By some estimates, Americans deposit more than forty billion dollars into vending machines each year. A vending machine business represents a great opportunity for entrepreneurs to start a home-based business with realistic earning potential. Savvy businessmen and women realize that quarters and dimes can quickly add up to a lot of money when you own dozens of machines in good locations. This article looks at the vending industry in the US and provides an overview for those who want to start a profitable vending route.
A growing industry
The vending machine industry in the US has grown at a phenomenal rate over the past few decades and it looks like that growth rate will continue well into the future. This growth is driven by an expanding population, an ever-increasing variety of new retail concepts, and the increased need for convenience. An ever-increasing variety of payment options now also means that consumers will never have to pass up offers from machines because they don’t have coins in their pockets.
Recession proof?
Most sectors within the industry are considered to be insulated from economic downturns due to the fact that they are price competitive with retailers. Over-the-counter products, such as coffee, often represent a much cheaper option compared to retail.
Competence
The industry is certainly competitive, as is any business, but competition isn’t always a bad thing. In some cases, co-located vending machines support each other by forming blocks that offer better variety, value, and convenience than nearby stores.
A seasonal business?
The industry is not seasonal in general. Certain machines that make hot or cold drinks, for example, will certainly fluctuate in sales volume throughout the year. Some places may be better in summer or winter. Don’t forget that some locations may close entirely for short holiday periods, leaving you with no sales.
Start a Vending Route – Regulatory & Compliance
Some states require sellers to have a business license (usually around $100), a seller’s permit, a sales tax license, or all of these things. Before configuring the route of your vending machine, you should consult and find out how to comply with local regulations. Depending on the products you are selling, you may also need to comply with your local health authorities.
Most retail business owners choose to be a sole proprietor, but a limited liability company has advantages to offer as well. It is best to speak with an attorney or accountant and try to determine the best legal operating structure for your situation.
Start-up costs
Start-up costs in this industry are reasonable. It is possible to start a vending route for less than a few thousand dollars. However, if you have more funds available, you can obviously start in a better position and grow much faster.
The nature of sales work
The job of a commercial vending machine operator can be divided into two basic areas. First is the maintenance and replenishment of the machines that the owner has in various places. Second, operators have to continually find new locations to place even more machines.
As a vending machine business owner, you can choose to work alone, with a partner, or hire teams to work for you. The most successful business owners in this area take on a sales role, continually trying to get more out of their machines, while hiring crews to restock the machines and maintain them when necessary. If you want to hire staff to collect cash and restock machines, you need to develop systems for accounting for inventory and cash so your staff don’t take advantage of you or steal from you.
Vending machines and repairs
The great thing about vending machines is that they are essentially your best employees. You can be very successful even as a single operator while taking advantage of the productivity of your machines. Vending machines never need a vacation and only require electricity to run in some cases (rather than a salary) and are therefore the ideal workers.
Vending machines have to be fixed from time to time and if you are not technically savvy, you will have to hire someone to do it. Having machines that are not working properly for a period of time can cause your business to lose sales volume and locations.
Customer service
In the vending business it is essential to treat customers well. This will not only ensure that you can maintain your account, but you can also generate new business through referrals.
Customers hate it when they put money in a slot and nothing happens. If the manager responsible for the place where his machine is located receives too many complaints from customers, then he may decide that it is not worth having vending machines in the place.
The importance of good locations
Machine locations are often not free. Sometimes operators find that employers want to have machines on site for the convenience of staff and allow them to be on site free of charge. More realistically though, companies and other places may want to charge you a small fee for electricity or make you pay a fixed amount into a ‘social club’ or charity fund.
Some business managers will insist on a portion of your machine profits and may demand anywhere from 5% to 40% commission for giving you the privilege of occupying a small portion of your valuable floor space. How much you can pay for the right will depend on how much exposure and therefore how many sales your machine gets.
Working with a charity vending machine can help you secure new accounts. Charities are often happy to have vendors represent them in exchange for a donation that can be set as a percentage of machine profits or a flat fee per machine.
A good location will make the owner visit frequently to restock the machine. A worthwhile place should allow the owner to collect at least $70 cash each time he visits; otherwise it’s not worth the owner’s time.
The most profitable machines for a vending business owner will be the ones in crowded places that are well suited. They will have large capacities, will not require much service, and will have products with the best profit margin. They will also offer a range of payment options and offer a good variety of products in a minimal footprint.
a cash deal
Vending is a cash business, and aside from the hassle of having to deposit large volumes of coins, business owners benefit from getting paid upfront for their products instead of chasing customers for bad debts.
As providers carry large amounts of cash while servicing their routes, they increasingly have to look for solutions for their security.
Franchise or Independent?
New entrants to the industry will have to decide if they want to start a vending route from scratch, start with a franchise, or purchase an existing route. Due to the number of scams in the vending industry in recent years, it is recommended that you do the hard work yourself and do it alone. There are many sharks out there who offer unrealistic promises to naive newcomers and scam them, so you should avoid these people.
Industry challenges
The challenges facing the industry include the continued downsizing of companies. There is a trend for factories and offices to hire fewer and fewer people and more and more people are starting to work from home. This can make large locations more difficult for operators to find.
Selling also generally gets a bad rap. Many people have had bad experiences over the years with vending machines. The general feeling among a large part of the population is that vending machines are often unreliable. People feel that if something goes wrong it is almost impossible to contact the operators and they have little chance of getting their money back. Many established vendors are beginning to address these issues, but much can still be done to improve the reputation of the industry.
a bright future
The vending industry in the US and internationally should continue to expand rapidly in the coming years. For savvy entrepreneurs who are prepared to put in some initial effort, starting a vending machine route represents an opportunity that is limited only by the owner’s drive and imagination. Some want to run a small route and only work three or four days a month, while others want to build an empire. Either way, auto selling is one of the most compelling business opportunities for Americans today.
