Automatic Merchandiser serves the business management, marketing, technology and product information needs of its readers including vending operators, coffee service operators, product brokers, and product and equipment distributors in print.
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20 products for sale 10 products for sale ADAM JOE 4 Days of Supply 7 Days of Supply 91 Deliveries per year 52 Deliveries per year $9,100 Supply Cost $5,200 Supply Cost 3 telemetry roadblocks and how to fnd solutions By Jim English, Contributing Editor Vending operators embraced telemetry hoping for increased profts, but sound business analysis is required to use the technology effectively. Y ou've probably read a dozen articles about cashless and telemetry over the past few years. Most of them provide a wonderful story of how technology will allow operators to sell more and service less. The real question is — if the success is real, why are we still sitting in 2013 with less than a few hundred thousand connected machines across an industry of more than 5 million? The answer is simple, for the most part we've only heard half the story. A few years ago an operator from New Orleans, La. was explaining telemetry to a group when he made a simple but prolifc statement, "We don't know what we don't know." At the time he was talking about the need for daily sales data. Little did I know, but that statement was one that would be repeated over and over 8 Automatic Merchandiser through the years. The story of telemetry 2.0 starts with a few more things we didn't know, but need to understand, to fully leverage telemetry. 1. We didn't know how our decisions impact the bottom line. The concept of proft in vending is straight forward enough — take as much money as possible out of the machine every time you open the door. There are a couple of major variables to manage: pricing and product margins as well as service costs. Simple sure, but truly one of the most complicated problems I've ever come across. Why? Because vending is a capacity constrained environment where every decision: equipment, assortment, pricing and even other equipment on site all have an impact VendingMarketWatch.com May 2013 on proft. Vending is also unique because our service costs are much higher than traditional retail and because they can vary signifcantly by item. In a typical retail environment the focus is on gross margin — in vending when we leave out service costs, we miss the biggest variable on proftability. Indeed vending is one of the few places where you can make less money by selling more product. Don't get me wrong, gross margins matter, but they may vary by 10 to 20 percent between items where service costs can vary by 10 times that. To explain this concept let's suppose we have two nearly identical operators, Adam and Joe, located side by side in identical warehouses and are supplied by the same distributor who charges $100 for every delivery. They both have the same total sales and gross margins but Adam sells 20 different products while Joe only sells 10. Because he carries less inventory of each item, Adam requires a delivery every 4 days while Joe can wait to be supplied every 7 days. Who's business is more proftable Adam or Joe?