Thoughts on .50 cans vs .60+ or .75

[uofajoe99]

Next week is our first official week with about 16 locations snack and soda.

Most of the soda machines are cans selling for .55-.65. The guy we are buying from had no clue on how to program the machines and didn't raise prices accordingly with the rising costs. My contention is that we can immediately raise the cans to .75. Logic is that when someone puts a dollar at .55-.65 that they aren't getting any "additional" product from machine with the change so we should go ahead and bump it up to pay for rising fuel prices/cost of goods/and to pay off the previous owner quicker.

Now our best location is a small shipping factory that has three coke machines. One bottle at $1.25 and two cans at .50 (also a snack and coffee).....The can machines are the busiest machines on the route. My thought is that these "factory workers" are putting in a dollar and then reinserting the .50 to get a second drink. At this location I am worried that moving to .75 will eliminate this. Go with the Wal-Mart idea and sell "more for less...?"

Thoughts...opinions...experiences...

[Summit Vending]

How are your 20oz bottles selling at this location? This is just some quick math and speculation but you are probably paying around $7.00 per case for 12 oz cans so you are profiting about .20cents per vend selling at .50 which equals out to about a $4.80 profit per case. Even with the idea that you are selling them two cans with one dollar at .50 you would still make more per vend selling just one can at .75. I would also assume that you would have an increase in sales in the 20 oz machine as well once the increase goes into effect.What I would do and this is just my opinion is post a letter on the machine informing them that due to rising costs (wholesale and gas) that starting in 15 or 30 days prices for 12 oz cans will increase to .75 which is still a fair price to charge considering the economy. I think you will be appreciated more if you give the workers the opportunity to get use to the idea that the price is going up rather than just a quick price increase overnight. Again just my opinion.

Brian Goodman

Summit Vending LLC 

[coinvestor]

uofajoe99'

Did you say that next week will be your first week? If this is true I would not raise your prices yet. I agree that your prices need to go up, and its an easy case to make to the location when they are this low, but timing is very important. When you take over an existing route you eliminate any obligation that they may have felt to use the previous vendor for whatever reason (he's just a nice guy, he gives good service, his father retired from here). You need to establish a relationship prior to any price increases. I would wait 3-6 months before raising prices, if not this may be the deciding factor in whether or not to find a new vendor (even if the new vendor would have higher prices). When I consider taking an existing location part of my decision is made from knowing that I am stuck with the current pricing structure for awhile.

In my area the machines in front of Walmart have always been notorious for having low prices. Recently they have all gone to .75 a can for Coke and Pepsi products.

I agree with summit. Always give adanced noticed. This will spread out your price haggelers across a few weeks rather than all of them getting you in one day:) It will make it easier to go into work. I usually post the letter on the machine for 3-4 weeks. Make sure that your letter states the things that people already know this will help people sympathize with you. Here is the beggining of my letter:

"Like most business that are food and transportation based, we are seeing a significant increase in the in the cost of our products and the cost to transport. The increased cost of gas has not only increased our operating cost, but the operating costs of our suppliers that they then pass on to us. This leaves us paying more for our transportation, and also making less to cover this expense."

JD

 

[coinvestor]

Ohh, I forgot to add:

Don't take a quarter price increase at one time. You will shoot yourself in the foot. I think a .15 price increase at one time is the highest I would ever do at one time in a good location that I intended on keeping. Pricing problems with accounts can take awhile to get right, so the best thing to do is avoid them and make sure that you are not creating the same situation in other accounts.

I had a guy tell me that the most important thing in vending is volume. Volume is not number one. Number one is margin, number two is volume. I will add that this guy also had pricing issues. I used to work at a manufacturing place where the joke was that "we loose a little money on each one, but we make it up in volume"

Just my thoughts!

It sounds like you have a good account there inspite of there pricing issues. How many employees do they have?

JD

 

[uofajoe99]

Don't know the number of employees at each location.

I understand the logic of not raising prices in my "first week" but in all honesty we aren't showing our face just yet. We are purchasing this route and in the beginning we are going to make it look like we are just helping him with the work. In a couple of weeks/months after we build up a good working relationship with the clients we are going to say "well I've been doing this and that for him and now I think he is going to go ahead and sell it all to me." We think that this way will ease peoples worries from "switching" so abruptly to a new vendor.

Definitely going to "butter up" the change in prices with a letter, even though I think people understand the price increase anyways. Unfortunately many of them feel the crunch everyday............

Next week is going to be fun/challenging. Most of the locations are decent, but many need some TLC. I am going to have to replace many stickers, adjust prices, and fix some bill validators here and there.

Most worried about the snack end of things. Can't tell if he was running the machines down very low because he was selling to us, or if he doesn't stock as much because of shelf life. Nevertheless it seems like the machines have TONS of spots to feel and I have narry an idea on how to feel them all.

[tedk]

"Nevertheless it seems like the machines have TONS of spots to feel and I have narry an idea on how to feel them all."

 

If you go to Sam's you will probably see a big sign at the end of the confectionary aisle showing their top 20 sellers for candy. Use this as a starting list for a product selection sheet. Ask the fellow you are buying the route from if he has such a list. Then look at some other machine in public ares and see what type of products they offer. Create a modest list (it will expand on it's own) and submit it to your locations to see what their preferences are. 

Depending on how long it is going to be until you announce that you have taken over the locations, you could let him raise the prices and make him the "heavy".

Ted