Dollars Versus Percentages

For those of us who have been in the vending industry for many years, we are accustomed to looking at our profit and loss statements and our various costs as a percentage of sales. Remember when we offered can soda for 50 cents, candy for 40 cents, and chips were 25 cents? Even a salad sandwich was 75 cents. Our product cost was roughly 50 percent of the vend price. It was a “rule of thumb.”

We looked at and we still look at our product cost as a percentage of sales. If the candy bar cost us 30 cents, we minimally needed to get 60 cents for a price point back in those days.

The problem is that we cannot just look at percentage as a method of determining our vend price. We need to look at what the market will bear. A customer of mine recently told me, “you can’t take a percentage to the bank.” How true!

INCREASING PRODUCT DOLLAR MARGINS

If our quasi competitors, the convenience stores, can get $2.00 for a cup of coffee or $2.99 for a bag of beef jerky, why can’t we? Take a stroll through a convenience store and look closely at the items they are offering.

In some cases like coffee, our margins are and should be well above 50 percent. In other items, we may be able to get a good price that gives us good dollar margins, but we may not get the 50 percent margin.

We as an industry have had the mentality that people will not buy products from a vending machine if the product is priced over $1.00. This is part of the reason why we have the low profit margins today.

NEW TOOLS ARE AVAILABLE

Technology allows us to satisfy our goal to offer the products and sizes that people want at the price they are willing to pay with the payment method they wish to use, no matter how much cash they have in their pocket at the time. Let me repeat that.

Our goal is to offer our customers the products they wish to buy at the sizes and prices they are willing to pay with the payment method the customer wishes to use at that time.

In other words, a customer should never walk away if they had a desire to purchase a product from our machines.

LOOK AT WHAT THE COMPETITION CHARGES

I took a survey of a couple convenience stores in the Midwest to see what was being sold at various price points, paying particular attention to the snack and beverage categories. Here is what I found.

Beverages:

- Fuze White Tea, 18-ounce - $3.59
- Amp Energy Drink Tall Boy, 16-ounce - $3.00
- Caribou Coffee, 12-ounce - $3.59
- Gold Peak Tea, 16.9-ounce - $2.79
- V-8 Fusion, 12-ounce - $1.79
- V-8 Vegetable Juice, 12-ounce - $1.99

Snacks:

- PowerBar Harvest Whole Grain, 2.29-ounce - $1.99
- Snickers peg bag (bite size), 4.4-ounce - $1.59
- Planters Trail Mix, 6-ounce - $2.59
- Jack Links Beef Jerky, 1.8-ounce - $2.99
- Pearson’s Salted Nut Roll Giant, 3.5-ounce - $1.29
- Nature Valley Granola Bar, 1.5-ounce - $.80

We can sell these items from our vending machines. No longer are we dependent on our customers having the cash to purchase the higher priced items. With the advent of cashless solutions, we can now offer items with higher price points and higher dollar margins.

Even if our margin percentage on some of these items is less than 50 percent, our “dollar” margin may be higher than traditional products. Look at the total “margin capacity” of a machine and determine what you can do to maximize total profit dollars per machine per week.

A combination of traditional 50 to 60 percent range margin products and higher “dollar margin” products will accomplish these goals.

Take a look at this scenario when setting up a planogram. Fill a glassfront beverage machine 8-unit capacity column with a product at $1.25 and a 62.5-cent product cost (50 percent margin).

CONSIDER MACHINE CAPACITY