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the company, who handles the deduc- tions from the employee's paycheck. "Beside the increase in sales, the oper- ator also benefts from not having to pay credit card fees on those payroll deductions," said Allahyar-Steiner. Mobile payments are another dimension to this changing micro market payment trend. "Last year, smartphone purchases accounted for about 4 percent of total purchases in our stores," said Patrick McMullan, vice-president of Three Square Mar- ket. "Year-to-date that is now over 16 percent." It's not just consumers going mobile, however. McMullan says that in that same year, 20 per- cent of their operators started using the company's back-end mobile app to manage their micro market busi- nesses with varying degrees. Software and new technologies are only part of today's micro market landscape. Operators are also learn- ing how the micro market business differs from vending and OCS. They are educating themselves on ways to earn the best profts and initiating best practices that will ensure their future success; and for most, that means overcoming challenges, too. Operational challenges One of the diffculties for operators adding micro markets is deciding how much time and what resources to dedi- cate to the segment. "A lot of operators have internal goals to convert a percent of their business to be micro markets," said Joe Hessling of 365 Retail Markets. "That can be diffcult for a brick and mortar company with existing person- nel." One of the busiest people at 365 is the installation assistant, according to Hessling. Operators are trying to keep up with demand by working through challenges of incorporating or adapt- ing their business structure to include micro markets from warehouse space to inventory management and delivery. Hessling would estimate that operators are able to install a combined 4,000 micro markets a year, across the coun- try and across equipment suppliers. However, as operators hire personnel and gain experience that number will grow. "I can see it soon being 6,000 a year," said Hessling. What's after low hanging fruit With the expansion of micro mar- kets happening rapidly, many micro market suppliers anticipate that the market will mature in the next 6 years or so. Current estimates of the number of potential micro market loca- tions vary between 40,000 locations to 75,000 locations in the U.S. "The 40,000 placement number is very con - servative," said Joe Loparco, REVIVE's vice president of sales and marketing. "That projection was based on the mis- taken belief that only locations with at least 250 employees would be proft- able. With higher per capita spends and much better margins, even 100 to 150 person accounts can be proftable. This is especially true if the micro market supplier doesn't charge commissions on product sales or upcharge credit card processing fees." But what comes next? Will micro markets ever be able to service the locations with 100 people or less? "That is the challenging part for the micro market industry," said Steve Bryant, national sales manager for Microtronic US, LLC. Once all the best locations are taken, the industry will have to evolve again to meet demands of the smaller locations. Micro market suppliers are already introducing new kiosks for the smaller workplace and developing leaner micro market turn- key solutions. "The concern is Can the micro market systems be priced so the smaller accounts can still be prof- itable?" said Bryant. "One of the unique things about micro markets is that there are advantages to opera- tors, locations and customers. It's an exciting industry to be in right now." Technology will unlock locations Many suppliers are looking to technol- ogy to solve the problem of meeting the future demand for proftably serving accounts with fewer employees. Inno- vations in technology can and will be adapted to enhance the micro market systems. Suppliers are also betting on wider applications for micro markets as theft prevention tools develop. This will open the business of micro mar- kets up to hotels, hospitals, clubs, schools, transportation and more. With a few tweaks, micro markets could allow vendors to break into the automated inventory control and distribution segment as well. Despite what the future holds for the micro market operator, getting there will mean utilizing the great- est opportunities of today. Right now operators can work with micro market software to better utilize the systems and engage the end user. As more consumers and loca- tions learn about micro markets, the requests for these systems will rise requiring operators to plan and execute long-term business solutions. Despite the looming market satura- tion, the software and systems of micro markets offer the proftability and fexibility an operator needs. The next generation of automatic mer- chandising is here and thriving. '' Can the systems be priced so smaller accounts are proftable? '' Steve Bryant, National Sales Manager, Microtronic US, LLC 34 Automatic Merchandiser VendingMarketWatch.com October 2014 M I C R O M A R K E T S O U T L O O K