Congratulations! You’ve secured your next big account! You’re about to order some vending machines and get started. However, upon looking a little more closely, this location could also be a prime candidate for a micro market setup, too. So what should you install? Vending machines or a micro market? Let’s run the numbers to see what makes you more money.
VENDING MACHINES OR MICRO MARKETS?
In this breakdown, we’re considering a 200 person, white collar account with no in and out traffic.
Let’s start off with up front cost. If we install four vending machines, two snack and two beverage, our up front cost is around $10,000. If we install a micro market setup with two snack racks, two fridges, and a food cooler, we’re looking at around $12,000 in up-front investment. In this scenario, micro markets have a bigger upfront cost, but what about potential revenues?
We can calculate sales numbers for both setups on a per person basis. For a vending setup, data shows that the average customer spends around $7 a month. With micro markets, an average customer spends around $20 a month. Customers tend to spend more at markets due to higher ticket items, added repeat purchases, and a more diverse product offering.
If we calculate those monthly purchases for each employee, we can see that our monthly revenues with our vending setup are $1,200. With our micro market setup, those revenues are $4,000.
Of course, there is a cost to fill and service both of these setups. For this example, we’ll consider a 40% margin on monthly revenues. As a result, monthly operating margin, or the amount of revenue you can consider profit, for four vending machines is about $560. For our micro market setup, we’re taking home $1,600.
From here, we can calculate our break even point. With the monthly profits vs. initial investment costs, you can expect to break even with four vending machines in about 17 months. To break even with a micro market, it will take you about 7 and a half months to break even and recoup your initial investment.
Let’s take our profit figures and extend them over a year. Your expected annual gross profit from the vending machine setup is $4,800 / per year. With a micro market, your annual gross profit will be around $19,200.
WHICH SETUP WINS OUT?
So vending machines or micro markets? In this scenario, a micro market setup is the clear winner in terms of profitability. Sure, it costs you more money upfront, but the higher monthly revenue with a micro market leads to much bigger profits in the long run.
With micro markets, not only do you gross more per year, but you get several added benefits as well like Fewer Service Calls, Higher Margins, More Product Offerings, Higher Customer Engagement, Better Accounts, and improved account retention.
Are micro markets always better? Maybe not. A micro market setup might not work in every vending account.
But the next time you eye your next big account, why not try and make it a micro market account? You may spend a little more upfront, but your wallet will thank you in the long run.