The Vending Machine Market - Essay Example

Background of product The product that tracks sales and other activities pertaining to a vending machine is one whose time has come. To be sure, owners of vending machines might have been dreaming about such a tool for some time but it is only now that the constellation of technologies has made it possible for a viable product to come on the market. The vending machine market is big. These machines are ubiquitous, found in schools, office buildings, and even shopping centres. It must be noted that the supposed ban on vending machines in schools is beginning to echo across the office landscape. “Obesity among the UK workforce cost the economy over pounds 10bn last year. Vending machines seem an appropriate target for vilification because they rarely offer healthier snacks, such as seeds, nuts or dried fruit. The vending market is worth more than pounds 2bn, and a report by Mintel last year found the majority of people who purchased from machines did so in the workplace” (Keating 2006). For those who operate the machines, however, it is a headache having to keep track of product numbers, sales, damage, or emergency cases when, for example, a customer is unable to get the product from the machine and takes his anger on it by giving it a few unfriendly bumps. Having a system that keeps owners aware of and apprised of vending machine conditions, outputs, and inputs, at any given time is destined for success, if of course, the positioning is done right. Marketing Environment The prospects for the vending-machine industry looks positive, driven by the increasingly fast-paced nature of lifestyles in the United Kingdom. With office workers running around with no time to have proper meals and with school students unable to sit down for a proper meal, it stands to reason that more and more places where people gather will take advantage of the “on-the-go” eating culture that vending machines provide. The range of places where products can be sold provides a glimpse of the incredible size of the market. These include: kiosks, service stations, duty free shops, with products ranging from biscuits and other snacks, through soft drinks to bottled water and even mobile phones! As vending machines become more sophisticated and able to handle a greater range of products they increase convenience to the consumer but also provide opportunities for those who have the smarts to get into the business, knowing that it is costly to have employees round the clock whereas, a strategically placed vending machine can provide the service and products that consumers need without having to worry about having sales staff on hand. Being part of a growing market certainly beats being part of a declining market. Right now, the vending machine business is on the upswing, which means that companies that are able to get involved in the business, on any scale, can benefit from the surge that is happening at the moment and is likely to continue in the foreseeable future. As a 2006 article in M2 Presswire notes, “Sales of products through vending machines increased by 3.1% in 2005, to GBP3.42bn. The number of vending machines in operation in the UK also rose in 2005, reaching 1.2 million, an increase of 3.4% on 2004. Sales growth in the vending market between 2001 and 2005 outperformed the increase in household expenditure on food and non- alcoholic beverages over the same period” (Research and Markets: Sales of products within vending machines increased by 3.1% to 3.42 bn in the UK. 2006). This places the vending machine industry in a very favourable light, one that shows that the designers of Coinmetrics have chosen a good industry with which to align themselves. The largest sector of the vending machine market, to date, has to do with refreshment machines, which include hot and cold drinks as well as confectionery, sandwiches and meals. Meanwhile, cigarette and tobacco products are doing well though since 2001 these products have gone down, probably, in response to increasing calls for people to become better aware of and take care of their health. In this regard, Restrictions on smoking in public places are expected to have a significant impact on the cigarette vending sector - and particularly those located in public houses - when the government measures are introduced in 2007. The ban is partial at the moment and will only affect public houses that serve food. However, if the ban eventually becomes full, then cigarette machines will need to be removed from all public houses. Another concern for the vending industry is the government's decision to ban vending machines from selling certain types of unhealthy foods in schools from 2006. Many of the leading vending operators have already changed the foods they sell in their school-based machines to healthier alternatives. (Research and Markets: Sales of products within vending machines increased by 3.1% to 3.42 bn in the UK. 2006) It must be noted though that vending machine purchases are usually not planned though this could change in the future. Already, there are indications that this is changing. For example, some regular retailers have vending machines in front of their establishments. This means that in those hours when they are not operating they can still benefit from customer patronage. In other words, even though a store may be closed, vending machines serve as an extension of the shop and its offerings, proving regular or even people who just happen on the shop but are unable to enter because it is closed, an opportunity to get some of what they wanted through the vending machine. Forecasts indicate that for the second half of the decade vending machine sales will continue. The number of products offered through such machines is also likely to increase, all of which means that this is a good business to be in at this point in time. PEST Political Though there are hopeful signs across the board there are a few areas where vending machine operators have to be careful. The government has been coming under increasing political pressure to have vending machines removed from schools. Those who challenge the presence of vending machines in schools have tried for years to use “education” to get children and their parents from not taking advantage of the offerings available in vending machines. The failure of this approach has meant using new tactics, which has included getting the government or school boards to pass laws or create rules that effect such bans. The result is that “Only a few weeks into the school year, some of Britain's biggest contract caterers are already complaining that pupils, unable to get what they want from school vending machines, are buying their favourite snacks and drinks at newsagents and chip shops beyond the school gates. Catering executives have told the Guardian that unless they receive adequate compensation for abandoning junk food, they will quit schools where they cannot make a decent return” (Bowers and Lewis 2006). Many contract caterers that used to supply the vending machines in schools have begun to pull out because they are unable to work in an atmosphere where a ban is in place. The irony is that students, who crave the kind of foods offered in vending machines, now have to outside the walls of the school to satisfy their cravings. Smart vending machine operators will be looking to set up their products at the periphery of schools. In the future, there might be restrictions on placing