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Texas operator finds success with just bulk


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Are you serious smiley? Your scenario is hardly worth discussion.

The first vendor spent TWICE as much yet didn't earn TWICE as much.

Who would take that option?

The first vendor in your example had $100.

He should forget the 35% COG product and buy $100 worth of the 25% COG product.

Then his $100 would return $40 rather than the $30 he'd be getting from the $100 spent on the higher COG item.

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Yes, I'm serious. I'll reply hoping that someone finds it worth discussing.

First I'm not sure why the first operator is spending twice as much. He's filling a vending machine with a product with 35% COG vs 25%. That's not twice as much unless he fills the machine at a much higher level.

Second you can get too wrapped up in return on investment and return on sales. It is quite conceivable that the girl with the corner lemonade stand has better ratios than the guy with the mcdonalds franchise. That doesn't make it a better business.

You've got a finite number of machines out there to make a living off of. Assuming that you can afford to buy the better merchandise and that you don't have a more profitable place to invest the money, you should be doing it and making $30/ month/ machine and not $20/month/machine

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Yes, I'm serious. I'll reply hoping that someone finds it worth discussing.

First I'm not sure why the first operator is spending twice as much. He's filling a vending machine with a product with 35% COG vs 25%. That's not twice as much unless he fills the machine at a much higher level.

Second you can get too wrapped up in return on investment and return on sales. It is quite conceivable that the girl with the corner lemonade stand has better ratios than the guy with the mcdonalds franchise. That doesn't make it a better business.

You've got a finite number of machines out there to make a living off of. Assuming that you can afford to buy the better merchandise and that you don't have a more profitable place to invest the money, you should be doing it and making $30/ month/ machine and not $20/month/machine

I see you drank some of that a&a koolaide they where selling a few years back when the prices started to explode.  I remember the speech by Kovens saying that phalates , lead jewelry scare, licensing  and other factors where gonna spike the costs exponentially and we had to raise prices.  He didn't lie or be dishonest ,he was just deciding to lead his company into higher priced merchandise and more expensive displays etc. and since he is really the only "major" player in bulk anymore we all had to follow .

 

Higher priced vends only help one type of operator, that is operator that doesn't want to service all the time, a operator that has large chains spread over long distances(service vending comes to mine) and the biggest factor is gas prices.  Got to spread out time of service on these good corporate accounts or you can't do it.  

 

The only way they can service say a large chain of grocery stores where they are only allowed limited space for small rack is to greatly extend service cycle, this is because along that long route they have mom and pops that don't do the volume but have to have good collection to pay the hourly wage plus gas prices for the service.  Takes just as long to service rack with $20 as it does with rack with $100 in it! and only reason it has $100 is because they waited 3 months to service it. The large grocery in that same town would have been empty if they had cheap good product in it a month ago, so the higher vend price just slows the empty of machine so they don't get service calls as that equals a boot in their golpher over time but still allows good sales if its a hot licensed item like NFL, spongebob, Disney etc.

 

A&A is at mercy of big buyers like service vending and we are just the frosting on the cake and can't really compete with these second generation empires without having money already. Think about it , service had a warehouse full of machines paid for by walmart almost 20 years ago, and they work them and keep those coin mechs turning. Their business model of longer service cycles forces companies like a&a to adhere or bust.

 

if a&a orders 100k of a item you can bet that companies like service,tejas,vendomatic etc. buy over 80% of it. So who would you give a crap about if you where them??

 

The way to compete with these guys is not by doing same, its by having a more close relationship with your locations, put a name with your face, chit-chat etc. The same way the little hardware store in your hometown survives with Lowes down the street.  

 

You can also put cheaper and faster moving product in your machines to undercut their pricing(a kid gets a buck from his mom, does he want 2 toys or 1?), offer amusements like cranes or pushers that make the location REAL money and get them booted. Never let them "exist" in your locations, every chance you get try and get them booted. I hate service vending myself cause I've lost some good stops to their checkbook so i play damage control before the damage is done. I remind the location how big chains and Wal mart etc. have hurt us small businesses and how i patronize his place because he is "just like me".

 

I will not speak his name but a more "un-ethical" vendor I know has stack of "out of order" signs with him always and he makes a point to put out of order signs on service's racks at every location he passes, probably has cost service a million bucks in the last 5 years, i guess they shouldn't have got him kicked out of those couple grocery stores a few years back!! lol

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First I'm not sure why the first operator is spending twice as much. He's filling a vending machine with a product with 35% COG vs 25%. That's not twice as much unless he fills the machine at a much higher level.

 

 

Because you said the first vendor was spending $100 on the 35% COG product.

Then you said the other vendor was buying $50 of the 25% COG product.

If the first is spending $100 and the second $50...the first guy spent twice as much.

 

If they both spend $100, the second guy brings home $40 while the first guy is still only bringing home $30..

Here it is again as you posted it with the numbers highlighted...

 

Would you rather $100 of an item with 35% COGS (including shipping and displays or $50 of an item with 25% COGS

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I see you drank some of that a&a koolaide they where selling a few years back when the prices started to explode. I remember the speech by Kovens saying that phalates , lead jewelry scare, licensing and other factors where gonna spike the costs exponentially and we had to raise prices. He didn't lie or be dishonest ,he was just deciding to lead his company into higher priced merchandise and more expensive displays etc. and since he is really the only "major" player in bulk anymore we all had to follow .

