The vending machine business is a resilient industry with consistent growth.
At the moment, the vending machine market is estimated at $75.02 billion and is expected to reach $99.23 billion by 2033, according to data from Grand View Research.
The main forces driving growth in the vending machine business are convenience, speed, and flexibility in every purchase.
Just like any business, there are factors that directly contribute to growth and increased revenue.
Similarly, there are concrete reasons that waste monthly resources and keep operators from expanding their operations.
In this article, we’re going to go through the six key factors that determine whether a vending machine business will make it in the long run.
Let’s start with the cornerstone of any successful vending venture.
1. Location Acquisition for Vending Machines
When most operators talk about success in the vending machine business, the word location is probably the first thing that comes to mind.
Whether a vending machine achieves high sales is largely determined by its placement.
Locations with high foot traffic are likely to sell more products; people walk past machines, explore food and drink options, and make quick purchases.
Your ability to secure quality locations will be critical for your success in the vending machine business.
These locations are:
- Open public spaces and transit stations
- Schools and educational institutions
- Workspaces
- Manufacturing plants
- Gyms
- Hotels
- Apartment complexes
According to data from PlacementScout, locations with captive audiences and limited food alternatives generate roughly 2x the monthly revenue compared to locations with nearby food/product alternatives.
If your vending machine business can consistently identify locations with high foot traffic and build on top of your current routes, you’ll be able to expand and grow your machine fleet.
Here are the main steps for securing a location for your vending machines:
Research the Location
Your goal with this step is to get a sense of the daily foot traffic you can expect.
While vending location traffic varies significantly, understanding how many people visit the break rooms, entrance halls, and lobbies will tell you if the location is viable for your business.
Some of the best ways to get a feeling of foot traffic is to check the number of cars on the parking lot. If you’re looking into a workspace or office building, try to research how many employees are reported to work on the location.
In addition, make sure to check whether other competing vending machines are already installed at the location to see if somebody else is serving them.
Your way in is to either improve the residents’ experience in the location with your vending machines, or to provide a better service than then the operator that is already there.
Identify the decision-maker
After you’ve found a location that’s a good fit for your vending machine business, find the establishment’s manager or owner and reach out to propose machine placement.
Initiate a Meeting
There are three main ways vending operators reach out to cold leads: telephone calls, emails, and in-person appointments.
The latter is the best option since it gives you a feel of the foot traffic and sets your expectations.
2. Refill Trip Efficiency
The biggest expenses for vending machine businesses are fuel and labor.
Data from Neuroshop reports that a refill route for 10-15 vending machines costs between $200 and $400 per month in fuel, machine maintenance, and employee time.
Whenever you send a filler to visit a machine, the trip costs are deducted from the revenue you generate from sales.
I have so much overhead — the cost of employees, the cost of trucks, the cost of picking that product just to get to that spot. The type of location that I need is going to require a lot of people there. Matthew Rainey, director of Surpauss Refreshments
Refill trip efficiency is a key determining factor for success because it directly impacts your business’s bottom line.
Operators who can reduce unnecessary trips and visit only machines that need servicing will have lower overhead costs.
This, in turn, allows them to maintain a larger number of vending machines with the same resources.
And a larger fleet of well-placed machines translates to higher monthly revenue. Great results start stacking, and over the next few years, some vending machine businesses are able to pivot and cover more area that was previously inaccessible to them.
Refill trip efficiency has multiple components you need to juggle between :
- Ideal use of employee time; removal of idle time, and making sure they’re as productive with their visits.
- Singling out high-priority refills; only machines that need to be refilled, instead of every machine in the cluster.
- High filling percentage; eliminating costly trips where machines are filled only with a handful of products.
- Reduced refill time; eliminated back-and-forth visits from the machine to the van.
All of this is made possible with real-time telemetry hardware that transmits machine data that reports on inventory levels to the central cloud.
The most successful vending operators are those who can stop relying on static routes for product refills and switch to auto-generated (or dynamic) refill routes that generate delivery rounds on demand.
3. Vending Machine Product Mix Optimization
Product mix optimization is the practice of optimizing the product assortment in your vending machines to remove low-performing products and introduce more snacks and drinks that drive more machine visits and sales.
A study published in the British Food Journal analyzed 27,000 vending transactions and found that vending machines with optimized product planograms achieve higher sales at a faster buying rate.
How your vending machine business approaches planograms and product mix optimization has a profound impact on your success.
Adopting this practice means equipping your product managers with the analytical tools to track product performance and make adjustments on the fly.
The best VMS solutions on the market use sophisticated AI algorithms to predict stockouts and suggest the optimal product placement, so that every vending machine is stocked with the right snacks and drinks that the location’s audience wants to buy.
So how do we quantify this metric?
The higher-level picture is the percentage of your vending machine fleet with optimized product planograms.
Then, slice this percentage into individual machines and their product assortment.
