What’s fueling the explosive growth in vending and micro markets?

We all seem to be trying to answer one big question: What is driving the explosive growth in our industry? After listening to this podcast, you may reach the same conclusion that podcast host Bob Tullio did.

Two recent webinars from Automatic Merchandiser offered plenty of material that is certainly worth sharing on our Vending & OCS Nation podcast. 

While both one-hour live webinars are available on demand, the next two episodes of the podcast will look at some of the fantastic content and insights that were shared, including the state of the vending and micro market industry beyond the numbers. For operators and suppliers, what could be more important than that? 

• Benjamin Thomas, vice president, retail product strategy (North America) for Nayax
• Operator Jon Holden of All Star Services
• Josh Rosenberg of Forward Thinkers
• Orrin Huebner, a respected industry consultant with Orrin Huebner Consulting
• Tony Danna, vice president of small business and general manager, Cantaloupe Go Markets
• Matthew Rainey, owner of Surpass Refreshments, North Fort Myers, Fla.
• Natali Pupovac-Peters, head of global operations, Naturals2Go
• Jeff Criswell, business growth consultant and vending/micro market operator, Naturals2Go

On Vending & OCS Nation, the panelists will discuss industry trends, with a particular focus on autonomous retail solutions and what the future will bring. This episode combines the survey data with useful insights to provide a nice, wide-angle view of the state of vending, micro markets and, of course, that new technology that is coming at us like a freight train: smart markets.

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Episode at a glance: What’s fueling the explosive growth in vending and micro markets?

No time to listen? Prefer to read? Here is an edited podcast transcript:

Hi everybody, it’s Bob Tullio. Welcome to Automatic Merchandiser’s Vending & OCS Nation, the podcast for the convenience services industry. In July, I had the pleasure of producing and moderating two Automatic Merchandiser webinars. These one-hour live webinars are available on demand, but in this podcast, we’ll look at some of the fantastic content and insights that were shared. We’re talking about the state of the vending and micro market industry: beyond the numbers for operators and suppliers and autonomous foodservice and retail solutions.

Bob Tullio: Here’s an important survey result following a 20% jump last year. Micro market and vending revenue jumped 30% in the current period. What a surge in revenue from $21.7 billion in 2022 to $26 billion in 2023, to the current period jump to just under $34 billion? I asked Orrin Heebner if those numbers surprised him.

Orrin Huebner: The first thought was yes, it surprised me a lot. But then, when you dig in a little deeper and you see the effect now of micro markets, not only the addition of more micro markets, but we’re getting better at it, which means we’re more profitable, driving revenue, product selection, healthier items, things like that. I think smart stores have been a tremendous source of additional revenue, you have to go back, I think pre-COVID. So, a little you get a little COVID action here. If you go to 2019, we’re up 40%. I think we have some inflation there too, but a lot of good trends. We’re heading in the right direction.

Bob Tullio: Well, what’s interesting, too, is I don’t think smart stores really have much of an impact on that. So it’ll be interesting to see what next year’s results are, because this comes through Q1 of 2025. So it’ll be interesting to see what the impact is. And Matt Rainey, speaking of smart stores, I know you’re interested. Owner of Surpass Refreshments in North Fort Myers, Fla. Do you think this robust growth has been driven — as Orrin kind of alluded to some extent — by price increases? Or is it something else?

Matthew Rainey: I think it has a lot to do with the price increases and then also with the micro market and smart store trends, people are just putting more premium products in those types of settings.

Bob Tullio: Prices have to have gone up pretty significantly. Are you finding that your customers are a little less sensitive to price increases, Matthew?

Matthew Rainey: I think in the micro market setting, people don’t even look at the prices, to be honest. I think if they see what they want, they’re gonna buy it once it’s in their hand.

Bob Tullio: So here you have active micro market locations jumping from 42,900 to 55,770 in 2024, and I’m sure that number is even higher by now.

During our July 5th webinar, I asked Josh Rosenberg of Forward Thinkers and Jon Holden from All Star Services to weigh in on why micro markets and smart stores are so well-positioned to meet the needs of consumers and operators. Why is it resonating with consumers? Clearly, they’re attracted to the concept, which is driving the growth. Here’s Josh.

Josh Rosenberg: I think autonomous retail — it’s popular for a number of reasons, but you got to look at today’s consumer and where they spend their dollar.

It’s about convenience, speed, convenience and control, and today’s consumer wants to be in control. It’s just that simple and autonomous gives them that option. So think about it: where you live, where you work and where you play.

Autonomous [retail] gives them the option to be within arm's reach of consumption, and that’s it. It gives them the control to be able to control the consumption of what they wanna buy. So you take out the labor option for the operator. That’s the highest cost. Theft used to be an issue, but we can now control that.

The consumer used to have a concern with, does it work? Does it have the product I want? Is it where I want it and how I want it? We can now with data with understanding where the consumer is control of how they spend their dollar, whether it’s tap and go, whether it’s the app based, whether it’s the type of transaction and how they’re going to consume with their wallet, and the type of wall that they’re going to use their share wallet. They now have control of that consumption. So altogether, it’s frictionless.

