If you are considering getting into the vending machine business, now might be a good time. Industry insiders report that the global vending machine market will reach $25.25 billion by 2027, up from $18.28 billion in 2019. That's a compound annual growth rate of 6.7%.
Experts attribute this projected growth to an increase in the customization of vending machines and an uptick in demand for touchless purchases. Today, along with selling snacks and sodas, you can have a vending machine made to carry just about anything from personal protection equipment (PPE) to false eyelashes to items that cater to specialized businesses like laundromats and car washes. With technology making vending machines smart — machines can now be programmed to accept cashless payments and to integrate with smartphone artificial intelligence (AI) — the industry has a promising future.
While you may be considering the vending machine business as a full-time or part-time way to earn passive income with relatively low start-up costs, it's important to recognize that there will be capital outlays and time involved in running the business. You will need to purchase and stock the machines, which will have to be regularly restocked and periodically maintained. The type and number of machines you own will determine how much hands-on effort will be needed to keep your business running smoothly. Fortunately, with the availability of business accounting solutions, running the financial aspects of your business is easy, freeing you up to concentrate on making your vending machine company profitable.
This article explores how to make money in the vending machine business and provides insights into:
- What market trends reveal about which vending machines will be profitable now and in the future
- What to consider when looking at startup costs for your new small business
- How to select the right location for your vending machines
- How to manage all the paperwork, recordkeeping, and accounting that comes with starting and operating your own vending machine business
Selecting the Best Vending Machines for Your Business
With so many choices, it can be difficult deciding which types of machines will best meet your budget and your needs. Many small business owners new to the vending machine business will start out with one or two machines, secure suitable locations, and then expand into more machines and areas as they begin to see a profit. Setting up an accounting system to track what you are spending and what your return on investment (ROI) is will help you decide which vending machines to buy and when.
Bulk Vending Machines
One of the most affordable types of vending machines with the biggest profit margin is the bulk machine. Bulk machines are those low-tech dispensers of gumballs, other candies, and toys you see at playgrounds, parks, and restaurant waiting areas. While they aren't exactly modern marvels like the latest high-tech vending outlets — the basic gumball machine design hasn't changed much in decades — these low-cost, high profit margin machines are a great way to enter the market with little risk.
You can purchase a new Rhino classic bulk candy machine for under $100 and can find refurbished machines for half that amount or less on auction sites and through private sellers. Fill the machine with gumballs — less than $35 for a package of 850 — and you're in business. At $0.25 a gumball, you can pocket over $200 from that one starter machine. Find a good location for your machine — any place where kids congregate — and you can count on sales. With the low maintenance costs of bulk machines — most are mechanical devices with few moving parts that don't require electricity or battery power to operate — you could start turning a profit in no time.
Food and Beverage Vending Machines
Think of the last public place you went to that didn't have a drink or a food machine. It's not easy to come up with one. These types of vending machines are everywhere for a reason: Americans love their snacks and ice-cold drinks.
Snack machines stocked with savory and sweet treats like chips and chocolate bars and cold drink machines stocked with Pepsi, Coca-Cola, or other soft drink products, water, and iced tea make up the largest share of the U.S. vending machine industry — almost 30%. The margins for these items are impressive. A 12-ounce bottle of water will cost you less than $0.50 wholesale but you can sell it in your machine for $2. A small bag of chips might cost you $0.35 and you can easily command $1 for it in a machine.
You might want to think about offering some healthy vending items in your snack and soda machines. Sales of zero-sugar beverages, low-calorie drinks, and natural low-sugar healthy snacks are surging and trend-watchers say this growing preference for healthier alternatives in snack vending machines will continue.
The mechanical machines needed to dispense multiple products are larger than the single-product bulk machines and are significantly more expensive. Prices typically start at around $2,000 per machine. Electronic machines that take credit cards and have more sophisticated functionality can cost $3,000 and up. While these machines attract more consumers, they require more mechanical maintenance, time, and effort to keep items stocked, factors that will play a part in determining overall profitability.
Ice Vending Machines
Selling ice via vending machines can be very profitable. Ice has an almost unlimited shelf life and is a popular item that costs very little to produce. Taking the national average for water and utility costs into account, your costs to produce 100 pounds of ice in an ice vending machine will approximate $0.25. If you sell a 20-pound bag of ice for $1.75, you stand to profit about $1.60 per bag.
Of course, you will have to find a good location for your ice vending machine and shell out the cost of purchasing the unit, which can run $20,000 and up.
Specialty Retail Vending Machines
Specialty retail machines — think inedible items — are the vending machine owner's new black. With machines stocking every type of vending product you can think of — electronics, OTC medicines like CBD items, clothing, and jewelry, to name just a few — it is no wonder that this category grew from 7.7% to 22.8% in 2019 alone. Vending machine operators looking to diversify their vending businesses are confident that there will continue to be growth in this sector.
Most machines used for these types of items are the higher-tech electronic machines with loads of bells and whistles — almost all have card readers and some allow you to select an item, pay for it, and tell the machine to drop it from the display into the sale slot from your smartphone. Higher-end goods can give you bigger ticket margins, but equipment and maintenance costs — not to mention costs to procure inventory — are going to set you back more than investments in more traditional vending options.
Find the Best Vending Machine Locations
One of the biggest considerations when deciding which type of vending machine you want to purchase and which items you will carry is location. If you have access to places that young children frequent with their parents, you might want to start off with bulk candy machines and/or snack, drink, and toy machines that appeal to those customers. If, on the other hand, you can place your machines in high-traffic areas frequented by well-heeled consumers, you might want to throw your hat into the consumer goods vending arena.
Ideally, you will find suitable locations that are frequented by the demographic you want to target. Hopefully, these locations are not already overwhelmed with convenience stores and/or other vending machines that interfere with your vending machine profits.
Try your best to include the location in your business plan, aligning machine type, product, and location with a well-defined target market.
How Skynova Can Help You Run a Profitable Vending Machine Business
The vending machine business can be very profitable if you carefully consider the available options and assess their viability based on location access, how much return on investment you need, and how long it'll take to see that ROI.
Skynova's business software and templates will help you perform all of the recordkeeping, accounting, and business process tasks necessary to start and run a successful vending machine business. Sign up for a free account and get started today.
Notice to the Reader
The content within this article is meant to be used for general guidance and may not apply to your specific situation. Always research the viability of any potential new business venture thoroughly and, when prudent, consult with experts in the field. It is also advisable to seek advice from a professional accountant to ensure that you're meeting accounting standards in connection with any business matter.