Vending makes great new career for entrepreneur who loves technology

What’s a former national hotel executive doing in the rough-and-tumble, work-a-day vending business in Orlando, Fla.?

Gary Arwin is leveraging the skills he acquired in nearly two decades of business management in the hospitality industry to provide a good living for himself. He enjoys the challenge of sales, he is fascinated by technology, and he likes the one-on-one contact he has with his customers. He particularly appreciates the chance to be the master of his own future, something the vending industry gives him.

“I like that aspect of it,” Arwin said. “Basically, you control your own destiny.”

As the vending industry changes, newcomers like Arwin are finding ways to get ahead in the business that weren’t available several years ago. Vending technology and mobile broadband tools have evolved, creating new ways for operators to provide good service.

Astute newcomers like Arwin, who bought a small operation six years ago, have been able to take advantage of business tools like tablets and smart phones. And evolving vending technology such as cashless readers. But they also learn, as their predecessors did long ago, that there are no short cuts to success in vending. Operators have to provide good service to succeed, and to do this, they must be willing to listen to customers carefully and respond to issues at the drop of a hat.

Arwin’s company, Gator Vending, a 2-route operation serving the greater Orlando area, has grown steadily in the time Arwin has owned it. He has learned from his mistakes, and his commitment to good service has yielded some large customers, including some airlines and national name retailers.

With two full time employees, Arwin wears many hats as owner/manager, which makes for long work days. But as owner/manager, he has been able to provide the type of attentive service that some of the area’s most demanding customers have not been able to find from larger vending operators.

Vending: an unlikely career

Arwin, the son of a Yellow Pages advertising salesman and a teacher, always wanted to own his own business. A good student all his life, he applied himself to business studies in college. He never imagined he would some day be in the vending business.

Growing up in Syracuse, N.Y., Arwin was enamored with luxury hotels. He studied hospitality management at Bryant University in Smithfield, R.I., and spent 12 years as a controller and general manager for a hotel chain.

He liked the hotel business, but as his children got older, he didn’t like getting transferred to different cities every few years. He wanted his kids to have the experience of growing up in one place, as he himself did.

Having never lost his desire to have his own business, when the opportunity presented itself, Arwin teamed up with some partners on a hotel supply/renovations company in Orlando.

The company grew, but early on, problems emerged among the partners. Within seven years, the business folded. Arwin, convinced it was time to be a sole business owner, contacted a business broker in Orlando. The broker showed him various businesses for sale, including a vending company with 68 soda and snack machines in Titusville, Fla., near Orlando.

Arwin met with the owner of the company, R.J. Vending, visited some of the locations, and decided to buy the company. To Arwin, vending seemed to be a “cut and dry” type of business, one that provided a tangible value to the customer. Vending struck him as a business tailor made to a person like himself with a good work ethic who enjoys customer service. In retrospect, he admits he had little idea how complex and demanding the vending business is.

Learning from the ground up

In addition to the stops, the company came with an employee and a delivery van. Arwin opted to service the locations himself for six months to learn the business from the ground up.

Arwin’s hospitality background had instilled in him some strong marketing skills. One thing he realized right away was that the company needed a better name.

He enlisted his wife and children in this effort. His brother went to the University of Florida, home of the Gators. The alligator signified strength. Hence, the name “Gator Vending” won out. But alligators are also mean. So he reasoned he needed a friendly alligator. He hired a professional designer to come up with a cartoon image of an alligator holding a beverage and a snack. “We wanted to be known as a fun company and a professional company,” Arwin said.

The Gator logo adorns his shirt, his Website, his truck and all marketing material.

Being aware of the importance of the Internet, Arwin launched a Website almost immediately.

After six months, he decided it was time to hire a driver so he could focus on finding new accounts. He ran an ad on Craigslist, an Internet Website, and interviewed dozens of applicants before deciding to hire someone. That person quit after three weeks due to the physical strain of the job.

His second hiring attempt was more fortuitous. Arwin came across James Amatuccio, a former vending driver who had left the business but wanted to come back. Amatuccio proved a reliable employee and remains as his right hand man.

Arwin realized he could grow faster by using bottler loaned cold beverage machines. But he quickly learned that customer preferences vary, and bottler machines limited his product choices. The cold beverage market was becoming more diverse all the time, so he opted to own all his beverage venders. In retrospect, this has proven a good decision, as his beverage sales continue to increase.

