What Business(es) Do We Want To Be In?

Posted On: 3/1/2018

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As the National Automatic Merchandising Association readies its first rebranded NAMA Show (it had been OneShow since 2010), we have been thinking back over the half-century since we attended our first, which was  in Chicago's International Amphitheater. And, for some reason, we've found ourselves engaged in a number of conversations about the origin and development of the several components of the industry today – merchandise vending  (now including micromarkets), office refreshments (now including "pantries"), amusements (now including virtual reality) and music, now mostly sold through digital downloading jukeboxes. This is a diverse collection of activities.

We suspect that shoe retailers (for example) do not engage in periodic discussions of how best to describe the business they're in. In this industry, such discussions have been almost continual for as long as we can remember. In the late 1960s, many people believed that full-line vending was converging on the foodservice industry and might challenge the booming fast-food business as the Next Big Thing. In the 1970s, the apparent onset of deindustrialization in the United States encouraged serious thinkers to worry about definitions. A NAMA chairman warned that America's passenger railroads had declined, two decades earlier, because they clung to the belief that they were in the "railroad" business rather than recognizing that they really were transportation companies. The advent of office coffee service and its expansion with allied products and services prompted some operators to bill themselves as professional breakroom management organizations; the offer was to assess each lociation's needs and deliver the most appropriate service, whether provided by an eight-cup pourover brewer or a "full-house" single-cup fresh-brew vender.

In our experience, two tendencies always have been at work in this industry. The first is rooted in the entrepreneurial mindset of the operator. When an operation running jukeboxes in 1948 received a request from a location for a cigarette machine too, the operator naturally replied: "Sure, we can do that." By the same token, when an OCS operation was invited to make a proposal to a desirable account that wanted vending service too, the reply was the same.

And so it is today: a location that wishes to subsidize snacks and beverages for employees through a pantry service generally will find that its present service provider will respond favorably, if the numbers can be made to work.

At the same time, operators often have resisted what appear to be practical suggestions for adding complementary lines. We recall several examples of this.

In one of them, cigarette machine operators listened attentively to the suggestion that they attach small disposable-lighter venders to their machines. They agreed that it was a sensible suggestion, but few of them actually did it.

In another, music and amusement operators considered the recommendation that they offer their tavern accounts automated countertop single-portion fryers and portion-packed frozen products – chicken nuggets and the like – for use with them. This would give the location a convenient solution for serving bar food that required no investment and little labor; and it would give the operator additional revenue from stopping the truck. But the most common reply we heard was, "That's interesting, and it makes sense … but it's not the business we're in."

A pattern that emerges here is that operators, who pride themselves on accommodating reasonable location requests, are likely to add a new service if it fits into their service model and their clients ask for it. But they usually are not eager to propose radical changes to their clients. They respond effectively to "pull" from accounts, but are reluctant to "push" new ideas on them.

This cautious attitude probably aided survival in the past, but it may be unhelpful today. The present economic and social environment is very different from the one that existed during the heyday of heavy industry with huge factories employing thousands of blue-collar workers. This change has removed many constraints on operators, in terms of the kinds of products they can sell and the range of prices those products can command. At the same time, it has put a premium on individualizing the menu in order to gain participation from everyone in the location, which calls for fast and detailed sales analysis. It also calls for devoting much more attention to logistics and on rigorously reducing shrinkage in order to keep operating expenses at a minimum. And it is establishing a partnership between operators and employers, with the common aim of maintaining workplace morale.

We'll be thinking about all this at the NAMA Show, where we expect to learn a lot and see many new things. We'll also be remembering the innovators and pioneers who built this fascinating industry.