vending machines within a certain radius of schools. For now, contract caterers may be wise to take advantage of the lack of such provisions in order to continue supplying much wanted food and snacks to young people so that they can have the peace of mind they need to study rather than worrying about not having the tasty treats that have become a part of their daily diets. Environmental As noted above, there is a slide in the demand for cigarettes across the board. This is not only with respect to their availability in vending machines. Vending machine operators who scan the environment properly may come to a determination that of all the products available to be sold in vending machines perhaps cigarettes and tobacco products need not be at the top of their product offerings. After all, if the market is going down, from the point of view of business, there is no reason to go down with it. Social/Demographic Though vending machines have had a reputation for supplying junk food, this need not continue to be the case over the long haul. More and more people are becoming conscious of their diets and as baby boomers get older it might be wise to provide vending machines that are user friendly, such as those that are well lighted or use large texts that can be read by people with poor eye sight. Also, for those who are health conscious, the industry can experiment with how it can best meet the needs of such people. There is no reason why fresh products cannot be provided in vending machines if they are serviced regularly to ensure that expired products are not available to consumers. Technological In places like Japan, it is already the reality for people to make purchases in vending machines using their mobile phones. This is at a time when conditions are ripe for selling such products as mobile phones themselves. The sophistication of vending machine technology is set to transform the retail experience. When customers know exactly what they want and know how to get it, there is really no need for customer service. A customer that knows exactly the brand of product she wants can simply go to a vending machine and buy it. What this means, in practice, is that there are going to be shops that have an array of vending machines with no customer service personnel in sight. This may not be as bad as it sounds. Already, there are some products that people are not comfortable buying from others. These include condoms, tampons, and other personal products. When consumers know that they can get these products at any time without having to deal with customer service personnel they might very well become regular patrons. Technology, therefore, is creating the opportunity for when vending machines will become an even greater force in the retail world than it is today. Possible future influencing factors on industry/sector The sophistication of technology is certainly one of the factors that will continue to drive the vending machine market. Also, if vending machines can be adapted to provide healthier products, those who condemn them might be forced to reconsider their positions. After all, vending machines are neutral. Is it possible to create nutritionally rich products that can simply be delivered by vending machines? This may be something for technologists to work out but it is not within the realm of possibility for such a challenge to be adequately met. 2. Segmentation Segmentation may be done on the basis of food products and personal hygiene or personal care products along with general convenience products such as mobile phones that people might need in a hurry. By the same token, there are other convenience products such as instant cameras that might be needed in a tourist area. For example, a tourist whose camera is not functioning for one reason or another might be relieved to be able to buy a cheap camera that can be used to capture the images around. Such an individual might not be looking to buy an expensive camera, just something that might work for the moment. In addition to targeting by product type, it is also possible to target on the basis of schools, offices and office blocks, and parks, for example. All of these places have different needs in terms of the kinds of products that might be offered in them. Also, the kind of security needs or information that might be needed from these machines may differ depending on their locations What the future holds The digital revolution is already having an impact on vending machines. For example, “Coca-Cola HBC recently finished a six-month trial of 30 networked Coke machines at Dublin Airport in Ireland that sold mobile-phone top-ups, ring tones, games and logos--all downloaded from a central database--as well as soft drinks….The Coke machines' revenues doubled. And Vodafone's kiosk sales are exceeding expectations by 200%” (Grose 2006). Digital technology is creating the groundwork for vending machines to offer much more than the current staples. Also, making it possible for vending machines to accept more than just cash could increase the customer base considerably as it is not uncommon for some people to find themselves in need of a product but with no cash or coins on them at the moment though they may be carrying their Visa, which they never leave home without! In the case of Vodaphone, vending machines seem like what the doctor ordered. “Vodafone's goal is simple: it makes no money from selling phones, but from the voice and data traffic they deliver to its network. So it wants to get Vodafone-networked phones into as many hands as possible. Vending machines seem to be one of the cheapest ways” (Grose 2006). Conclusion Regardless of who is operating the vending machine having timely information, especially real-time can be indispensable in planning. Machines need to be stocked, they get vandalized, or break down. If operators can monitor a computer screen that highlights through beeps or other alert devices what may be happening at a particular site, companies can increase their profitability manifold. They will not have the problem of leaving a machine unstocked for a long time thus missing out on potential sales. At the moment, there are no credible competitors to what these inventor/entrepreneurs are offering but this is not guaranteed for any length of time because big manufacturers with a lot of cash and expertise are apt to jump into the market once they realize the potential profits to be made. Bibliography Bowers, Simon and Lewis, Paul. “School dinners: Pay more or we quit, canteen operators to tell schools as vending machine purge hits profits: Firms say pupils buy fizzy drinks and crisps outside Setback for Jamie Oliver as new TV series begins.” The Guardian, (Sep 18, 2006):11. “Cash-Rich, Time-Poor Society Drives UK Impulse Food and Drink Market.” Business Wire, (Oct 5, 2006). Gould, Nigel. “Ban soft drinks in Ulster’s schools.” Belfast Telegraph (Jul 24, 2006):1. Grose, Thomas K. “The Vendor Benders.” Time International, Vol. 168 Issue 10 (Aug 28, 2006):41. Guthrie, Jonathan. “Business owners can learn from private equity.” Financial Times, (Nov 23, 2006): 17. Keating, Matt. “Work; Question of the week; Should vending machines be banned in the office?” The Guardian (Mar 4, 2006) “Research and Markets: Sales of products within vending machines increased by 3.1% to 3.42 bn in the UK.” M2 Presswire (Mar 29, 2006):1. Revill, John. “Twenty years of quality at vending machine builder.” Birmingham Post, (Mar 9, 2006):24. Read More