You want to see their inventory list and check their:
- Individual product sales cycle: the number of days it takes for the product to sell out at full capacity. If the product occupies two or more spirals and is slow-selling, remove it or keep it on one spiral.
- Empty products: tells you the number of times the product was empty in the machine. Empty products are flagged as lost sale opportunities and are a clear-cut sign that you should dedicate more machine inventory space to these products or refill them more often.
- Units per day: how many product units are sold every day.
This enables your product managers to make data-backed decisions about which products to stock in each machine and to optimize the assortment for each location and its audience.
4. Warehousing and Smart Stock Control
The retail industry is particularly sensitive to poor warehouse management.
This holds true for vending, since it’s part of the unattended retail sector and involves perishable products and warehousing processes that contribute to financial loss.
The National Retail Association published data showing that administrative errors account for 21% of all shrinkage losses in retail.
Whenever an employee incorrectly enters data, handles products poorly, mislabels food, or makes a counting error, they’re creating a discrepancy between the actual inventory count and the reported stock in storage.
Poor warehousing and stock control are one of the silliest ways of losing revenue, since you’re actively hurting your assets that are supposed to bring sales profits.
In fact, the most successful vending machine businesses have refined their warehousing operations to reduce product shrinkage, eliminate administrative errors, and pack exactly the right number of products for specific machines on refill trips.
When a vending operation reaches a certain level, its warehousing processes need to mature as well; otherwise, you’re going to see much more shrinkage and product loss.
At this point, you need to consolidate warehousing operations within your VMS, so you can automatically manage this critical aspect of your vending machine business.
With a good process, you can automatically reserve items from your central warehouse, allocate them to a specific vehicle, and pack them for refill trips.
The machine filler goes through their route and checks every machine, so there are no discrepancies when they return to the central warehouse.
For vending operators, real-time telemetry enables smart stock control and eliminates manual errors.
5. Adoption of Cashless Payment
It is no surprise that most vending transactions today are cashless.
Vending Times reported that cashless payment dominates the unattended retail sector:
- 77% of vending machine transactions relied on cashless payment
- 96% of micro market transactions were cashless
- 100% of smart store transactions were also cashless
Since cashless payment is the preferred payment choice for most customers, your vending business can’t grow and earn more revenue if most of your fleet is still cash-only.
Right now, my revenue in vending, 83% that 2.4 million, comes from cashless. It’s very few swipes, but it’s a lot of people using their phones, people using their credit cards, tapping it. There are just not a lot of people carrying cash anymore. Matt Moran, owner of All County Vending
Operators who have not equipped their machines with card terminals, RFID readers, and mobile payment options are leaving money on the table:
- They’ve made their products exclusive to customers who have the cash on them, whereas machines with cashless payment options have a much larger customer base since virtually anyone carries a card with vending amounts.
- They’re leaving their machines in the dark because they’re not collecting real-time sales data, making it difficult for them to identify consumption patterns.
- They’ve deliberately missed the opportunity to achieve a sales uplift. Cashless payment customers are more likely to spend more money at vending machines since they’re not limited to cash on hand.
Knowing how to choose a cashless payment system is crucial, especially if a large portion of your machine fleet is still cash-only. Becoming a successful vending machine business means embracing the technology that has a direct impact on the monthly bottom line.
6. Vending Management System Effectiveness
A VMS is the very foundation of any successful vending machine business.
It’s impossible to juggle stock control, machine refills, sales, payments, and other key facets without consolidating them into a single software solution.
A 2024 market report published by Vending Market Watch found that 81% of surveyed vending operators view VMS implementation as a great investment, second only to implementing cashless payment systems (91%).
Prekitting is the third crucial investment, as backed by 69% of surveyed operators.
Since a VMS is the operational backbone of modern vending machine businesses, becoming a proficient user of your VMS is not optional if you want to become a successful business.
There are two perspectives at play here:
1. Having a VMS that can process all your real-time telemetry and payment data and mix it with AI algorithms to predict sales and stockouts and suggest the most effective actions
2. Becoming a proficient user of your VMS to take advantage of all its capabilities. This largely depends on your business’s organizational agility, i.e., its willingness to undergo change management and integrate new processes into its everyday operations.
It’s critical to note that not every VMS is built the same.
The most advanced move beyond reporting and steer your business towards dynamic predictive operations. In practice, this means switching parts of your operation from scheduled, static tasks to on-demand work.
For instance, a UK-based operator, Livewell, deployed Televend’s VMS and switched to dynamic routes. They eliminated unnecessary refill trips by 30% and reduced the amount of products they had to carry with every visit.
The workload optimization enabled them to service 30% more machines while reducing fuel costs.
You read the full customer success story for more details about the project.
Back to You
In the vending machine business, success has little to do with luck.
When your machine fleet is expanding, paying attention to processes becomes more important than ever, since every organizational inefficiency comes with a hefty price tag.
At the end of the day, the success of bending businesses comes down to their logistical backbone.
The most successful vending operators think less like machine owners and more like systems builders.
Contact our team today and take the first step towards operational excellence.