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MICRO MARKETS 1. Embrace the retail environment The frst thing vending operators have to understand is [a micro market is] retail, and not vending," said Joe Hessling, CEO of 365. "Not portraying a retail experience means micro markets can be a disadvantage if operators aren't paying attention," Hessling said. He believes this starts with quality looking displays from the shelving racks to the micro market kiosk. "We pay a little more attention to the way a store looks," he said. This is a sentiment shared by Michael Coffey, vice president of strategic initiatives for Canteen Vending Services. "We see lots of operators entering micro markets by the lowest cost of entry," said Coffey. That includes getting free coolers and shelving from suppliers. Coffey has had greater success with a more sophisticated looking presentation for Canteen's micro markets, called Avenue C's. Presentation is only a portion of retail merchandising however. One thing that is more important is how the products are displayed. Coffey recommends zones of product, more like the aisles of a grocery store. "It has to be consistent with how customers shop for retail," he said. Coffey's other tips include bundling products together, such as cookies and milk, having featured items and offering discounts. He recommends planograms in micro markets and believes in once a quarter addressing the bottom 25 sellers. 2. Hire dedicated drivers with merchandising skills Because the look of a market and the products inside are so important, it requires special attention from the service provider. "A vending machine does frst in, frst out 32 Automatic Merchandiser Shrinkage and inventory Another piece of the retail environment micro market operators must accept is a certain amount of shrinkage. Vending management software and handhelds have helped eliminate this from vending, but it does exist in micro markets — although at a very low percentage. "My shrinkage across the board is 1.5 percent," said Jim Brinton, CEO of Avanti Markets and Evergreen Vending in Tukwila, Wash. Some locations are as high as 2 to 3 percent, while some have virtually none, and it's diffcult to predict. Aaron Speagle, CEO of Breakroom Provisions, and Piedmont Vending in Hickory, N.C., accepts average losses of 2 percent. "That's about the same as a grocery store," he said. Inventory of the micro markets is handled in many ways. Brinton does inventory monthly and has drivers spot check each category during service visits. Drivers are able to spot a theft problem even before the inventory, because they will arrive with less product than they actually need to fll the space back to par level. Speagle, on the other hand, has a manager inventory the entire market every three months. [automatically], but a micro market operator has to be involved in merchandising," said Jim Brinton CEO of Avanti Markets and Evergreen Vending in Tukwila, Wash., which currently operates 250 micro markets. He trains his drivers to rotate product and be aware of stales. This special attention to detail is why some vending drivers just aren't right for servicing micro markets. VendingMarketWatch.com April 2013 Instead many operators hire drivers outside of vending. Aaron Speagle, CEO of Breakroom Provisions, and Piedmont Vending in Hickory, N.C., tries to hire drivers who once stocked shelves in grocery or convenience stores. "They know how to create the right presentation," he said. 3. Understand the needs of the new client Micro markets have created a meal stop for customers. "It's driving a lot more customers to buy full meals versus just snacks," said Brinton, "so operators have to have enough of those items." Offering a full meal includes different kinds of fresh foods as well as the snacks and beverage options to pair with them. Specifcally, hot beverages are evolving in micro markets. The clientele visiting these new formats likes having single cup options, which more micro market operators are adding. "In our micro markets, we're running Keurig type single cup, Tassimo and even some Starbucks iCup brewers in large locations," explained Brinton. He sells these in addition to traditional coffee service being offered elsewhere by the location. "What really goes up in a micro market is the premium beverage, healthy and fresh food," said Coffey of Canteen. For example, in the Avenue C markets, 11 percent of the total sales are from specialty salads. The price point of these salads is $5 to $6, nearly double what can be charged for salad in a food vending machine. "This is a new customer that never used vending before," said Coffey. Micro markets are a sales growth area for vending, but also a different business model. It requires even more of an eye towards merchandising and picking the right products to really make the micro market a success.