We see vending machines everywhere these days, and many of us enjoy the convenience they provide. But have you ever wondered what it’s like to run your own? Are vending machines even profitable at all? Of course – if they weren’t, people would not set up so many of them.
There are some things to consider if you want to run a successful vending machine business though. You need to study your local area carefully and pick some appropriate spots, and also do your best to stand out with a more unique offer in a market that’s quite crowded at the moment.
If you can pull it off, running vending machines can turn into a nice stream of almost passive income.
Are Vending Machines Really That Profitable?
On average, a vending machine can bring in around $50 – $100 per week. This depends on many factors, like the type of products you’re selling and the location of the machine. And while it may not seem like much, remember that many entrepreneurs who run vending machines usually handle multiple ones simultaneously. Some have even turned this business into franchises.
You might have to do some experimenting until you’ve found the right balance for optimal profitability. You should start by looking into what your competitors are doing. Here are some questions to ask yourself:
- What are the most popular spots for vending machines in your area?
- Are there any underserved niches?
- Are customers frequently complaining about a certain machine’s issues on social media?
- Is a new company opening soon?
Vending machines can work especially well in small towns with an undeveloped market for them. They are far from the only similar idea – if you live in a similar location, check out these small-town business ideas for alternative options.
What Are the Costs of Running a Vending Machine Business?
Setting up a vending machine business comes with some upfront costs, as well as various long-term expenses. You’ll need good financial backing to get started with this business. All in all, it can cost you $10,000 – $20,000 just to set up your first machine. And if you go with the profit estimates from above, it can take you several years to break even on your investment.
That’s why the optimal approach is to set up multiple machines as soon as you can. If your budget allows for it, you should ideally start with several machines immediately.
Your typical vending machine costs around $2,500 – $7,000 on average. Like with any type of machine, the market varies quite a lot. There are some more advanced models that cost significantly more, as well as some cheaper ones, especially if you look at the second-hand market.
Investing in a high-end vending machine is something you should consider. They usually come with lower maintenance requirements and costs, and may have some features that improve the customer’s experience. For example, they might have a lower rate of error, resulting in fewer incidents of something getting stuck in the machine.
You will often have to pay rent for the space you’re using. This can vary a lot, but you are usually looking at around $50 – $200 per month, depending on the location.
Depending on which state you live in, it can cost you next to nothing to get licensed, or it can be quite expensive. For example, in Texas, you have to pay both a General Business Fee (which can range between $200 to $1,000, depending on the number of machines and the date of submitting your application), as well as a Registration Certificate Fee, which goes between $150 and $300, depending on when you register.
In general, you should always check into whether you need a seller’s permit or another type of general license for selling products.
You’ll obviously need to pay for the items you’re selling as well. There’s no average here, as there are many types of products you can sell in a vending machine – more on that below. But as a rough estimate, you’ll be looking at a 25% profit margin for most types of products. You might also need to pay for storage if you want to always have items available for restocking.
You should invest in some basic repair and maintenance tools. While you can call service professionals to handle all issues that arise, performing basic maintenance tasks yourself can go a long way toward reducing your costs. This won’t cost you much either – you can get a basic set of tools for $100 – $300.
One of the great things about a vending machine business is that you can run it entirely on your own. But as you start to scale up, you’ll want to look into hiring employees. The good news is, most people don’t expect to be paid much for restocking vending machines, and since there are no specific skills required for this job, the hiring pool is quite large.
What Kinds of Products Can You Sell in Vending Machines?
Many types of products are sold in vending machines. Some of those only make sense in certain areas, while others are pretty much universal.
Food and Beverages
Vending machines for food and beverages are probably the most popular ones on the market. You can sell various snacks, drinks, and even warm food and drinks. Placing these machines next to areas with a lot of daytime foot traffic can bring in lots of sales, as long as there is no serious competition around you.
Vending machines for cigarettes and other tobacco products are also quite popular. A good thing about this type of product is that it can sell well in relatively low-traffic areas. Many people find themselves running out of cigarettes in the middle of the night, and having a cigarette vending machine in a populated residential area can be quite lucrative.
If you can place your machines close to an airport, bus station, or another similar location, you should look into selling travel supplies. Inflatable pillows, basic hygiene products, blankets, phone chargers – there are quite a few things that people need while they’re traveling and often forget to bring with them.
