Early Adopters Share Wisdom On Four Ps Of Micromarkets Part 1 People

Scott Halloran

A panel of pioneer micromarket operators shared the four "Ps" that they have identified as central to harnessing the full potential of the unattended stores -- People, Process, Products and Profit -- during a half-day early-bird panel discussion at the recent Atlantic Coast Exposition in Myrtle Beach, SC.

Moderating the discussion was Scott Halloran of Trolley House Refreshments (Richmond, VA), who presently has 55 micromarkets in operation. Putting operators into the big picture, he noted that there are some 10,000 micromarkets deployed nationwide, citing statistics from industry research firm Bachtelle & Associates.

Bachtelle's studies show that average micromarket performance was very strong in 2014, with $4,552 in monthly sales at an average location. The smallest locations generated $271 in average monthly sales, while the largest pulled in $30,910; the median average was $3,541.

Annualized micromarket sales were $26,501 for the smallest locations and $71,735 for the largest, the median was $44,264, and the average, $56,902. Excluding the very large and very small locations, the operator members of Bachtelle's research panel averaged 53 micromarket installations and relatively strong, consistent average market sales levels.

The average unit selling price was $1.63; the average transaction sale amount was $2.34; and units per sale averaged 1.43.

Another important piece of the big picture for operators is to stay abreast of the steady stream of regulations being drafted specific to micromarkets as health officials assess just how to approach the relatively new retail model. Halloran introduced National Automatic Merchandising Association senior director and counsel of government affairs, Sandy Larson who provided an update. | SEE STORY

People -- the first of the four "Ps" discussed at the ACE seminar -- are universally regarded as the most valuable asset to any business, and micromarkets are no exception.

Halloran introduced Randy Peak of Canteen (Winston Salem, NC) who emphasized that adding micromarkets to an operation affects staffing needs in many ways. Servicing micromarkets calls for a skill set different from vending's. Micromarkets also require additional training, as new duties are assigned to existing personnel. As the micromarket part of the operation grows, new positions must be created.

Market Manager

Paramount to laying the foundation for micromarket success is the designation of a market manager, according to Peak. He advised hiring someone for the position who has a background in retail merchandising outside of vending, since the design and setup of a self-serve market differs from a vending area. Product placement, the use of promotions and direct customer engagement are critical.

Randy Peak

It's also essential that the micromarket manager be data-savvy, since reporting systems require more internal data analysis than typical with vending.

Greater collaboration with end-users is also required of a micromarket manager than is typical of vending management. "The market manager has to be able to interact and figure out the demographics, and be comfortable having conversations with strangers. Knowing customers' faces drives business," said Peak. "Customers know the managers are there to listen to product requests and concerns, to assist them if they're having issues with their market card, and to help with kiosk questions and training."

Route Drivers

Drivers must focus more closely on a wider range of details when servicing micromarkets, putting sanitation first and keeping ahead of product dates and inventory levels, Peak emphasized. "They must be prompt, courteous and professional, because they are likely to be interacting more with customers," said Peak. "We started with new people who had never serviced a vending route. We trained them specifically for micromarkets, and that was extremely successful for us."

It's also essential for drivers who service micromarkets to have a merchandising mindset, Peak stressed. That includes a sharp focus on product rotation and display and first-in, first-out inventory control. "Where they put it, and how they put it there, has driven sales and retention and maximized the right products that we want to sell," said Peak.

A customer-friendly attitude is another must for micromarket service personnel, just as it is for a micromarket manager. Drivers will be required to field questions concerning the markets they serve, train customers in using them and respond to complaints and suggestions while onsite.

Warehouse Staff

A vending company's warehouse personnel are also impacted by the move to micromarkets, with the addition of 200 or more SKUs, on average, increasing the amount of product to store, rotate and manage. "It's possible you'll need new team members and more space," advised Peak. "Getting from one micromarket to 10 is the hardest part. Don't be scared if you have to add people along the way."

Purchasing and ordering also become more complex with the move to micromarkets. The warehouse manager needs additional time to order and manage inventory, to ensure that par levels of stock are kept correct; micromarkets require managing more SKUs with lower par levels. Purchasing also becomes more involved, as operators have to search out more products to meet customers' needs, and brokers continually introduce new products into distribution. Receiving product also becomes more time-consuming when more SKUs are delivered.

Marketing Professionals

Marketing is another staff function that takes on increased prominence with micromarkets. Customer communication is central to effective marketing, and Peak advised operators to invest in someone to focus on it through email campaigns, social media and the company website.

Design skills are very important in developing the marketing tools needed to maximize micromarket sales. Hiring an employee with these skills can be well worth the investment to create impactful ads for kiosks, point-of-sale materials posted inside markets, and materials to support promotions and deals, menu displays and updates.

"You can grow first and then focus on marketing, or focus on marketing and then grow," said Peak. "We worked out deals with suppliers for 25¢ off, and they'd reimburse us. Another promotion is that after 2 p.m. on Friday, we mark our fresh food down to half-price. Spoilage went down, and we covered our cost. All of this has to be promoted and communicated."

Office And Accounting

Accounting and office staff also take on additional duties when micromarkets are added to the mix, because more systems need to be reconciled, Peak explained. At present, market reports must be entered manually into accounting systems; and new line items are required on the balance sheet and P&L. These include market card "float," an effect that will be familiar to operators who recall the prepaid card payment systems that appeared a quarter of a century ago.

In vending, the customer puts money in a machine and immediately receives the product, Peak explained; but in a micromarket, customers trade lump-sum payments for credit to their accounts; the operator gets the benefit of the balance as it's drawn down. "That's the 'float'; truly you owe them that money," he noted.

Halloran said his company typically has a "float" of $55,000 to $75,000 on its balance-sheet that shows as a liability, since it is indeed money owed to customers. He agreed with Peak that training back-office staff in understanding the nuances specific to micromarkets as distinct from vending is vital.

Vending Times will continue its coverage on the roles of Process, Products and Profit in operating a micromarket in upcoming issues. The series will also be published at vendingtimes.com.