Vending industry feels slack, taps technology
Behold the boxy vending machine: purveyor of the 3 p.m. Snickers bar and unlikely economic thermometer. When shifts get shortened or people laid off, people use vending machines less. So, vending companies have started embracing technology to increase efficiency and sell new products.
Special to The Seattle Times
In vending machines the world over
Toilet paper in Asia
Ballet flats in British nightclubs
Fresh French baguettes in Paris, baked inside the vending machine after you insert your coins
Gold coins and gold bars in Germany
Medicinal marijuana in California
Umbrellas in Japan
Behold the boxy vending machine: purveyor of the 3 p.m. Snickers bar and unlikely economic thermometer.
The vending industry, which typically does more than $20 billion in annual sales in the U.S., has been broadly affected by the recession. When shifts get shortened or people laid off, people use vending machines less.
"That really hits between the eyes," said Jim Brinton, founder of Tukwila-based Evergreen Vending.
In addition, the remaining workers get nervous and tend to save their quarters and dollars, said Dan Mathews, executive vice president of the National Automatic Merchandising Association.
As a result, the industry can sense a downturn coming often before the country becomes conscious of it, he added.
"The vending industry feeds people at work," Mathews said. "The fewer the people working, the greater the impact."
According to the trade publication Automatic Merchandiser, which tracks vending-machine sales of food and beverages, 2007 was a peak year, bringing in about $23 billion in revenue.
But by 2009, total revenue had dropped to around $20 billion, and it in 2010 it recorded only $19.25 billion, the lowest amount since 1994.
Industry experts think vending is on the upswing. Although sales fell again last year, the drop was less steep than it was in 2008 or 2009.
And decreased sales made vendors realize that if they were going to attract new customers, they had to change what they were doing, Mathews said.
Today's vending machines have expanded on the initial four Cs — coke, candy, coffee and cigarettes — that turned vending into a multimillion-dollar industry since its inception in the early 1900s. Generation Y vending consumers also want machines stocked with flavored water, tea, multigrain chips and nutrition bars, Mathews said.
In addition, vending companies have started embracing technology to increase efficiency and sell new products.
Through remote machine monitoring, vendors can track when a machine needs to be refilled and know exactly how many of each product it needs.
Pay-by-credit-card systems, a byproduct of radio frequency identification technology, were introduced, opening up avenues for more expensive product lines.
One company to take advantage has been Best Buy, whose "Best Buy Express" vending machines are found in many of the nation's airports. The machines, thick as safes, vend some of Best Buy's top goodies for travelers, including Canon digital cameras and iPods.
"In a way it was probably good for the industry because they took advantage of the technology available and so many of the operations became more efficient," Mathews said.
Smaller operations who can't as easily invest in upgrading their machines are still having difficulties.
"If you take people's money to buy gas, they stop buying goodies," said Edward Galltin, owner of Debbie's Vending, which has about 20 snack machines throughout the Seattle area. He said some of the places his vending machines used to be have gone out of business. The vending machines, meanwhile, have been relocated to Galltin's garage.
The Seattle area, buffered by the tech sector, often feels nationwide economic declines a little later than other areas, which explains why vending sales in the region didn't drop until nearly a year later than in other parts of the country, said Brinton of Evergreen Vending, which owns and operates about 5,000 vending machines throughout the Northwest.
While other regions have seen their sales start climbing again after a low point in 2010, the Seattle area's sales have remained fairly flat, Brinton said.
The next big thing in the vending industry may not come out of a vending machine at all. "Micro-markets," or small pay-by-kiosk convenience stores owned by vending-machine companies, have given a jolt to the vending industry.
For consumers, the beauty of the micro-market is access to a wider — not to mention healthier — range of products, said Ken Nelson, a spokesman for Avanti Markets, an offshoot of Evergreen Vending.
The markets take up roughly the same amount of space as three or four vending machines but carry several dozen more products. Payments are made through a kiosk machine that looks like an airport ATM and operates similarly to the self-checkout scanner at the grocery store, accepting payment in debit or credit cards as well as specialized Avanti accounts that can be created using the kiosk.
Avanti Markets are located almost exclusively in office buildings with more than 150 people, which makes the venture economically feasible, Nelson said. Because they're unmanned, companies rely on the honor system for payment, but all are monitored by surveillance cameras. The company makes sure chairs and tables are accessible near the merchandise, giving customers a place to sit and chat on their breaks — within proximity to more snacks, of course.
The system works, likely because many Avanti Markets are not easily accessible to the public and the surveillance videos are carefully reviewed.
"Nobody wants to go home and tell their spouse they got fired from their job because they stole a Snickers bar," Evergreen's Brinton said.
The concept also seems to be resonating with people who might shun traditional vending machines.
"It's super convenient — they have almost everything you could want," said Emily Hernandez, who works for the Seattle Cancer Care Alliance. On a recent Friday, she sat with a friend and chatted for 20 minutes at an Avanti Market in one of ZymoGenetics' buildings on Eastlake Avenue.
"It's a lot better than the vending machines," Hernandez said, "because those always eat your money."
Blythe Lawrence: firstname.lastname@example.org.