What Business Are We In?

I received a call recently from an old friend who is a longtime distributor of amusement equipment. His nephew owns a business and was looking for a refreshments provider, so he asked whether I could recommend a local coffee service firm. VT had just profiled a prominent OCS company, so I asked my friend whether he had read that article. He said no, he usually reads the amusement section, because that's what pertains to his business.

About a week later, I received a message from another friend who represents a jukebox company. We spoke about the recent Amusement and Music Operators Association's Road Scholar program he had just attended, and he reported that one of the speakers was a developer of cashless vending technology who had described his products and attempted to "educate" amusement operators on this "new" technology. Of course, cashless payment is hardly a new concept to an industry that survived the "token wars" in the early videogame arcades, and operators who attend the Road Scholar program are not newbies. And, of course, digital downloading jukeboxes and high-end videogames have accepted major credit and debit cards for years, while multifunction payment/access/loyalty cards are in widespread use in family entertainment centers.

My point is that alert operators keep their eyes and their minds open. They attend industry seminars and trade shows, and learn all they can about new growth opportunities through trade journals like Vending Times. Industry suppliers will do well by emulating them, for two reasons.

First, entrepreneurs always have entered merchandise vending from many different directions: jukebox operation, tobacco wholesaling, industrial catering and pre-brewed coffee delivery, to mention four that launched many vending companies 50 or 60 years ago. Many of those pioneers remained active in the businesses from which they had diversified, though some did not. Competitive pressures often led other operators who had approached from a different direction to enter those businesses, too, and they in turn inspired reciprocal competition.

Second, these operators remain entrepreneurs, and if a good client asks them for something, they will look for a way to provide it. Thus, many full-line vending companies were providing office coffee service before 1980, but usually as an accommodation for their existing clients, although a few did form coffee service divisions. For that reason, many providers of OCS brewers, accessories, and coffee and allied products exhibited at National Automatic Merchandising Association trade shows long before there was a "coffee service pavilion" for them. And in much the same vein, technology providers, suppliers of locks and security systems, moneyroom equipment, truck bodies, lifting tailgates and other materials handling equipment that are useful to route operators will exhibit at vending and amusement trade shows.

This bears on a question I hear quite often: "What business are we really in?" It's not an easy question to answer, but over time, certain patterns emerge because of the way service businesses evolve.

Vending operators used to be very happy providing service to offices with a dozen people on staff. These became "marginal" as equipment and operating costs increased, and ultimately dropped off into unprofitability. Meanwhile, new technology made possible those costlier, more elaborate types of vending equipment, including refrigerated food, fresh-brew coffee and postmix cold drink machines. Many operations redefined themselves as full-line vendors, specializing in applying that new equipment to providing food and beverage services around the clock to large clients. Others did not, but grew horizontally by adding jukeboxes and games and going after a wider range of public locations. Still other entrepreneurs studied those now-underserved small locations -- and one result was modern OCS.

This intricate interaction between technology and the current needs of the market continues unabated today. Operators who might have added contract cafeteria management four decades ago are likely to add micromarkets today, and some who concentrate on OCS now will take up (or return to) full-line vending when market demand shifts again. I know many traditional amusement equipment distributors who are now securing micromarket locations. The business we're in is applying the best available equipment and processes to meeting the refreshment and entertainment needs of people away from home. Skill in one segment translates well into others, and this dynamism makes our industry so interesting.