10:30 am By Catherine Rampell FreedomPay E-ZPass has led to higher tolls unusually low prices overhead costs COMMENTS by Tom Britten (the vendor defender) I was bothered by your vending machine cost comparison direction to leave convenience stores, pharmacies and cafe aside; their prices should be higher because these establishments have higher overhead costs With all due respect to your well established expertise in economics Catherine, maybe, you could use a little lesson in the seldom understood field candy bar economics. The vending business is a buy it by the mile sell it by the inch business that involves huge numbers of small transactions over wide distribution areas. This involves precise logistical planning and management of how candy bars are moved, especially in metro areas such as New York and Washington. This required micro distribution of products is in itself a major overhead cost unique to this industry. Vending companies dont manufacture the products they sell, they merely purchase and resell, and accordingly they are allowed only a small mark-up over prices changed by Hersey, Frito, Pepsi and the like. In reality, the manufacturers set the price of the candy bars, the vending company does not. The skilled service people who replenish the machines when candy bars are sold are well paid career employees with medical insurance and full benefits. Compare that to convenience stores, pharmacies overhead costs. You ask why prices for the same candy might be different from Washington to New York. Accommodating credit card purchases of candy bars does in some cases increase sales; however, the cost of telemetry and credit card companys transaction fees negates any bottom line effect. Your theory, relating higher selling prices to the availability of cashless purchases is flawed. The most-likely reason is the commission on sales that your vending machine company pays to your employer.
I suggest you add this to question for your readers: How much less would a candy bar cost if the vending company didnt have to pay a commission? Tom Britten (the vendor defender)