Micro markets are an entirely new channel within our industry, explained Brad Bachtelle, owner of Bachtelle and Associates, in his second session about micro markets during the NAMA OneShow. "We found a way to drive sales and make customers happy," said Bachtelle about the micro market industry as a whole.
According to his 2012 micro market channel census, based on surveys from all the suppliers, there are 2,642 active micro market locations and 2,724 active kiosks. The number of kiosks is higher because some locations have duel kiosks. Bachtelle calculates those micro markets are producing $90,740,057 in retail sales for the 2012 calendar year.
An astonishing figure is that from 2011 to 2012, the number of micro markets grew 169.2 percent from 1,012 to 2, 724, according to Bachtelle. Also, he showed that in 2012, 56 installations were removed, which he believes indicates operators are refining their ideas of where micro markets fit best.
Bachtelle cited the average full year for kiosk sales to be $48,410. In the next 10 years, he's estimating there will be 35,000 new micro market locations with revenues for the segment of $90.7 million to more than $1.6 billion. In 2022, Bachtelle predicts micro markets will reach 45.6 percent market penetration.
The micro market consumer
Looking at the transactional data from more than 200 locations and physically asking questions of customers, Bachtelle discovered a number of specifics about the micro market user. First, the average transaction price was $1.89. Second, they gravitated toward card payments.
"The largest velocity [of sales] was on prepaid-market card," said Bachtelle. He reported that velocity to be 72.3 percent, or approximately three out of every four transactions.
Additionally, his research showed that the top 5 percent of consumers drove 25.3 percent of micro market sales. "We've got super heavy users," he said about customers who visited more than twice a day. He found 1.1 percent used the markets three or more times daily. Most of the purchases were cold drinks, snacks and food. Customers visited the market from 10 a.m. to 2 p.m., however, 24 percent of the volume came before 10 a.m. "And that's a huge opportunity," said Bachtelle.
Bachtelle believes part of the benefit of a micro market is the environment, which draws more visitors when compared to a traditional vending bank. His research shows that there are 1.9 daily visits to a typical vending location, but 2.3 daily visits to a micro market location. Daily purchase frequency was .7 for vending and 1.2 for micro markets. "Clearly, we're getting customers we never got before," said Bachtelle.
Customers also rated micro markets much hirer than vending on environment, shopping experience, ease of use and overall experience. Vending averaged a rating of 4.3 out of a high score of nine. Micro markets averaged 7.9. Bachtelle did admit that customers would likely have given vending a rating of 6 or 7 points, if they had not experienced micro markets, however once they have a micro market they viewed vending very differently.
Micro market customers were asked what they like most about the market. A majority, 79.8 percent, like the variety. The second most frequent answer was the payment system, followed, in ranking order, by fresh food, ease of use and product access. The only dislikes Bachtelle reported were high prices (46.4 percent) and no cash accountability (15.5 percent).
Micro markets are a unique channel
According to Bachtelle there are two types of micro market operators, those that are using them to grab locations quickly, and those who are adding them as defense against other operators. He sees aggressive operators adding micro markets as quickly as possible.
Whichever type of operator is running them, Bachtelle feels there's still room for improvement. "Nobody knows how to make this truly profitable yet," he said. "It's so new." He believes micro markets need to be refined, but are clearly a different business with different deliverables and consumer expectations. "Micro markets are not an extension of vending," he said. "…they are a hybrid channel."