Vending machine suppliers: How do they make money?
Obviously, vending machine owners and vending machine suppliers are involved in this line of business for profit. The main attraction for anyone doing this business is the automation: placed a vending machine and machine would come in on its own. But it is really that easy a business, read on and find out if you should start this business.
Vending Golden Rule: Buyers
Vending machine manufacturers and vending machine suppliers will offer some advice to prospective vending companies on the strategies to follow.
And it appears that there is one golden rule when it comes to vending machine profits; numbers of customers (Buyers).
It is a simple logic for any companies to place their snack vending machines or coffee vending machines in strategic places in the hope of catching the largest number of customers possible.
However, the element in discussion here is buyer not traffic. A vending machine can be placed in a high traffic location without anyone buying but a basement carpark without high volume of traffic, can have many buyers.
And this is one rule that if current vending suppliers is willing to share with you, can provide immediate revenue and greatly shorten your learning curve.
Vending Machine: The Math
With the average soda vending machine, one might typically make 100% margin, so a can of drink that is sold for a dollar, you get to make fifty cents (SGD).
And for hot vending machine, such as coffee vending machines, with cost per serve going for around $0.20 (SGD), you can at times make 150-200%.
Here, we will look at RTD (ready to drink) dispensing machine.
Assuming that your machine attract an average of ten customers a day, it means that in a week you can expect to sell seventy cans and in a month two hundred and eighty. You profit will then amount to one hundred and forty dollars.
A doubling of your sales volume will mean a profit of only two hundred and eighty dollars a month. You can see from this illustration that if at one machine, vending machine companies is looking at a very small profit margin.
And in the vending world, it does not really matter if you are looking at hiring a vending machines or looking at vending machines for sale, either used or used. The machine cost do not have a great impact on the margin.
Soda vending machine is considerably higher than snack vending machine. So, if you are operating the latter, your profit is even leaner.
The only way to have higher margin is to operate a fleet of machines, rule of thumb is to have at least 100 machines to be making any meaningful profit.
Vending Machine: The Cost
Starting this business requires some capital. Some of the things that need to be procured immediately are:
- Vending machines
- A delivery van
- Soda or snacks
Calculating ROI
Assuming you purchased a used combo vending machine it would set you back about one thousand one hundred dollars. If you made an average of fifty cents clear profit on every item sold and sells twenty items in a day, the return on your purchase would be about three months.
However, that is gross margin after taking away the COGS (cost of goods), this calculation does not include power costs for the machine as well as location costs.
These need to be factored in as well. And it can add on another $0.20 to $0.30. Which means a profit of only $0.20.
So $0.20 X 20 products sold = $4/day
For a $1100 machine, it will take around 275 days. About a year before the machine has paid for itself. And then your machine would start to make money for you.
So, do take note of this when negotiating for tenure of a location.
Other types of Vending Machine
Snack vending machine suppliers other than providing a snack service, is also into hot food. In Singapore for instance, there are entire cluster of vending machines serving hot food to a community.
The issue with this is the perishable nature of the products. Products need to be topped up regularly, and spoilage is high.
Another vending solutions that has entered the market in the last few years: The orange juice machine. This model needs a very high maintenance because of the perishable nature of the product and the high risk of pests.
The only vending machine in our view that would make good money is the table top coffee vending machine that serves the office and businesses.
This business model collects money on a consistent basis and has a fixed revenue coming in.
Hope this article helps you in your vending machine business. If you like to check out other information similar to vending machine suppliers, click the link to check out our homepage and if you need further assistance, drop us a message and we will do our best to assist you.