And that gives us that ability. Then you take brick and mortar: Brick and mortar is no longer king because a three-by-three space can now be a retail store.

Take us through COVID, and we’ve shifted our buying habits. Amazon Effect: delivered to our door just in time delivery. Uber effect: We can now “Uberize” our delivery. But we found that we don’t necessarily like that transaction cause there’s friction in that transaction. If it’s food, we don’t necessarily get what we want the way we want it. And it’s not always the quality in which we desire. But the technology has enabled us to get a better outcome whether it’s food, we can get a better product at the point of purchase, if it’s if it’s beverage, we got better assortment, if it’s retail product we now have delivery mechanisms with the autonomous device, the smart store, we might refer to as a smart cooler, but they’re not all cold device. The smart store now gives us the ability to sell just about anything.

So to kind of summarize it, speed, convenience and control have put the consumer in charge. It’s reduced our labor cost. It’s allowed us to come closer to the consumer wherever they live, work or play, and that’s exactly what we want us to consume. So, autonomous retail: it’s thriving. It’s only going to expand, and it’s given us a great opportunity to meet the consumer at the point of transaction.

Bob Tullio: Definitely going strong, no question about that. Jon Holden from All Star Services from Michigan, you’re on the front line every day. You know, people are friendly in Michigan. So why is the public often clamoring for autonomous retail solutions instead of dealing with a checkout clerk or a vending machine?

Jon Holden: Well, we do have a lot of friendly people here in Michigan, and no matter how friendly they are, you can’t have a quick frictionless checkout. You know, Josh said that word, and I just lit up. So I was like, oh, that’s exactly what I was gonna be talking about. But it’s really something that our consumer now gravitates towards. They want to be able to go up to a designated space to do and use their designated method of payment, which now we’re seeing, very, very frequently, is simply a smartphone, you know, using an app-based program or their wallet on the smartphone right there. Tap to pay, grab their product out of the smart store, and then continue on their way with zero human interaction. It’s really kind of funny coming on the heels of COVID. I mean, we’re basically three to five years later out of this, but it really has changed so many retail and buying patterns from our consumers, where consumers are looking for, you know, a lower touch solution.

You know, a lot of us are vending operators here on this call. I would say probably all of them have vending machines. Vending machines are a fairly high-touch point of sale right there. And when you’re dealing with the smart store, you’re simply tapping your phone. You are grabbing that handle, and you’re grabbing the product, but it’s a lower-touch option.

And then the thing that, of course, all these emerging new faces in the workforce, that personal communication is really something that a lot of people don’t like, no matter how friendly that checkout cashier may be, that interaction is something that there’s a lot of discomfort in, so there’s a lot of avoidance to that. And with the smart store, you don’t have to talk to anybody. You tap that phone, you grab your product, and you are on your way.

Bob Tullio: Tony Dana from Cantaloupe, is the revenue growth being driven by sheer numbers, just more micro markets leading to a big jump in revenue. What are your thoughts?

Tony Danna: Yeah. So I have a few thoughts on it. When you look at sheer revenue, obviously price increases are going to play a factor in that. There’s no doubt about that. When you go to NAMA and you see all these new suppliers out there and then suppliers getting it into the channels where operators can get their hands on it, the variety we have in micro markets now compared to, you know, 10 years ago. A lot of times, it was still just a glorified vending machine. But operators are getting really dialed into their product mix, and they’re listening to their customers and they’re incentivizing their drivers, you know, based on revenue per location.

 So, I think that’s played a big part in it. I think fresh food has come a long way, you know, and fresh food, obviously, your average ticket is going to be a lot higher. And a lot of the fresh food suppliers that we’re seeing coming to market now really give it an elevated look, which can justify more of an elevated price. So, we’re seeing that a lot, and then the interesting one is we’re seeing more of these smart solutions being placed where traditionally only vending machines [were placed], and people would be comfortable with vending machines.

I believe this is a driver, and I believe it’s going to drive us for the next five to 10 years. You know, we did an installation at an airport down by the baggage claim. No one would feel comfortable putting a micro market themselves, like just the micro market down there. But now with these smart cooler solutions, it’s been really fun to track. Just yesterday, I was looking at the transactions on it, and there was a $72 transaction, OK, that would never have happened in the vending machine world.

So we’re gonna see higher ticket items because they can touch it, feel it, just like a micro market. And we’re going to get more multi-item purchases.

And this slide here, when you’re looking at micro market growth, this is, in my opinion, just a matter of operators. The old saying: If you’re not comfortable putting a micro market in there, your competition is going to come, and they’re gonna offer the micro market and put it in there.

So that’s why you’re going to see some growth. The operators are definitely getting pushed into it. But then, secondly, are these small market solutions. You know, it’s never been more cost-effective to get into micro markets with the Go Micros, you know, and the like out there. So that big jump out of — that is driven by operators, is more comfortable going into locations with less than 100.