Reliance on refurbished machines

He also learned that buying refurbished machines was more economical than buying new ones. Hence, he made it a practice of buying refurbished machines. He has made it a practice of paying for equipment with cash or using equipment manufacturer short-term financing. He looks to recover his equipment outlays in one to one and a half years.

Arwin also learned it pays to have his own lift gate. Reliable equipment movers proved elusive in his area.

Six months after buying that first route, Arwin was able to purchase a location with 30 machines in various employee areas at the Orlando airport from a business broker. This became his second route, necessitating the purchase of a new delivery truck and hiring a second driver.

The airport location grew over a period of a few months. However, the airport management eventually required that vending deliveries be accompanied by a security employee. This has been an inconvenience. It made Arwin realize that being in vending, he needs to be prepared for unforeseen developments.

Arwin bought some locations from a locator associated with an equipment manufacturer, but quickly decided this was not a financially smart way to grow.

As a rule of thumb, he began seeking accounts with at least 75 people, making exceptions for locations with multiple shifts or close to an existing location. He has not pursued school accounts, largely on account of the strict nutrition rules.

He works out of a 1,600-square-foot warehouse in an industrial park. He does all product and ordering himself, as well as most of the equipment deliveries and repairs. “I’m wearing many hats, as most smaller guys have to,” he said.

Arwin didn’t pick the best time to get into the vending business in Florida. The recession that hit in 2008 was especially brutal to Florida, which relies heavily on tourism. Nevertheless, he learned there is always room for an aggressive service provider committed to good service.

“The big guys can’t provide the same personal service that I can offer,” Arwin said.

Sales tool: a good Website

He realized in his first year he was getting a lot of service inquiries from his Website. He reasoned that if he had a better Website, he would get even more inquiries. He hired a professional Website designer who also offered some help with search engine optimization. This proved a smart investment as the inquiries increased.

An important feature on the Website is the information request form which allows him to qualify the leads. Most of the two to three leads he gets per week do not result in sales, but he has gained some of his best accounts from the Website.

One of Arwin’s most discouraging experiences was finding that some customers are willing to work with vending operators who don’t have liability insurance and don’t pay sales tax. He said some business owners understand he needs to cover these costs, but some don’t care and only want the lowest possible prices.

“You can’t sell a candy bar for 60 cents and make money,”  he said.

Customer needs drive the business

Arwin was aware that vending technology was evolving, but he realized the technology was expensive. He wasn’t looking to offer cashless readers when he got a call from an account with 100 employees who asked him if he could provide credit card readers.

The account also wanted OCS and point-of-use water cooler, two things Arwin was not offering at the time. He decided it was time to learn about all three of these areas. He told the account he was interested in providing all of these services.

The account had met with some larger vending companies, but Arwin offered something unique; the owner’s (his) cell phone number. He won the account.

Arwin purchased and installed USA Technologies readers, along with $5 bill acceptance and dollar coin payout, on the snack and beverage machines. This was his first exposure to cashless, and he was pleased with the results.

He wasn’t sure there wasn’t some cannibalization of cash sales, but one thing he noticed for sure was the higher priced items sold better than in accounts that didn’t have cashless readers.

Little did he know at the time that the account was about increase its staff sevenfold. Arwin now has vending banks on four floors for this company.

The positive results with the cashless reader encouraged Arwin to offer cashless to more customers. Since he installed cashless, he has increased his higher ticket offerings in his machines, such as $2.50 energy drinks. Most of his glassfront beverage machines now have a full row of energy drinks.

New cashless concept emerges

In the meantime, a local technology company developed a cashless vending product using Bluetooth technology and was searching for vending operators to test its new concept. Arwin’s USI distributor, Sunstate Vending Equipment Co. in Apopka, Fla., referred the company, Coin Free Inc., based in Winter Park, Fla. to Arwin. Coin Free designs and distributes devices to support the acceptance of credit, debit and loyalty cards.

Coin Free developed a Bluetooth/wi-fi reader that communicates payment authorization through both serial (multi-drop bus (MDB) machines) and electromechanical (older machines) systems. Customers can make purchases by downloading an app to their mobile phone, select from a list of products and prices on their phone, authorize the purchase on their phone, then make their selection from the vending machine.

The screen that appears on the phone gives a list of generic product categories, i.e., chips, and a price point. Once the customer has selected the category and the price, the credit or debit authorization is communicated to the Bluetooth modem on the machine. The customer then selects the product on the machine keypad. If the customer selects a product priced lower than the authorized amount, their account is credited the difference. If they select a product priced above the authorized value, the sale is denied.

