Over the past six months, we’ve spoken with an increasing number of distributors interested in buying vending machines from us to mark up and resell to their customers. In some cases, this model has worked out, but in our experience, distributors that approach vending as a service instead of a product tend to see greater success.
Why? Because customers who have thousands of dollars to put toward capital expenditures aren’t going to put that money toward a vending machine (especially when they can get a machine for free from another distributor such as Fastenal). They’re going to put that money toward things that can make them more money. Manufacturers, for example, would rather focus CapEx on payroll and machines so they can produce more parts.
Approaching a vending machine as something to be marked up for a profit, ironically, usually results in less profit. Treating vending as a value-added service and selling tool, though, can help distributors avoid one of the biggest threats to their profitability: customers’ obsession over price.
Today’s buyers have taken the buying process into their own hands and into the digital realm. In response, many distributors have grown e-commerce capabilities, and nontraditional, online competitors like Amazon have entered the space. This continuing shift online is increasing pricing transparency and product commoditization, resulting in an increasingly price-obsessed customer base and putting distributors in the unfortunate position of having to choose between revenue leakage (or even customer churn) and price-driven margin pressure.
Rather than engage in the ongoing race to the bottom, distributors must find something else to offer customers that they truly value. You may not have the resources to offer free two-day shipping to your customers, and you may not have the in-house e-commerce capabilities to offer automatic ordering. But you can give your customers immediate product access and better inventory control by offering them a VMI-powered vending machine.
The price of today’s most affordable vending machines has made it possible for distributors to profitably provide them to customers as a value-added service, even when vending lower-cost items or working with small accounts. The model works because customers looking for better inventory management are usually more than happy to shift some of their spend to the distributor that is providing these benefits.
The most successful vending programs allow customers to maintain inventory control through the machines even while assuring that overall spend will justify distributors’ investment. Learn how to set up a mutually beneficial vending program with your customers in 5 Vending Contract Dos and Don’ts for VMI Success. You can also contact us directly to learn whether providing a 1sourcevend machine will get you the ROI you’re looking for.
Contact 1sourcevend