The Case For Vending, Part 3: Product Manufacturers Value Vending, but Face Challenges

The average vending operation does not utilize the available software to report this type of data. Jim English, president/CEO of Sprout, hopes to change that. Sprout is a strategic partnership to embed technology, improve operational efficiency and develop interactive consumer programs for unattended retail locations. As part of this process, the Vend Marketing Institute (VMI), a coalition of 17 independent vending operators, will deploy telemetry and cashless services across its network of approximately 60,000 vending machines. Cantaloupe Systems will support these deployments with its Seed® services platform, including the company’s new Seed® cashless service.

English became cognizant of the need to improve the level of retail professionalism in vending while serving as general manager of vending at Masterfoods USA. Prior to moving to the vending channel, he was global accounts director for c-stores and managed trade programs for all channels of trade.

CONSUMER DATA PROJECT UNDER WAY

The Sprout project is designed to transform an adversarial relationship between vending operators and product suppliers into a collaborative one. The vending trade lacks the same controls that other retail channels have that enable them to drive top line sales. English believes technology, particularly wireless telemetry, will provide vending the tools that will give them the same ability as other retail channels.

English said vendors need better data on their product sales, including velocity as well as profit margin. One reason that product manufacturers are able to offer more promotions in other channels is that the retailers are better able to measure the results.

Retailers have the data that allows them to manage product mixes on an individual store basis.

“Vending is the only place in the world where even the best operators only have a marginal view of what’s selling in the machines,” English said.

With the type of data that wireless telemetry will make available, English said vending operators will be able to adjust the product mix every time the machine is serviced.

Telemetry will also provide the foundation for cashless transactions and loyalty programs, which English said will bring more value.

CONSUMER INTERACTION

Better category management can increase excitement among customers, driving business. While operators do occasionally run point-of-sale programs at locations, they are not as prevalent as in other retail channels. End caps and special displays are planned months in advance for brick and mortar establishments. This gives an incentive to manufacturers to deal with these channels. On the other hand, vending operators can make a decision faster, so manufacturers can get exposure to the market faster.

A GOOD CHANNEL FOR TESTING NEW PRODUCTS

Frito-Lay considers the 50 million people who use a vending machine daily as a great sampling vehicle. Vending users can try the new product with minimal risk since the offering is in a single-serve size.

For a manufacturer, the hope is the consumer will enjoy the new product and look for it in other channels, such as the grocery store.

Paul Schlossberg, president of D/FW Consulting, was formerly director of marketing and national accounts at Frito Lay Inc. He said that vending does have some unique benefits for product suppliers. One is that the trade is not as dominated by high volume retailers.

The manufacturer has a stronger bargaining position since there are more buying units, each buying smaller volumes.

Decisions also get made faster with vending operators, Schlossberg noted. With retail organizations, getting a deal signed can take weeks and even months.

An even bigger advantage to vending in Schlossberg’s view is that vending, being a single-serve channel, is a great sampling opportunity for new products. He recalled that vending accounted for a large percentage of the pilot purchases for some of Frito-Lay’s most successful products.

Brad Bachtelle, president, Bachtelle & Associates, agrees vending is great for sampling. “The best thing about (vending) is its paid sampling. It’s a very effective means,” he said.

VENDING HAS POSITIVES AND NEGATIVES

A former vending operator, Bachtelle now consults with product manufacturers on their vending programs. He said vending offers advantages and disadvantages to product suppliers.

It is the only channel that reaches consumers where they work, which is very positive. “We take our equipment to where consumers are,” said Bachtelle.