Exploring the Vending Horizons
Apartment complexes offer a profitable third market for water vendors
Apartment complexes are springing up in cities and suburbs across the U.S., offering on-site rental agents and maintenance workers, as well as amenities such as pools, tennis courts, laundry facilities and vending machines. Although most have always offered vending machines filled with soda and candy, some are now offering the convenience of vended water.
Without leaving the complex, residents can bring their own bottles, deposit a few coins and leave with water purified by sediment filtration, solid block carbon filtration, UV sterilization and RO technology.
As a low-cost alternative to bottled water, water vending machines have become a feature of retail locations all over the world. Water vendors place the machines inside or in front of stores and connect them to the stores’ water, electricity and drains. For use of these facilities, vendors pay the storeowners a percentage of the profits. Generally, the most profitable locations are supermarkets because water is a planned and repetitive purchase. Secondary markets are convenience stores, gas stations and other small retail locations.
Until recently, apartment complexes have been considered an unreliable third market for water vendors. According to Ron Dwyer, owner of Arizona Water Vendors (AWV), these properties were never seen as a profitable market because vendors didn’t place quality machines there. Instead, they installed new machines in supermarkets, moved older machines to convenience stores and gas stations and placed worn-out machines in apartment complexes. With these old machines, apartment residents rarely received quality water and good service.
AWV is an OEM that manufactures and sells water vending machines. Dwyer saw the potential of placing new machines in apartment complexes, but his conventional machines were too large for apartment vending areas. To overcome this obstacle, he designed and built a smaller machine that would fit through a standard-size doorway.
With the new machine ready, Dwyer and AWV Manager Tracy Boers contacted the Arizona Multihousing Association and began exhibiting at the association’s annual tradeshow.
“We go every year and exhibit a water machine,” Boers said. “We’ve done that for four years. Now we’ve got one of the property management companies actually planning space for the water machine when they build their complexes.”
AWV has been placing the machines in Phoenix-area complexes for four years, and both the company and the property managers are finding success in the market. In the past, property managers didn’t take any of the profits because vending machines are considered an amenity. AWV has a standing offer of 20% of the gross, which is paid to managers quarterly.
To maintain profitability, AWV only places machines in complexes with at least 200 units and has initiated a marketing campaign to increase awareness of the service. The company created an informational flyer that includes a photo of the machine, the price for a gallon of water and an explanation of the RO process.
“We provide those flyers to the property management companies along with a supply of tokens for our water machine,” Boers said. “We have the leasing agents put a flyer and a token for a free gallon of water into every move-in packet.”
Although marketing is necessary to attract new customers, AWV has found that providing a simple, reliable machine keeps the customers coming back. Even though most manufacturers have evolved to computer-controlled machines with various options for payment and vended amount, AWV has continued to use its original electromechanical controller.
“We have stayed with electromechanical systems because your typical water buyer is not a high income, high-tech kind of person,” Boers explained. “We keep the systems easy to operate from a customer standpoint—they drop in a quarter; they push the button; they get a gallon of purified water.”
This system presents fewer problems for operators as well. “When people call us, usually we can solve their problems over the phone,” Boers said. “Our system is simple; either a component has power, or it doesn’t. Because of that, they’re simple to troubleshoot, easy to work on and inexpensive to repair.”
Although computerized machines offer more options, heat and humidity can lead to problems for computer control boards. According to Boers, power to the components doesn’t just stop; it becomes weak or intermittent.
“There’s nothing that will kill your vending business faster than intermittent service,” Boers said. “The whole idea in vending is simplicity and reliability. If they drop that quarter in and it doesn’t work, they’ll go somewhere else.”
AWV provides a one-year warranty on the components and manufacturer’s defects on all of its machines and an unprecedented six-year warranty on the controller.
According to Dwyer, three things must be true for vending machines to be profitable. “The equipment must actually work; it must be clean; and the water must be of a good quality.”
Regular maintenance is key to achieving these features. While the frequency of recommended visits depends on usage, vendors should spend at least 15 minutes on each machine. During this time, they should spray and wipe down the machine, record the number of gallons sold, check incoming water quality and pressure, change filters if necessary, pick up nearby trash and collect the money.
Besides regular maintenance, vendors also must be available to repair the machines and give refunds. “Water vending isn’t put the machine in, plug it in, and walk away thinking you never have to do anything but go get the money,” Boers said. AWV places a sticker with their contact information on each machine and tries to respond to all service calls within 24 hours.
“When customers have enough consideration to call and tell me what happened, I’ll call them or write a letter and send a refund,” Boers said. “I think they really like the personal attention.” wqp