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Vending machines : Cost of vending machines - and how the business actually works
The business of vending machines seems attractive to many entrepreneurs, who think there isn’t much to do apart from buying the machine, filling it up as needed and collecting the earnings.
It’s a bit more complicated than that: first, the cost of vending machines should not be neglected, and require a significant investment. Then, other operating expenses need to be planned. At the end of the day, profits depend on what you sell: more expensive machines sell items with bigger profit margins. Here’s what should be done, how much you should expect to spend and how much you may expect to earn when investing in bulk machines and soda machines.
Before talking about the cost of vending machines themselves, prospective vending entrepreneurs should understand that there are other related costs so that their business can flourish. All these add up to make up for the total operating cost of vending machine businesses.
Location is everything
Vending machine operators simply don’t want to leave their machines at a place where there is little traffic and few possible customers.
For instance, shops in busy commercial streets should be preferred to dark alleys... But many people does not always mean big profits: installing vending machines in restaurants or canteens has proved to be a wrong option, as people there... get all the food and drinks they want anyway. Finding the right location has a cost.
More often than not, this cost will be materialized by the commissions paid to the owner of the place where the machine is left. Depending on the machine size, expect to pay 10 to 20% of gross sales to the business owner.
Many entrepreneurs in the vending business just think about getting their supplies at the nearest supermarket. But they could significantly increase their margins by getting their supplies from wholesale suppliers. Typically, vending machine operators should look for 200% to 300% gross margins.
Cost of vending machines: bulk machines
Bulk machines usually sell such things as gumballs, nuts, confections, toys and novelties in capsules. These machines are usually considered as a good entry point into the vending machine business, as they are much cheaper to acquire - but they will not earn you much.
Cost of bulk machines
Bulk machines are the cheapest on the market and usually cost between £120 to £180, depending on supported products.
Profit margins and earnings
Although profit margins are interesting in relative terms, earnings are meagre in absolute terms as items sold by these machines are extremely cheap. For example, a single gumball sold at a bulk vending machine for 20p may have been purchased for as little as 1p. Which means there’s a 2000% margin, but also that hundreds of machines, selling thousands of gumballs will be needed to secure a living wage.
Cost of vending machines: soda machines
Soda vending machines have a much higher initial cost, but generate much more revenue.
Cost of soda machines
Refrigerated soda machines usually cost upwards of £2,500. The fact that these machines need a permanent power supply, and actually consume quite a bit of power, also means that shopkeepers and business owners accepting to lend some room to install the machine will ask for higher commissions.
Profit margins and earnings
Typically, a 33cl Coca-Cola can be bought for as little as 20p and sold at 60p, which represents a 300% margin, buy you only need to sell 100 to earn 400 pounds. In order to reach this figure though, you will still need to install more than one machine, in more than one location, as the average profit of a single vending machine location is estimated to be approximately £20 per month.