Urban lifestyle, changing consumer behavior and economic growth have bolstered the market for vending machines
Vending machine dispenses a product or a service, and it is a fairly new concept in India. Economic growth, development of cities, lifestyle and eating & drinking habits have opened a huge market for these machines which can cater to consumers directly. There exists a high potential for growth, both in sales of these machines and goods & services sold through these machines.
Both goods and services can be sold through vending machines. Goods include pre-packed beverages, snacks, newspapers etc. Services include bill payments, recharge cards like mobile talk-time recharges, tickets and so on. There are different kinds of vending machines for different purposes. Some type of vending machines include machines for snacks and beverages (packed foods), hot beverages (tea and coffee), magazines and newspapers, tickets and machines for services like recharges etc.
Sales of goods and services through vending machines are pegged to be worth $1 billion by 2012. According to Pulin Dani of Plus Beverages, a vending machine manufacturer, approximately 12-15% of the potential market for vending machines has been tapped in India till now. So, a huge market is still untapped. Estimates suggest that globally, the industry mix of products sold through vending is 40% for canned beverages, 19% for snacks, 8% for hot beverages and 33% for other products. However, vending of services is a fairly new concept and is expected that the share of services would increase considerably in the coming years.
As of now, hot beverages’ vending machines for tea and coffee has the substantial share in sales of machines in India. These machines are mostly found in offices, shopping-malls and restaurants. However, sales of snacks and beverages machine are picking up and have a huge potential. Potential locations where these machines are installed are train-stations, airports, universities, shopping-malls, offices, hospitals, hotels, fuel-pumps etc.
|Fairly new industry in India|
|Projected to be a $1 billion industry by 2012|
|Changing lifestyle, technology, consumer behavior expected to influence business significantly|
|Only 15% of the market captured till date|
|Machines available on rent too|
|Business point could be supported by just operating 4-5 machines.|
Manufacturing of vending machines is just like any other manufacturing activity. Most of the components required to manufacture or assemble a machine are available in India.
|Growth Drivers of the Industry|
|Changing lifestyles, eating and drinking habits|
|Consumerism due to increasing incomes (economic growth)|
|Upcoming urban centers and corporate culture|
|Technology (making vending easy and convenient)|
|Fairly new industry. Large part of market still untapped.|
However, some sophisticated components and systems like currency recognition system are imported. In India, there are no regulations as such regarding manufacturing vending machines. However electrical equipment norms regarding machines needs to be followed.
|New vending machines available in the market have the option to accept currency (both notes and coins), give the change back in terms of notes and coins, accept payments through cash cards etc
- S Choudhary
The cost of a vending machine depends upon its size, sophistication, payment system and other special features. A typical, small, basic snack & beverage vending machine costs around Rs 40,000 in India on the lower side. A hot beverage machine costs around Rs 10,000 on the lower side.
These machines are also available on rent. In this business model, monthly operation charges are paid to the owner of the machines whereby the owners provide the machine and services such as maintenance or as agreed in the contract. The vending operators (those who install and run vending machines) decide and arrange for the location and pay electricity bills and space rentals. Generally it’s the vending operator that decides on the products to be sold through vending machines. Monthly operational charges for a typical snack and beverage machine is around Rs 7,500. According to Pulin, most of the machines are on rent in the market and are very often owned by the operators.According to a study by the National Automatic Merchandising Association (NAMA), scale of operation does affect the profitability of the operators. However, according to Pulin, businesses can be operated with just 4-5 machines and still be profitable in India.
Main revenues of the vending operator come from the sales of products through these machines. However, other options like advertising seem to have a substantial scope. Advertisements could be done both by displaying products in the front-glass machines or by putting ads on the machine itself.
|Approximately 12-15% of the potential market for vending machines has only been tapped till now in India. So, a huge market is still untapped
- Pulin Dani
In India, conventional vending business models and machines have not done well. Major reasons are consumer habits, non-availability of machines suitable for Indian conditions and the availability of cheap labor. People are yet not very comfortable using these machines because of complications, trust and other factors. Also, currency recognition and especially of notes has been an issue as prices of products is generally such that payments through coins is not convenient. Instances of vandalism and rough use have also been an issue and has deterred installers/operators from making investments in these machines. Machines often break down because of dust, heat etc. Furthermore, availability of cheap labor has come in the way of popularity of vending through machines. One of the major reasons for vending is to bring down the labor cost and especially when labor cost is the major chunk of cost. But in India this advantage has not accrued to vending businesses till date.
Other areas that need to be taken care of is keeping machines well stocked, goods should be quality products, quick repairing in case of breakdown, keeping machines clean etc.
There is a huge scope for machines that are designed and that can be designed addressing the issues faced by old vending machines in India. Currency recognition is a major step to solve the payment problem. Other payment modes such as through mobiles, credit cards also seem feasible. According to S Choudhary, Vice President (Sales), E Cube India Solutions, new vending machines available in the market have the option to accept currency (both notes and coins), give the change back in terms of notes and coins, accept payments through cash cards etc. Also, these machines are being tried to be put on networks whereby information is easily available and thereby increasing efficiency. However, according to Gary Partridge, International Sales Director, Seaga, a vending machine manufacturer, real time networking (telemetry) is an interesting concept but in India it is costly. The information provided would unlikely help to reduce cost and only minimally increase efficiency at this stage of the industry development.
|The exciting aspect in India about vending is that India does not have a long history of vending. There are no pre-conceptions in India about what is vended. So a lot more different products could be vended through vending machines
- Gary Partridge
Other measures like installing machines in safe places like metro stations, hotels etc., where no explicit security is required for these machines, could be a good way out. Changing habits and lifestyle are likely to give a big boost to this industry.
Vending is a fairly new concept in India. According to Gary, the exciting aspect in India about vending is that India does not have a long history of vending. There are no pre-conceptions in India about what is vended. So, a lot more different products could be vended through vending machines. Also, the impact of slowdown on vending business has not been significant. Industry estimates suggest that the industry will experience substantial growth and will lay down opportunity open both for vending machine manufacturers and operators. According to Choudhary, still major part of the market is untapped. Demand for these machines is growing day by day due to advantages like making products available 24*7, not being dependent on anyone or manpower and various other advantages.
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