shrinkage reports for possible theft. If you need some help to get started, there are industry consultants who specialize in micromarkets who can assist you to get started, and even help you install the micromarkets.

 
MIKE FERGUSON is a 30-year veteran of the vending/micromarket and office refreshment services industry. He founded VMAC Solutions (Vending, Markets & Coffee) to provide intermediary services to companies exploring merger or acquisition, and to serve as a consultant and coach to operators dealing with technology challenges such as the addition of VMS software, automated warehouse fulfillment, including prekitting, and expansion into or upgrading of office coffee services and micromarket operations. Ferguson can be reached at Mike@VMACsolutions.com or (713) 569-6463. Visit vmacsolutions.com.