Bob Tullio: I mean, in the early days, it was 200 employees — got to have at least 200 employees, and that was what people were talking about as being borderline. Ben Thomas from Nayax. As VP of retail products strategy, do you see any end in sight to a more autonomous approach in retail? In fact, can you offer any trends that you’ve seen to support your position?

Ben Thomas: If anything, we’re just getting started. I think autonomous retail isn’t a passing trend. That’s just a response to a long-term shift in labor, consumer behavior and operational needs. Some of the trends I’ve seen firsthand, typically around labor and staffing challenges, continue to push businesses to find more efficient ways to operate.

And automation allows operators to extend hours, extend locations, manage costs without relying on large teams. Consumer expectations have changed. You know, people want instant access to product, whether it’s through smart stores, mobile checkout, micro markets. Convenience is no longer a luxury: That’s a baseline requirement.

And the big one. Real-time data is becoming essential. You know operations need visibility across their fleet to make better decisions about inventory, pricing and services, and autonomous systems really generate the kind of insight to help operators stay lean and competitive.

Another big one is expansion to non-traditional locations. Now we’ve got we’re kind of getting out of this current you know office space, you know marketplace and going down into residential locations, hospitals, hotels, universities that really are only available through this autonomous model, you know, so that’s a big component that we’re starting to see this kind of shift of landscape.

And so, in short, the move toward a more autonomous way of growing is driven by both necessity and opportunity. And the technology is ready and it’s there. And I think the smartest operators are really starting to lean into it.

Bob Tullio: Orrin Huebner, there are plenty of new operators entering the industry. So, what are some of the big challenges those operators face when they start up, and what are you telling them when they contact you and say, “What do I do?”

Orrin Huebner: Well, first of all, it’s always capital, right? Everybody needs more capital and the understanding of "What do you need, not only to purchase equipment and keep it going?", but working capital every day. People understanding that you’re going to go 100 miles an hour, 100 hours a week. Are you prepared for that and they think they’re going to make all this money. And they’re sinking all the money back into the business instead of putting it into the bank.

And so I think the conversation goes more to "What are your expectations? Where are we going to go? How are you going to get there? What’s your road map to success?"

Picking the right vendors, having great marketing. You don’t know if the company is one of the largest in the business, or they just started out last week, if you have good marketing material. So that’s the start of conversations.

Bob Tullio: But I don’t know. I know what you’re talking about in terms of the hard work, Orrin, I thought this was a passive income business.

Orrin Huebner: TikTok, TikTok, TikTok…

Bob Tullio: So Natalie Popovic-Peters, head of global operations for Naturals2Go. You folks had a big presence at the NAMA show. Tell us about what’s happening with your company, what you’re all about, and the impact you’re having on new operators and your hopes for the industry.

Natalie Popovic-Peters: Let me start off by just sharing a little bit about our company, because we were actually there representing two companies, we have Naturals2Go, and we have Vendtech, and we get a lot of questions. As you know, there are two companies here, how do they work together?

Naturals2Go is our business opportunity. So we are the experts in putting people into business — into the vending business specifically. So since 2009, we have placed over 2500 vending operators into this industry, so this is our baby. This is what we’ve done for a really long time, what we do really, really well.

Supporting that brand is VendTech, and VendTech is really our manufacturing and technology arm of the business. So they’re the ones that make sure that we have the best equipment out there, the best technology and everything that our operators need to actually be successful.

Bob Tullio: I think your concept is very timely, especially with the amount of consolidation that’s going on in the industry, and 65% of the industry’s revenue is made up of 10% of the businesses. I mean, there’s been a lot of consolidation out there. Do you agree that this condition creates an opportunity for your up-and-coming operators?

Natalie Popovic-Peters: Absolutely. And it’s funny because this industry has been very fragmented in the past, but I think what’s happening is that people are coming into the business, and especially when they’re coming in with four or five machines and they’re still working a full-time job, but they don’t have all the time and energy to invest in.

They realize they can only do that for so long, so they’re being swallowed up by those people who are willing to invest the money and the time into the business.

With us, we have a unique advantage where we’re a national company, we have local operators, and at the end of the day, every location wants good service. If you provide good service and you provide locations with what they need, they’re not going to want to let you go, and you’re not going to lose that customer. And you can gain more business that way.

With any business that you’re in, you need to be able to serve your customers, right? But I think there are opportunities for the small dogs in the industry to do really well.

Bob Tullio: Last question is for Orrin. If I want to become an operator, how much capital do I need? Give me a number.

Orrin Huebner: More than you think.

More than you think you know. Here, here’s what you want. Where do you want to be? And take it times two.

So, if you want to be a couple hundred thousand in a year, I always say think, think double, and raise as much capital as you can because you just don’t understand what it takes with the trucks and the machines and the product and staying up with everything. I always say: Whatever you think, times two.

Bob Tullio: After listening to this podcast, did you reach the same conclusion that I did? We all seem to be trying to answer one big question. What is driving the continued robust growth? What a great question for our industry to be asking.