Lessons Learned About the Vending Machine Business
Vending Machines as Passive Income
I love working my businesses. Nothing feels better at the end of the day then to know you made things 1% better than they were the day before. The ironic thing about the vending machine business is that I initially started into this business for the passive income stream. I knew having a few machines wasn’t going to replace my day job, but who couldn’t use a couple hundred bucks each month on the side? What I thought would be a passive business has not been as entirely passive as I thought it would be; and I am having a ton of fun doing it.
How the Vending Machine Business has Grown my Mindset
I absolutely love passive income, but I’ve also learned how much I love learning new things, new strategies, and growing a business from nothing into something. I get enjoyment from visiting my assets, seeing whats selling, tweaking and refining my purchases, mixing up the placement of items and how varying the price points within one machine affect consumer behavior. Instead of being bothered by visiting my assets or running to the wholesale club – I embrace it. After you notice buying trends or even get suggestions by the consumers on site about what to offer, then it becomes fun. So, here are some of the lessons I’ve learned about the vending machine business.
Listen to Your Customers
Look, listening to your customers sounds like a no-brainer, but its worth explaining. When you visit your assets and people offer recommendations or wish list items for the vending machine, LISTEN TO THEM! They are literally telling you, “Hey, if you offer this item I will give you my money for it.” Isn’t this the whole point of getting into the vending machine business? You want to sell your product, right? Then listen to what the people who are going to be buying your product have to say!
Don't Get Greedy With Your Prices
Vending Machines are a volume based business. Let’s look at McDonalds. McDonalds is not making a killer profit on selling you a hamburger. They are making a killer profit by selling a ton of hamburgers to a ton of people. Successful vending is similar; this is a volume game not a huge profit margin game. Customers know when they are getting ripped off for a 1oz bag of chips and they will develop resentment against the machine if they feel like they are getting bent over every time they get a snack or drink. Be cool with lowering your profit margins to make more sales.
Consumer Psychology
As a consumer, in my mind, $1.25 occupies the same mental space as $2.00. If I am paying $1.25 for a bag of chips then I am not likely to buy anything else because that puts me over the $2 threshold. Now, if that bag of chips was $1.00, I’ll probably have no problem buying a drink or another snack. As a consumer, I’d rather pay out $2 and get two items than mentally pay $2 (actually $1.25) for 1 item. And, as the operator of that machine, would you rather have a customer make 1 purchase at $1.25 or have that same customer make 2 purchases at $1.00? I am not saying that everything should be $1.00, but just knowing a little about consumer psychology is helpful. Cheaper prices bring higher sales volume, consumer trust, and repeat business.
Pricing Strategy
Chips and Candy
The longer I am in the business the more and more I see the benefit of having different price points all over the vending machine. Everyone has their own idea of what makes a “good deal”. Giving the consumer the freedom to “shop” around for what they think is a good deal is good for business. The chips can have two different price points depending on the size of the bags and how much in demand they are. The same goes for the candy rows. Peanut M &Ms are monster sellers, but Milky Way is not. Price the Milky Way a little cheaper than the Peanut M & Ms and you will see the product move!
It also helps to have “discount” trays where items close to expiration or just not selling great are heavily marked down. After all, would you rather throw away food that has expired or at least make your principal back on the item?
Beverages
I think all can sodas should be the same price or at least very close in price. To mix things up and give the consumers more options, offer water bottles at cheaper prices than can soft drinks and bottled Gatorades or other drinks at higher prices. Throw a few energy drinks in the mix and now you’re giving the consumer many options on how they want to spend their money. Shopping is fun and the longer consumers are looking at your vending machine, the more likely they are to buy something. Looking at a vending machine with just 1 or 2 price points is just meh.
Pastries
Pasties are one of the things I find more difficult in this business. They are the most expensive for you to purchase and almost all of them have expiration dates. The best advice I can give in this category is to see what consumers in that building like to buy and price accordingly. Some of your best profit margins in this business can be from pastries, but if you price them too high then the items are slow to sell and expiration dates start to creep up on you. If this happens, you probably need to move the current selection of pastries into your discount tray and adjust your price lower for the future. Remember, smaller profit margins are perfectly fine if it creates loyal consumers that keep coming back.
Conclusion
Don’t go into vending because you heard it was a passive income stream. It simply is not; at least not at first. Once you master your products, properties and pricing strategies than you can put the business on auto pilot and start delegating. Until that time, treat this business like a business and put in the work it deserves. I have been grinding at this for about 4 months and I am nowhere near putting the business on auto pilot and I am ok with that. If you’re not, you might want to think twice about jumping in. I, 100%, see how there can be a lot of money to be made in this business and I also see how this can eventually be a passive income stream, but starting out I advise you to embrace the grind and hustle your ass off.