Toys and Other Small Products
Setting up in a mall or close to one? Consider selling toys, keychains and other small trinkets. Placing these machines close to the venue’s exit usually works best. People leaving a large shopping center are usually mentally exhausted from their shopping and are more prone to making small impulse purchases. It’s the same reasoning behind all those candy bars and snacks you often see at a grocery store’s checkout.
Advantages of a Vending Machine Business
What makes a vending machine business so attractive in the first place though? It boils down to several factors, including scalability and freedom.
Easy to Scale Up
As long as you have the capital for it, expanding your vending machine business is as easy as buying new machines and setting them up. You should consider creating a plan for expansion ahead of time. Know which spots you want to take next and what kinds of products you’re going to sell there. Take the time to study the market in more detail.
No Need for Physical Office
While you can definitely benefit from having a physical office at some point, it’s not a strict requirement for starting this type of business. At most, you’re going to need a place to store your inventory. You can handle everything else from the comfort of your own home.
Always in Demand
Vending machines will probably never go out of fashion. In fact, the market is growing at a steady pace, and is projected to grow by another 10% over the next decade. You just need to secure deals for attractive spots and understand what your local buyers are looking for. At some point, you should invest in professional market research to continue scaling up reliably.
How to Increase Traffic to Your Vending Machines
This one is a bit tricky. Unlike many other business models, you can’t rely on traditional marketing to draw in customers. When was the last time you’ve seen an ad for a specific vending machine? At best, you might be able to leverage advertising if you’re planning to set up an entire franchise.
Location Is Crucial
Always pay attention to where you’re setting up your vending machines first and foremost. This is probably the best thing you can do to increase your chances of success. Here are some ideas to consider:
- New offices with lots of employees
- Apartment complexes
- Schools and universities
- Hospitals and care homes
Unfortunately, even if you identify a place that could use a new vending machine, you’re not guaranteed to be able to secure a spot there. You will always need the permission of the owner, and you might sometimes get rejected. You don’t lose anything by trying though – so make a list of places and start reaching out.
Word of mouth can be a powerful marketing tool, but it’s not one you can harness reliably. But if you play your cards right and do your best to provide something better than your competition, people will eventually take notice. Make sure your machines are always stocked, clean, and in good working order. This will go a long way in helping you stand out.
Things to Keep in Mind When Running a Vending Machine Business
You will need to stay on top of your game when running a vending machine business. Always be on the lookout for opportunities to improve what you’re doing and explore new ideas. Be mindful of the perils of expanding too quickly without a solid plan as well.
Managing Multiple Machines
Managing a few vending machines is relatively straightforward. Once you get to double-digit numbers though, you will want to look into a more organized solution. There are specialized software solutions – like VendSoft – that can streamline the process for you. Or, if you prefer to save some money and go with a DIY approach, an Excel sheet can still be quite useful in making sense of the whole situation.
You’ll need to keep track of when each machine needs to be restocked, machines with reported problems, as well as your product inventory. You should also get into the habit of optimizing your restocking route once the number of machines gets to a certain point. Otherwise, you’ll be wasting a lot of time just traveling from one machine to the next.
Responding to Customer Problems
You will need to be diligent in responding to customer problems, especially for cases like failed transactions or a product getting stuck. While it can be difficult to spread the good word about your vending machines as we outlined above, the opposite is definitely not true. As soon as one of your machines gets a reputation for being unreliable, you will lose almost all traffic to it. Even fixing the problem might not bring people back at this point.
It’s a good idea to get a comprehensive insurance policy for all your vending machines. Vandalism is going to be one of your major concerns, especially if you operate machines in outdoor areas. There’s only so much you can do to keep your machines protected through traditional security measures, and you should be prepared to deal with your insurance company on a regular basis in some cases.
Frequently Asked Questions
Q: Is a vending machine business a viable long-term investment?
A: Vending machines are very popular, and things will likely remain that way for a long time. As automation and other similar technologies continue to take over, there will likely be even more focus on this type of service. You will likely be able to manage your work more easily thanks to these new solutions as well.
Q: How can I quickly scale up a vending machine business?
A: Always be on the lookout for new locations to set up. Pay attention to events like your competitors moving out of an area, new buildings being constructed, and office relocations. If a major company is moving in close to you, check if they might be interested in having vending machines on the premises. Save up as much money as you can so you can invest in better machines as well. The sooner you start to do this, the more prepared you will be for your future expansion.