Niche Services Pay Off

Oct. 15, 2018

Larsen Vending has excelled by finding its perfect niche in the large, competitive convenience services market in Phoenix, AZ. For vending, it was serving the high-risk apartment complexes in residential areas. It’s a segment many operations won’t touch. More recently, it’s been installing high-end micro market boutiques that make Larsen Vending stand out to local businesses. Owner and founder, Doug Larsen, believes in providing great looking equipment and the best customer service, no matter the size of the location. It’s the first lesson he learned in business and one that has helped him create a thriving operation now employing the second generation as well as many long time employees.  

Starting out small 

Larsen Vending started 35 years ago when Doug was searching for a way to support his sons. “I was a single dad with two boys managing a gas station,” said Doug. “I was thinking about a way to earn some extra income, so I could take the kids on trips.” This led him to buy a used vending machine and find a place to put it. It cost him two paychecks for the machine, despite it not being the latest model or very attractive. It would turn out to be an expensive lesson in the importance of design and merchandising.

“I remember, I got a call from the supervisor of the property a week after I put it in, asking me to remove it,” Doug said. When he talked to the supervisor, he found out it was the look of the machine that was the issue. “He said it just doesn’t look good enough to be out here on our property.”

Doug had to hire someone to move the machine, as he couldn’t do it himself, costing him further. However, as luck would have it, Doug was an avid golfer, and the supervisor wanted to learn how to golf. They got talking and he told Doug that if he could get some better-looking machines, he could place them on the seven properties they owned. Doug worked out a deal leasing vending machines from a bottler and was able to secure the locations.

“Oddly enough I still do four of those seven locations all these years later,” Doug said modestly.   

Growing up vending  

While it all began with a single, used machine, the company has grown to over 1,400 pieces of equipment bringing in more than $3 million in revenue. Doug’s son Eric Larsen also works at Larsen Vending as the general manager and has driven much of the new micro market division.

Eric remembers growing up in the industry. “I was the most popular kid in elementary school, because I always had snacks and candy around,” he said. After Eric graduated high school, he joined the Marines, but eventually returned to the family business. “I sort of fell back into it,” he said. Plus, Eric discovered he was good at building customer relationships, which helped Larsen Vending get and retain business. 

Experts in apartments  

One area where Larsen Vending truly shines is its apartment vending business. It’s a niche business Larsen Vending has cultivated in order to compete in the saturated Phoenix area, tailoring its processes to attain profitability.

“We have a lot of quality competition out here,” said Doug. “However, there’s no competition in apartments, because of the vandalism. We have two to three vandalism hits a day —people trying to get the money.” Most of the vandalism happens at the pricier apartment complexes. Eric thinks this is because thieves believe more money will be in those machines.

Larsen Vending has an established process of putting in apartment vending machines, from pouring cement slabs to installing vending cages. The company aims for large apartment complexes of 200 to 700 people, but understands that the audience is not always on site and ever changing. In addition, working with the management of apartment complexes is somewhat of an art. Apartment management companies merge, split and quickly turnover management staff making building relationships difficult. “It can be unpredictable,” Eric said. “Apartments are a certain kind of business. It’s a non-captive audience, there is a high risk of vandalism and high transit of customers.”

However, apartments are the bulk of the vending business and one that Doug is proud to continue. “No one else does apartment vending better than we do,” he said. “We take care of our customers.”

Doug isn’t just referring to the services of Larsen Vending, but also the equipment. The company will replace a vending machine if the location thinks it looks bad. It also uses LED lighting inside its vending machines so that customers know the equipment is working and because it makes the products eye-catching.  

Mobile is a winning technology 

Focusing on apartments also changed how Larsen Vending looked at technology. While it tried adding credit cards readers in 2011, the move didn’t pay off. The hardware was expense and sensitive to damage, plus it didn’t show the return Larsen Vending expected. Currently cashless readers are only on about 10 percent of Larsen Vending’s machine fleet.

On the other hand, in 2016 when the company tried PayRange, a mobile payment enabling technology that connects on the inside of the machine, it was a great success.
Eric said, “Mobile payments work better at apartments, because 12 to 16-year-olds have a phone, few have a credit card.” Those are the people around much of the day and make purchases at apartment vending machines.

While Eric recognizes that credit card readers are beneficial for telemetry and could send data directly to the company’s vending management system, which it added in 2008, he doesn’t feel it’s worth the extra costs for his business. The biggest benefit would be for scheduling, says Eric, but Larsen Vending has it’s a system its been using for years to great success. “We have a revolving schedule on index cards that basically allows us to do dynamic scheduling by hand,” said Eric. The company plans to continue testing cashless readers and other technologies to see what could improve the bottom line, but isn’t willing to jump in without a proper return.

“I love technology,” Eric said, but I’m not going to sacrifice having a profitable business for my family, just for having technology.”  