The mobile phone needs to be within 30 feet of the modem to activate a cashless purchase. The device sits on the front of the machine above the keypad. The circuits inside the device connect to the machine’s MDB or, in the case of an electromechanical machine, to the vending machine controller. Arwin has the device on both MDB and electromechanical machines.

The cashless vending product, called the virtual universal wireless interface (VUWI®), can handle up to seven separate credit/debit or loyalty cards. The last item on this screen is the entry of a personal identification number to be associated with a credit/debit or loyalty card. When activated for a given card, each time a purchase is made using that card, the system sends an email with details of that purchase to the given email address. 

All VUWI data is stored on the Coin Free PCI-DSS (Payment Card Industry Data Security Standard) compliant server, not in the customer’s phone. Hence, the information is secure, should the customer misplace their phone.

There is no swiping the VUWI device on or near the machine. Hence, the device does not need to meet government reach requirements like controls on the machine.

The front of the device has a Bluetooth adapter. There is a label on the front of the adapter that says “Use your cell phone to make a purchase. No cash. No card. No problem.” A flashing LED light draws attention to the VUWI.

Arwin has placed VUWIs in three of his accounts, including an Apple store with 200 employees. He claims the response has been very positive.

The VUWI, while still in beta test, has some advantages over other cashless systems, Arwin noted. The hardware is less expensive. Coin Free charges him $5 per month for each device.

The transaction cost to the merchant is also less than other cashless readers. The processing fee can be as low as 3.5 percent, he noted.

Coin Free also offers prepaid purchases with VUWI, which will make sense with captive accounts. The company is already offering a 1 percent loyalty reward for downloading the VUWI app. Other loyalty rewards are being developed.

When a vending location customer joins the VUWI loyalty program, they are asked to put a minimum $10 balance on their VUWI account, noted Matt Brady, vice president of marketing for Coin Free. This balance can then be used in the vending machines with VUWI readers or the other VUWI compatible sites at gas stations, restaurants and retailers. This is the same concept being used by the emerging micro market industry, where a prepaid balance is established for purchases at the market so that there is not an individual payment being made for each item being purchased at the market.

This method increases the transaction amount for a single payment which then reduces the percentage of the merchant fee paid by the vending operator, Brady said. This is why VUWI can reduce the merchant fees a vending operator pays for credit purchases from their vending machines.

At the Apple store Arwin services, 62 employees downloaded the VUWI app, even before any marketing was done to the employees.

The VUWI won him a recent account with 85 employees.

Future improvements planned

Arwin uses QuickBooks for accounting. He realizes he will need a stronger accounting system as he grows. He has an associate working on a system.

Arwin also wants to get a better handle on how well products sell. He has always believed that greater variety yields higher sales, but he realizes the variety he carries has high inventory costs.

His machines have very few double facings, even his cold drink machines.

Arwin also realizes his static route deliveries are not cost efficient compared to other delivery systems vending operators are currently using. In order to better optimize his deliveries, he will need more accurate sales tracking than he has with manual accounting.

He is hoping that whatever software tool he eventually finds will be Android compatible. He has found the Android Dropbox tool helpful for sales presentations. After reading about mobile software tools in a recent issue of Automatic Merchandiser, he learned he could download Dropbox on his tablet. “That is awesome,” he noted.

Future promising

Arwin is optimistic about his future. He realizes that more and more customers are comfortable making vending purchases with cashless readers and mobile phones. The more cashless purchases customers make, the more higher ticket sales, he noted.

He also sees a lot of growth for his 1-year-old OCS/water service division. He is presently exploring a liquid coffee.

Arwin has determined the business generates 4 percent pre-tax profit. While he realizes this is not a bad number, based on the National Automatic Merchandising Association profit report, he thinks it could better.

His immediate goal is to find another route driver to free him up to concentrate on selling. His goal is to grow from his current two routes to four or five routes with around 500 machines. At this size, he believes he will be able to maintain personal contact with customers and generate enough sales to generate a better profit margin.

His own children, a 24-year-old daughter and 18-year-old son, are not interested in vending careers in other areas. Hence, Arwin believe he will eventually sell the business when it comes time to retire.

The local economy has been improving slowly, he noted, as the tourism industry has recovered.

Meanwhile, he likes the business since he enjoys interacting with customers and making them happy. As new products and technologies evolve, he thinks the business will be exciting for years to come.