The average earning of a vending machine depends on many factors such as the type of food dispensed, the location in which it is placed, and it’s working condition.
The average cost of a new vending machine is around $2,500, with added $350-400 as freight charges. An average machine will give back around $25 each month as net profit. Think before you invest. Rent instead of buying a new machine.
An urban lifestyle, lack of time, change in the consumer’s money-spending behavior and varying eating and drinking habits have fanned the market for vending machines. They are popular because the product or service they dispense, does not require much human intervention and is available round the clock.
That being said, there is no denying the fact that vending machines are so common. I’m sure at some time or the other, every person has wondered about its working and the average earning that it must be generating.
A ‘would-be’ entrepreneur, must have at least once, tried to gather some information about the nitty-gritty of this business, before getting his feet wet in the business world.
Therefore, I would like to start by informing you foremost, that this business is profitable and can earn a decent amount of money, provided you follow certain rules. But if you own a single machine, the in-flow of revenue would be slow. Be prepared to face the challenges head-on, after all that’s what successful people do…Isn’t it?
First Things First!
You will have to decide first whether you are seriously considering it as a business or just a part-time stint for a few extra bucks. A vending machine doesn’t come cheap, and may require frequent visits to refill the stock and keep it running. Strategic planning is what is required.
According to The National Automatic Merchandising Association (NAMA), it is seen that every year, Americans drop close to a colossal $22 billion in vending machines, to buy candy, soda, coffee, ice cream and other snacks. That’s a whole lot of money to tap into, for a savvy entrepreneur. But don’t just go by the amount, read the complete write-up.
One, Two or Three?
A single stand-alone vending machine does not earn very large amounts of income. You need to have multiple machines to make a sizable amount of profit. It can be said that, if a machine is making around $15 to $25 per month, it is going good and earning well.
Gumball or Soda?
The actual amount earned can also vary according to the type of product dispensed. Bulk items such as candies or gumballs, usually have a high mark-up value of around 200 to 300 percent, whereas single items like drinks and cans can be marked up to an average of 60 to 100 percent.
For e.g., if a machine dispenses a gumball at say $0.25, that was originally purchased for $0.05, the profit is $0.20. On the other hand, a drink can dispensing machine, dispenses a can at $0.75, while it was purchased at $0.60. It can be seen that on the gumball, the profit margin is higher but the actual revenue is less and for a can, the actual revenue is more and the profit margin is less. Based on this fact, you have to decide whether you want to go for a high-profit product or an actual revenue product.
Studying the market is also very important and the vending machine does that job for you. The number of empty stacks, and the rate at which each product empties out, shows a clear picture of what is in demand. Even if the fast-moving product has a lesser mark-up, you can think of stocking it because then the vending machine will earn more.
Empty Stacks = Dead Money
One more thing to be kept in mind is that, if the empty stacks are filled as soon as possible then the revenue keeps rolling. And if the product dispensed is a low-profit one, then frequent filling should be the compensation. Otherwise empty stacks, be it of low-profit or high-profit products, equals dead money.
Location, Location, Location
If you keep a drink vending machine in a strategically chosen high-traffic area, then it can gather a gross profit of around $250 in a day, while a snack vending machine can gather around $500. But again, remember, the rent of the space at a high foot-traffic area like an airport would also be high. One more strategy that can be applied is that you can shift poorly functioning machines and place them in high traffic areas to increase its earning.
Better PR equals More Profits
A proper profitable deal with the owner of the space where the machine will be placed can help. By sharing a small portion of the profit will save the net profit from decreasing. Because, no matter if the vendor makes a profit or a loss, he will have to pay the decided share of money.
The purchase cost can be reduced by finding the right supplier. It would also help in decreasing the amount to be invested. Everybody knows that as products are bought in bulk, the prices are reduced. Applying the same logic and getting products at lower rates will help you to mark-up the price higher, and eventually your vending machine will make more money for you.
Depending on the size of the operation, the vendor has to be ready to shell out anything between $400 to $5000, for a van or specialized beverage truck, to carry goods around from one machine to another. Investing in a low-budget fixed truck, will reduce the input cost.
Old is not Gold!
If your vending machine is a new one, it will give you more revenue with lesser losses on repairs, as opposed to an old one. That translates as a vending machine earning more than it is spending (or making the owner spend).
I Want This! And That! And That Also!
Rather than spending on a single product machine, opting for a multi-product one will fetch more revenue. When the customer chooses a beverage can, he will realize that a packet of chips can go well with the drink and can end up vending that too. But that will be possible only when he sees the product in the display. In this way you can make your vending machine to earn more.
I’m sure that now you have a general guide to safely enter the vending machine business. But remember, it will not make money while you sleep, as it is usually mentioned in the ads. You will have to put in some amount of planning and a little hard work to reap the benefits.