I am away on a long overdue family vacation, but since reading what I feel is a self-serving response by AVT to an article published by NAMA, it has been eating at me enough that I felt I needed to respond now and not wait until I returned to the office later next week.
First off, again I want to be very transparent, as I have always tried to be. Yes, I am one of the founders of Avanti Markets, Inc. a Micro Market provider to the industry. But more importantly, I am a 38 year Vending Machine Operator (Evergreen Vending, Northwest Coffee Services, and Avanti Markets Northwest) located in the Northwest and still operating several thousand vending machines today. I thus am writing this response with my Operator and Industry hat. My operational business (Vending, Coffee Service and Micro Markets) remains my largest entity and ALL are important segments of my business.
In my 38 plus years in the Vending business I have seen the industry develop and evolve, but unfortunately also I have seen the industry’s sales and profits flat line or decline if you realistically look at unit sales and not just dollar sales. It does not take an economics major to tell you that is not a good trend! Yes, I have seen some innovation over the years with the introduction of the dollar bill acceptor, the glassfront snack and beverage vending machines, cashless vending, and a few other smaller, less significant changes, but to be perfectly honest, nothing has impacted my Operational business’s top and bottom line as much as Micro Markets have.
Now to address some of their claims in the article;
They first question whether micro-markets are taking the industry in the wrong direction. I guess if you are trying to maintain status quo. Absolutely! But, to repeat a saying that I have always believed in; “If you are not growing, you are coasting; and if you are coasting, you are likely going downhill”. Status quo is not where I want my company to be positioned, and would hope you would feel the same! I don’t know many industries that can survive long term without some innovation. Thank goodness our industry has been willing to change with the growth or adaption of Coffee Service, Technology innovation, etc.
Yes, they are grandstanding on the fact that there is shrinkage at markets. Yes, I know that is always going to be a concern, but most of our Operators are telling us that 1.5% (the Industry average) shrinkage is totally acceptable to them. Walmart or other retailers would love to have those kind of numbers when it comes to shrinkage. I don’t see them shutting their doors with their shrinkage number much higher than that. Yes, you need to manage it, but what business don’t you have to manage?
As to how you want to classify our Industry is not as important to me, as to what service our Industry provides to the end consumer. I believe we are in the Refreshment Services business, mainly servicing the “at work” employee, but also servicing many other sectors, public, etc. Personally I believe that our customers don’t care what we call ourselves, they just want a great product and/or service to best fulfill their needs. If we can provide them that through Vending, Office Coffee or a Micro Market, so be it.
The article next tries to note that there are things that make the Micro Market vulnerable to theft, contamination, etc. That is probably accurate, but I personally believe that micro markets are far less vulnerable to these things than the average grocery or retail store. Remember, these micro markets are serving a known group set of employees at a closed location. If every retailer thought that way, we certainly would have a lot less stores in our country. Find me one other food store that doesn’t have this same situation, but with any more variables (unknown clientele, larger footprint to control, no cameras watching the entire store, more unpackaged foods, etc.)
In closing; there are some facts that I do know about my own Operation that I am happy to share with you;
- In four and half years of operating micro markets, my micro market sales have surpassed what I had grown my vending sales to over the 38 years.
- My vending operations profits are still in the middle single digits
- My micro market operation profits are in the double digits
- My same store sales at locations that were converted from vending to micro markets have been on average two times the previous vending sales.
- The cost of opening a new Micro Market location is significantly less than a new vending location.
- I am still opening vending locations. Remember, we are a service business, giving the customer what they want!
- I am collecting sales tax on top of my product sales price, not out of my product sales price.
- Commissions expected from customers at Micro Market locations are either non-existent or significantly lower because we are selling convenience, technology and service, not on price and profits.
Lastly, I would like to note that hopefully most business owners are building their business to be worth as much as possible for the future. I believe that a well-rounded business with exposure in all business segments will be worth significantly more in the long run.