Slow start to micro markets 

While perfecting apartment vending in Arizona, Doug and Eric had seen micro markets, but it wasn’t a concept they were initially interested in offering. No doubt driven by the company’s heavy emphasis on apartment vending and the associated vandalism, but the pair were not eager to put 500 SKUs of product on open shelves where people could take it. However, in 2016 a location came to Eric asking for a micro market. He began investigating different providers and the services offered. He wanted the solution that would be an ideal fit for Larsen Vending.

“You have to have a lot of confidence in the micro market you are pitching to a customer,” said Eric. That confidence in the supplier was one of the reasons he chose 365 Retail Markets. They not only agreed to send a live kiosk to him for the demonstration, but a company sales representative as well that could join him in the customer meeting. Larsen Vending got the contract, 365 Retail Markets got a new customer and Eric went in search of micro market fixtures.

Focused on design

When Doug agreed to let Eric install micro markets, he wanted to ensure they looked appealing. “I remember I said ‘If we are going to do micro markets I don’t want to be as good as the other guys. We are going to need to do it the best or I don’t want to do it,’” Doug said. “That’s been the attitude Eric has followed and our whole company as well.

”With the idea of attractive displays in mind and an eye towards going local, Eric found Fixturelite. The company boasted high-end micro market displays and fixtures while being located in Phoenix. However, what really impressed Eric was the time, expertise and energy the company put forth in helping Larsen Vending succeed. “Steve came in and spent nearly 10 hours teaching me how to merchandise the micro market,” Eric said.

That not only helped the first location three years ago, but helped the company grew from two micro markets in 2017 to 10 markets in the first half of 2018. “We have never put a market in that people don’t say ‘oh my god. I was not expecting this,’ even though they saw exactly what it was going to look like because it looks exactly like it did in the picture,” Eric said.

Designing a boutique micro market  

Larsen Vending starts every micro market installation with coolers. Depending on employees, the food cooler might also have dedicated beverage shelves. However, Eric will never put food in a beverage cooler. “I refuse to use a beverage cooler for food,” said Eric. “It has to have a food lock.”

He also turns down micro market business if the number of employees is too low or the demands of the management make it a poor fit. “We are a little discerning about what we take,” Eric said. “If we say no, we say no with an option, even a competitor or alternative service.”

Markets under 200 people have a tough time being profitable in the area Larsen Vending services. Eric prefers over 300 as it allows the company to do innovative engagement promotions. No matter the size, however, once a location is chosen for a micro market, Larsen Vending spares no expense. “Better fixtures build relationships,” he said. “If you are looking to make money before building the relationship, you will lose the customer eventually.”

Larsen Vending opts for furniture-quality display that are free-standing and don’t rely on a wall for support or the area around them to look attractive. Everything is custom designed for the space and Fixturelite even offers a 3-D option so customers can “walk” through the virtual micro market space as well as view a rendering of the proposed micro market. It costs Larsen Vending 30 to 40 percent more to install these high-end displays Eric figures, based on research he’s done. It’s a conscious decision. “It’s high quality furniture. It’s custom,” Eric said. “And you have to pay for that.”

Servicing markets everyday  

“We are boutique in how we serve our markets as well,” said Eric. He has drivers, which he calls merchandisers, visit the micro markets 5 days a week, regardless of sales, to ensure everything looks serviced.

“If it [the micro market] is too slow, we close it,” said Eric. His market manager also takes all product out of each market monthly, to dust and clean every inch of the displays and coolers. Eric says it helps that his micro market manager is hopelessly charming, and locations love him. “It works well for that kind of a job because he re-solidifies the relationship,” Eric said. “It’s a huge customer relations boost for us.”

Keeping such a high level of service up is unusual, Eric has come to discover. Locations he has taken over complain most often about the level of service and Eric understands.

“Once you get to a certain size, you can’t manage every customer personally,” said Eric. “However, you have to evolve in some way such as by taking care of employees so they look after those relationships for you.”    

Employees are important 

Relationships are important to the Larsen family, whether it’s customer relationships or employee relationships. Doug ensures his employees are paid well, and he takes an active interest in their lives. In return his turnover is extremely low and his employees work hard for the company. “It really does pay to be involved with them and pay them well enough that they want to keep the job,” Doug said. “Then they’ve got your back when your back is turned. It helps keep the customer happy too because they see the same people, get the same service and you don’t have to keep training new people.”  

Larsen Vending route drivers are paid based on 100 percent commission. Eric feels this inspires a greater level of service and gives them control over merchandising. Plus it can be good money, a few of the drivers are closings in on $50,000 a year. Once the company has achieved capacity in its micro market routes, Eric plans to pay those drivers based on sales as well.  

Doug and Eric Larsen believe in what they do. They aim for better service and great looking equipment that will reflect positively on their business and on the business where the equipment is placed. It’s a lesson Doug learned early in his career and that Eric has embraced. The two value design and attention to detail, whether it’s a vending machine at an apartment complex or a micro market in a 500-person facility. With the proper know how and the right people, it’s a specialty that is leading Larsen Vending to great success. 


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