5 Reasons Even The Most Frugal Vendor Should Innovate

If it’s not broken, why fix it? I have heard this adage or something similar from many vending operators who don’t believe they will see a return on investment for newer equipment, cashless payment acceptance, and other updates to their business. However, vending, micro markets and office coffee service are all segments that constitute a service business, which rely on customers, and customers change. Therefore, I would argue that it is imperative that businesses change as well.

1. Efficiency

Investing in a new technology often leads to more efficiencies, which usually save money. Look at the computer. For better or worse, I can now type this text and share it with thousands of people in a matter of minutes rather than days or years. It is a lot more efficient than a handwritten manuscript or even typesetting. For vending, probably the most time saving technology I can instantly bring to mind is prekitting. It allows a driver to take only the products needed into a location, eliminating the rolling warehouse and multiple trips in and out. It saves so much that Jacques Dube, operations manager for McMurray Coin Machines in Fort McMurray, Alberta, Canada, was able to drop three routes, while increasing the number of machines his drivers can service by 50 percent. 

2. Perception

From cars to clothes, consumers prefer the newest items. It makes them feel special, sophisticated, happy, valued, etc. Retail stores spend millions of dollars on reconfiguring or redesigning their stores for a fresh, modern look. Vending operators tell me often their customers regularly ask for the latest and greatest vending machine. Many vending operators invest in this new equipment which allows them to utilize other technology without retrofitting. Other successful vendors have invested in ways to refurbish their vending machines to make them new (or almost new) in order to satisfy this very real desire to have the latest and the best equipment.

3. Competitive advantage, or lack thereof

Let’s imagine you have a competitor. You don’t offer cashless payments, you don’t offer micro markets. Your customers can’t order anything from your website, or you don’t have a website. Does your competitor? Even if your competition doesn’t offer these services, what is setting you apart as the better provider? Studies show cashless raises sales over 30 percent. Micro markets now represent 10 percent in annual revenues. According to 2014 research, 84.3 percent of people visit a company’s website before doing business with them. 

4. More (or better options)

For micro markets or vending machines, analyzing data is going to produce more sales. Without this data, it’s impossible to really see what is selling and how fast it’s selling. Operators that launch micro markets are always saying to me that they see surprising trends in what sells. And they can take some of those trends, and apply it to vending machines with great success. These are products that they would have said wouldn’t sell before. Plus, it’s important to look at a selection of products using product intelligence. Product intelligence includes assessing all aspects of products such as the selling price, the cost, the food cost as a percentage of price and possible menu mixes. At first glance someone might assume to increase profits, the food costs should be minimized, but the secret to successful menu engineering is calculating the contribution margin (CM) - the selling price minus the direct cost. Then subtracting out the indirect costs from the CM to give the total profits.

5. Unlocking products and services

Large companies like 3M and Apple have been faced with difficult times when each had to make a decision to either close the business, or change course. We know what happened with these two successes, but how about Kodak who decided to keep with the business they knew instead of innovate? It was a death nail. Analyze failures or poor performance to see other areas of growth or potential opportunity. This is the time to think outside the box and invest in new areas. This is the only way to ensure growth and to be around for the next generation.

It’s not always easy. The price tag involved in some of these decisions can make it tempting to rest on your laurels, but there are many operators who chose to head down a different path. They won’t tell you it was simple or perfectly executed, but they are enjoying success and growth from diverse products to expanded service opportunities. No matter what size vending, micro market or office coffee service company you are, it’s important to look at your business and invest in it with innovations.