Buying Supplies for your Vending Machine Business
How can you save more on cost so you can realize a bigger profit? After you find a location with an owner eager to have you place your vending machine, what do you do next? If you want your vending machine business to succeed, there is one other important thing to accomplish. You need to find great products that people want at the lowest cost possible.
If you choose the right locations and find high-quality products to sell, you will be in profit very quickly and be able to maximize your return. There are so many options for products in a vending machine business and just as many places to buy them from. No matter what product line you choose, chances are you will get them from one of these sources: wholesalers, cash and carry suppliers, brokers of specialty products or membership clubs. Read on to learn more about each and choose which will work best for you.
Wholesaler Sources
Pros:
Wholesalers usually offer the widest selection of product types at the lowest prices available. Some wholesalers have more than 1000 or even up to 50,000 different individual items to choose from. You can find regular-sized products, king-sized ones and more, and everything from bubblegum to sunflower seeds, potato chips, candy and beverages. Wholesalers supply anything you can imagine.
Besides having extensive lists of items to choose from, wholesalers are frequently better positioned to distribute them quickly to you. A vending machine business owner sometimes needs replacement products in a hurry, so it wholesale distribution center who can ship within 24 or 48 hours can be great to have on your side. While it is possible to drive to local wholesale centers, having product shipped saves you a lot of time better spent on talking to new location owners or planning more efficient routes.
Cons:
As convenient as shipping is, sending large quantities of products can become quite expensive. Additional fees may be charged if you order a smaller amount of products than their usual load. All of these extra payments must be added into your overhead and use when figuring out how much each individual unit costs. Shipping fees can cut into your profits considerably.
For smaller vending machine businesses with less than a dozen machines, a wholesale supplier may deal in bulk sizes too large for you to use up before their sell-by date. While the products can be cheaper at the start, there will be more waste if things do not sell as quickly as you had hoped. More waste equals lower profits.
Cash & Carry Suppliers
Pros:
Cash and carry suppliers are usually associated with a particular wholesale distributor, such as Vistar, one of the largest, who runs Merchant’s Mart. These supply companies or departments offer case lots of popular products that you vending machine business can order and then pick up at any one of their locations. They also cater to small mom-and-pop stores and other vendors.
Two of the main benefits of cash and carry suppliers is the amount of products available and the convenience. Since they are usually attached to a larger wholesale dealer, they carry the same product lines in smaller quantities. Also, the day you order is frequently the day you pick up your cases and you can drive off to service and vending machines right away.
Most of the cash and carry suppliers who work with vending companies do not have premium membership requirements so there are no extra fees associated with your wholesale purchase.
Even though these places are called cash and carry distributors, many also accept major credit cards as well.
Cons:
Some of the conveniences of cash and carry suppliers can also work against them. For example, if you live or work far away from the physical location, drive time and gas costs can eat into your profits.
There are also some instances when the products offered in these smaller quantities have a slight increase in price per unit. This is simply because more packaging time and material and manpower go into creating the caseloads as opposed to leaving products in their original pallets.
Since it is more beneficial for wholesale suppliers to sell in large quantities to more active vending machine businesses, selling directly to small startups is not always in their best interest. Because more work is involved, they raise prices accordingly.
Brokers of Specialty Products
Pros:
Vending machine business brokers who specialize in particular product lines are like freelance agents who research areas and demographic information and provide recommendations for hot products and where to get them. They probably work with more than one vending company every day so may be used by competitors as well as your own company. They not only give information and share resources, but they can also purchase wholesale products on your behalf to distribute at, perhaps, a lower cost than with bespoke orders.
Although it does cost money to use one of these vending machine business brokers, they can be quite valuable especially for beginners who do not understand or have the manpower to track sales trends and analyze profits over time in order to pick the best products or routes. They also negotiate with manufacturers to get special bulk discounts or rebates on larger quantities than your company alone these. These savings are shared with different vending machine businesses, but do increase your initial cost and thus, improve profits. These, in turn, can be funneled back into the business so you can grow and spread.
