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Happy vending
Published:  09 February, 2011

Vending food and drink to your customers can keep them playing on your premises, and provide a revenue stream too. Jon Bruford investigates

Vending machines are ever-present in our lives; everywhere we go, something’s available to buy from a machine – usually food or refreshments, and generally in locations where the machine is not the main attraction but where there will be enough people passing by for some to stop and take advantage of its offer, like train stations or shopping centres.

As consumers we know these machines, we trust them, and pretty much all of us use them. Britain’s vending sector generates £1.65bn in sales per year, and the UK has more than 500,000 refreshment vending machines. But how can amusement venues like arcades and bowling alleys take their slice of this (plastic-wrapped) pie?

As Jonathan Hilder, CEO of the Automatic Vending Association (AVA), explains, it’s close to a win-win proposition: “There are several reasons why vending is both useful and applicable to amusement arcades, bowling alleys and other amusement sectors. A vending machine can be open without staff attendance all the time that your facility is open. Effectively you can offer a choice across the whole range of consumable products. Say you’re in an area where a certain type of chocolate is incredibly popular – you can put that in your machine. You’re not limited, and any of the snacks, drinks, food that you see in general retail can be vended.

“Refrigeration of food can be done, so it can replace [other forms of catering] if necessary; in general terms, vending allows people to supply their customers what they want. The great beauty of vending, though, is that if you take advantage of it, you will keep people who want food, drink or whatever on-site in your facility – in the environment where you can sell them other things.

“Say, for example, a customer wants a cup of coffee and you’re not able to serve them coffee; they may go outside and go away, and you lose income potential. If you have the coffee to sell them, they might stay, and hire another lane for bowling because all of their friends have coffee too.”

So, while a vending machine might bring in a small amount of extra revenue, the principal benefit is keeping your customers on-site. The headaches that come with a vending machine are relatively small (“mister, that machine ate my 10p” and so on) and while the sums involved in vending transactions are generally small too, the mere presence of the machine can help to grow sales in other areas of the business.

Halo effect

There are some surprising twists and turns to the vending business. For instance, as the AVA’s Hilder points out, multiple vending machines can support one another, so if a venue has a snack vending machine alongside a coffee vending machine, that venue will sell 22 percent more coffee.

Coffee vending, indeed, has come a long way in recent years; and while the idea of increasing the time it takes a machine to actually deliver the coffee to the customer would be cynical in the extreme, why not look at a bean-to-cup vending machine? The added value of a truly fresh cup of coffee is one thing – but the customer also then has the time to really take in that snack vending machine next to it…and the halo effect comes into action once again.

According to Hilder, while a gym or similar venue might have some snacks perceived as healthy in a vending machine alongside the crisps and sweets, the main sellers across the country hold no surprises. “The top five brands according to Nielsen is what you’ll sell; there’s not really any rhyme or reason to what specific types of product vending succeed in specific locations, it’s really a very brand-driven business. Twix, Mars, Kit Kat – there is even a vending machine near the Trocadero in London which vends only Kit Kats, though that is an exception.”

Revenue share

There are varying business models for the venue that’s looking to boost its revenue – and they are all quite flexible, depending on how deeply involved you want to get in the upkeep of the vending machine. If you have – for example – a busy arcade that has several thousand people walking through it every day because it’s in an entertainment complex, you can do a deal with the company supplying the machines where you take a share of income for allowing the vending units to be on-site, working much like a ground rent.

This is the simplest model for the venue owner or manager, as it takes away the need to hold stock on-site, and to handle cash from the machine. And as Hilder elaborates, this flexibility is important for both venue and supplier: “The model for the customer varies entirely based on what the customer, the venue, wants. If they do not want to pay for the machines, there will be a deal so that you’re supplying the service but not benefiting from the income – because you’re not paying for the machines. Or there could be something where you contribute to the machines and enjoy an income from them. It depends on what the facility wants to get from it – and how involved they want to become.”

One of the more exciting things that vending can bring to a venue is player tracking. Combining vending with a membership smartcard (which also allows the customer to pay a single bill) means you can see what your customers spend their money on from the moment they step into the location to the moment they leave – and this can allow you, the operator, to incentivise them with coupons for return visits.

This leads to far greater customer retention, which with a well-chosen selection of vending machines means the customer will not only visit more often, they should stay for longer, too.

Hilder sums it up neatly: “In a bowling alley scenario, you could have your bowling shoes in a vending machine, for example. The customer walks in, and you give them a membership card when they pay. That card allows them to have a pair of size nine shoes, and allows them to get a coffee from the machine; they want more than one coffee, or maybe some crisps or sweets, and when they leave it’s all on that one card and comes to them in one bill.

“This might allow a location to employ less staff to manage the whole system; the payment systems can all be interlinked, and you’ll also have a very valuable cache of information about where your players go, how often, when. You can literally track your players’ spending via the vending machines. This technology exists right now, even down to the shoe vending.”

The future for the world of vending lies in combining these different technologies to make their offering even more valuable – the days of a vending machine being an anonymous box in the corner of your location are long gone.

Champion of coins

The Automatic Vending Association is the not-for-profit trade body for the refreshment vending industry of Great Britain. CEO Jonathan Hilder explains: “We have three areas of membership – operators, who clean, fill and operate vending machines; machine manufacturers and component manufacturers; and commodity manufacturers, who make the products that are sold in the machines. Operators vary from large international companies to ones that operate with two people running 40 machines in Scotland, for example.

“We provide members with a way of differentiating themselves from the rest of the marketplace. Our aim is to protect, develop and evangelise vending in the UK and to become the cohesive voice for vending, particularly in terms of lobbying the government.

“For example, the government recently agreed to change the 5p and 10p coins in the UK, from cupro-nickel [75 percent copper and 25 percent nickel] to nickel-plated steel. That move will save the Royal Mint £7.5m pounds, but it will cost the vending industry £43.5m. What we have done on behalf of our members is to lobby the government hard, and they have moved the date of the introduction of the new coins from 1 January 2011 to 1 April.”

High security

Fears of vending machines being vandalised or robbed are common – but they can also enhance security. The Automatic Vending Association’s Jonathan Hilder recounts: “A classic example of a venue needing greater security and finding it with vending is Selfridges, who had a real problem with a brand of jeans which was being shoplifted in huge numbers. Eventually they put the jeans in a vending machine, and the thefts stopped; they put a few pairs out for customers to try on, but the ones they actually sold were vended.”

Vending’s oddest location?

Vending isn’t just about refreshments – almost anything can be and is vended, from the commonplace (condoms, cigarettes) to the slightly unusual (jeans, Lego) to the downright peculiar (around the world, gold bullion, artificial limbs, medicinal marijuana, and bicycles are all found in vending machines).

But arguably the most controversial application for vending is here in the UK, with methadone – a drug used to treat heroin addicts – vended to prisoners in almost half of the UK’s 140 prisons. When the government-backed scheme came to light there was an unsurprising response from some parts of the media, charging that prisons were far too generous to their inmates.

However, these vending machines are generally situated in the prisons’ clinics, and access to methadone comes via fingerprint and retinal scans, with the dose controlled securely by the machine.

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