What is merchandising in vending? Jim English, CEO of Sprout Retail, a partnership designed to use technology to improve operational efficiency and develop interactive consumer programs, defines it as follows: “The art of balancing service frequency, assortment, pricing, sales rates and inventory to deliver the maximum gross margin every time you visit the machine.” He further notes: “The real challenge is that optimizing any one variable often sub-optimizes the others. Striking a balance is a tricky process, but with the right tools, it can be achieved.”
I agree with this definition and assessment. In talking with operators, two objectives come up:
- Putting the best selling products in the machine to maximize sales.
- Increasing space for best selling products to lengthen service intervals.
These are the twin goals of merchandising in vending. One operator summed it up by saying there are two types of machines: high volume machines that should be optimized for increased sales, and low volume machines which should be optimized for the longest service interval to reduce costs.
Before considering which strategies to use, an operator must have the tools necessary to implement them. The ability to merchandise effectively is directly tied to an operator’s technology capabilities.
Technology determines capability
With item level tracking capabilities – enabled with technology coupling DEX reporting and software solutions – operators are now able to actually understand what products are being sold in each machine.
The advent of pre-kitting and dynamic scheduling are tools from these software solutions that allow the operator to understand item level sales at the machine level and create operational processes that achieve the desired results.
The bottom line is that your level of technological sophistication has a direct link to your capabilities to effectively merchandise.
The table at right shows how your merchandising capabilities relate to your technology situation.
If you are not using any software that is capable of tracking item level sales, your only real option is to try and give planogram guidance to your drivers using account demographics like blue collar, white collar, school, etc.
While it can be valuable to utilize the demographic profile of the account, nothing is better than having the actual line item sales data for each machine. A machine in a white collar location may perform more like a blue collar machine based on the individual buying preferences.
When I first worked on developing a merchandising tool for vending, I focused on increasing sales. I was working with a vending operator who was using dynamic scheduling supported by wireless remote machine monitoring.
A fortuitous discovery
After reviewing the company’s data, the greatest benefit we uncovered was not in the sales gain as much as the productivity gain.
When we reviewed the sales data, it became clear that a few products were driving the dynamic schedule. The schedule was based on a threshold of two sold out products or three sold out columns in a snack machine.
By simply allocating two columns from poor sellers and doubling up the best sellers, the service schedule could be extended to nearly twice the original schedule, saving a ton of money on service costs.
The big discovery: merchandising impacts not only sales, but productivity.
Let’s look at how different levels of technology affect merchandising strategy, starting with non-glassfront, stacker cold drink machines.
If the machine supports flexible space to sales programming, you can allocate variable amounts of space to each product button.
If you are confident in the products in the machine, oftentimes determined by the bottler that supplied the machine, your goal should be to efficiently tune the space to sales to lengthen the service intervals while maximizing selldown.
Of course, before doing this, you should analyze the sales and see if any products should be removed and replaced.