Cons:
The majority of specialty brokers work primarily with large and established vending machine businesses with bigger budgets and more work to pass along. There may be “boutique” brokers who focus on particular niches or market their services to startups, but this is usually less profitable for them so it is a rare situation. If you do hire one at the start of your vending machine business, you will undoubtedly be assigned a junior broker who is still learning. This can mean fewer contacts and sources and less skill at tracking trends.
Many brokers are associated with a particular brand name of food, beverages and other products and may make up their primary sales force. Their goal is to sell as much product from that company is possible and not necessarily to improve your vending business or increase your profitability. They may be able to get you discount prices on bulk goods, but you will need to pay close attention to how much you can actually use in order to prevent waste. If you do go with the broker of specialty goods for your vending machine business, find out who they represent and if they are paid on a commission. Ones who are will be much less likely to have your best interests at heart.
Membership Clubs
Pros:
Costco, Sam’s Club and BJ’s are all examples of membership clubs that vending machine businesses can buy a product from.
Although they are open to members of the public who purchased a membership, these clubs are also attractive sources for wholesale products intended for vending machine resale. In that way, they are very similar to cash and carry suppliers. As long as you live or work nearby, these stores are very convenient for buying anything from candy to soda to pretzels. The situation is perfect if you have a vending machine that sells out quicker than you expected and your wholesale shipment is not to several days. You can just run to the membership club and buy everything you need to restock.
When it comes to cost, membership clubs do not put a considerable markup on the wholesale prices they get. Since they are such large companies themselves, they can buy in massive bulk quantities at special discount prices from the manufacturers themselves. These initial savings is passed on to you. This allows your vending machine business to sell products at the same price and keep your level of profit steady.
Membership clubs are very popular in the United States. For example, Sam’s Club has 620 stores and Costco has 450 stores all across the country. There is probably one or more of them conveniently located just a short drive away from wherever you do business. You can even find one along your vending route so you can make a quick stop to restock on popular products. This cuts down on both time and travel costs and helps those profits they large per unit.
Not only are quantities high and costs low, most memberships clubs allow you to return unused products for a full refund. Wholesalers, on the other hand, may charge return and restocking fees. This is just another way your vending machine business can benefit from membership at one or more of these bulk goods clubs.
Cons:
It is necessary to pay an annual fee to gain access to these membership clubs, but it is usually only about $50 every year.
The main problem with using membership clubs as a supplier in your vending machine business is that their selection of vending products may be minimal and they may not always carry the same brands each time you go. There also may be limited sizes or flavors available for the different products and prefer. For example, Sam’s Club sells primarily smaller sized beverages instead of 20-ounce bottles. If your vending strategy focuses on a vast selection of unique products, you may have to augment your membership club purchases with cash and carry or wholesale sources as well.
Conclusion
The Size of the Vending Machine Business May Determine the Source
Your vending machine business can use any one of these product suppliers or try a combination for different reasons. Now that you know the pros and cons of each you will be better prepared to make a decision about what will work best for your company. The main determination may come down to size. If you operate a well-established vending business with dozens of machines, a wholesale or product broker may work best for you.
If you have less than a dozen vending machines and are just starting out, membership clubs and cash and carry shops may help you afford varied inventory without taking on excess risk while still remaining profitable. Use one or combine the two to increase the range of products to offer and the amount you can sell.
Driving to the Supplier Cuts Into Profits
No matter how many machines you operate and how long your vending machine company has been in business, it is important to take drive time and travel costs into account when choosing your supplier. If you drive to the location, it costs gas, potentially tolls and wear and tear on the vehicle. On the other hand, if you have products delivered, you need to take shipping costs into account.
Focus on Buyer Benefits
In the end, the products you choose and where you buy them from should matter primarily because of the experience you can give to those hungry or thirsty people standing in front of your machines with dollars in their hands. The main goal is always to offer top-quality products that are in demand and keep the machines well-stocked at all times.