Higher priced vends only help one type of operator, that is operator that doesn't want to service all the time, a operator that has large chains spread over long distances(service vending comes to mine) and the biggest factor is gas prices. Got to spread out time of service on these good corporate accounts or you can't do it.

The only way they can service say a large chain of grocery stores where they are only allowed limited space for small rack is to greatly extend service cycle, this is because along that long route they have mom and pops that don't do the volume but have to have good collection to pay the hourly wage plus gas prices for the service. Takes just as long to service rack with $20 as it does with rack with $100 in it! and only reason it has $100 is because they waited 3 months to service it. The large grocery in that same town would have been empty if they had cheap good product in it a month ago, so the higher vend price just slows the empty of machine so they don't get service calls as that equals a boot in their golpher over time but still allows good sales if its a hot licensed item like NFL, spongebob, Disney etc.

A&A is at mercy of big buyers like service vending and we are just the frosting on the cake and can't really compete with these second generation empires without having money already. Think about it , service had a warehouse full of machines paid for by walmart almost 20 years ago, and they work them and keep those coin mechs turning. Their business model of longer service cycles forces companies like a&a to adhere or bust.

if a&a orders 100k of a item you can bet that companies like service,tejas,vendomatic etc. buy over 80% of it. So who would you give a crap about if you where them??

The way to compete with these guys is not by doing same, its by having a more close relationship with your locations, put a name with your face, chit-chat etc. The same way the little hardware store in your hometown survives with Lowes down the street.

You can also put cheaper and faster moving product in your machines to undercut their pricing(a kid gets a buck from his mom, does he want 2 toys or 1?), offer amusements like cranes or pushers that make the location REAL money and get them booted. Never let them "exist" in your locations, every chance you get try and get them booted. I hate service vending myself cause I've lost some good stops to their checkbook so i play damage control before the damage is done. I remind the location how big chains and Wal mart etc. have hurt us small businesses and how i patronize his place because he is "just like me".

I will not speak his name but a more "un-ethical" vendor I know has stack of "out of order" signs with him always and he makes a point to put out of order signs on service's racks at every location he passes, probably has cost service a million bucks in the last 5 years, i guess they shouldn't have got him kicked out of those couple grocery stores a few years back!! lol

Spot on Ron.

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We try to balance prem products to lower cost products to find a good balance. Often the better higher cost products will turn more units. We have been throwing out quarter one inch next to SV racks just little 4 and six ways. 30% total cog displays and freight incl. in six week cycles most are selling out. The thing about us independent operators is we can change and adapt to the location or environment fast. SV can't they are stuck on hight points and cycles or they are out. Keep in mind they need every single type of account also even that 15.00 one we pick up. All those crap stops add up for them. When going after their crane accounts keep in mind that they must have them set very high if not they could not last the cycle.

I go to auctions for closed supermarkets and have seen more than a few times SV cranes and racks auctioned off lol.

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Ok. I see the problem. My post is missing the word "sell". Typo

 

Got it.

Your point is understood. I see where we went off-course now. ^_^

 

You've got a finite number of machines out there to make a living off of. Assuming that you can afford to buy the better merchandise and that you don't have a more profitable place to invest the money, you should be doing it and making $30/ month/ machine and not $20/month/machine

 

Now that I understand your point...

 

You are basing your theory on the idea that higher COG equals higher sales volume.

This is faulty. One does not regularly equal the other.

Everyone's mileage may vary, of course.

But, I've had my share of dogs with licensed product.

And I've had my share of HOT sellers out of some very low COG product.

Each instance has occurred too regularly to consider it the "exception" but not regularly enough to consider it the "rule".

So I just consider it the peaks-and-valleys of the vending industry.

These peaks-and-valleys is why a lower COG is often more appealing.

 

cmiller states that we can water down a high-cost product with low-cost product in order to control overall COG.

But, if higher costing product equals more products sold, then wouldn't watering down product lower sales totals?

 

If we believe the higher COG product results in higher sales numbers, we must also believe watering it down by mixing it with lower COG product will lower the number of sales per cycle.

Can't have it both ways.

And as you lower your sales volume, the higher COG product becomes less appealing since higher-number-of-sales was what made paying a higher COG worth the investment in the first place.

 

There is also the law of diminishing returns.

There are only going to be so many quarters per location.

Some communities will not support the $1 price point.

And pricing your vend at $1 MIGHT put you in direct competition with more than just other vending companies.

I've seen grocery stores, dollar stores, and retail stores sell some pretty cool toys at $1 and some decent impulse items at checkout counters for $1, too.

If parents are going to pay out a dollar, the kids/customers will have much more appealing options on a store rack than in your machine.

 

I don't pretend to have the formula for success. Because I don't.

I just believe we can't put enough emphasis on the importance of watching our COG's and keeping them low.

Otherwise we may wind up working 80 hrs a week and learn too late that we only made $2 an hr.

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Ok. A number of good points to discuss. Your first point about higher cost merchandise not necessarily selling better is spot on. All items must be tested. In multiple locations. The better selling product gets reordered. Or more precisely, the more profitable product gets reordered.

Your second point about watering down the product is somewhat true. Sometimes . I have found that a mix of similarly themed items of different values can sometimes increase sales. The logic possibly being some customers will keep spending till the get what they want. I have also seen a mix kill an item.

Your final point on raising prices I agree with. Some locations can't support the higher prices. My example doesn't say anything about raising any prices

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