One of the hottest industry trends sparks opportunity for dealers everywhere
By Adrian Thompson, Polela Concepts
Its time has come. The concept of water vending is simple: The customer owns his own bottles and fills them at his convenience. An added bonus is 24-hour access. Savvy operators offering external water vending units also provide bottle sterilizers located inside their stores. Typically, sterilization is provided free of charge and is a great way to increase traffic inside the store and attract sales of other store items.
Water vending provides a fantastic opportunity for existing water business operators to expand their business into areas that are too small or difficult to service profitably. Water stores usually start small but end up having to increase staff as business grows. A vending machine in a storefront can ease additional labor requirements. At an average cost of $3,300 (United States) or $5,000 (Canadian), it is easy to see how quickly a business owner can offset the machine cost by avoiding the hiring of additional employees. Extended hours of operation and the flexibility of not having to be open seven days a week are added benefits.
"Water vending machines rapidly are becoming a major part of the bottled water industry in the northern United States and Canada," says Stan Brooks of Mobetta Water. "As a supplier to purified water operators, our sales of vending machines increases dramatically each year. The southern United States has enjoyed the use of water vending for many years through outdoor freestanding units similar to pop machines. These operators have recognized the fact that the real cost of water is not in the purification, but in labor, bottle washing, storage, transportation, bottle replacement, etc."
Most water delivery operators have customers who pick up water from them vs. having it delivered. The addition of a vending machine is inexpensive if the purification system already is in place. The service offered to customers is improved with access
at times that best suit the customer's schedule. Water vending also safeguards operators from customers migrating to alternate cheaper water suppliers. By being first in an area, an operator may slow or halt other operators from placing vending machines in their area of business.
Supermarket in-store filling stations almost always are located at the rear of the store, making it awkward for customers to purchase any quantity of water larger than five gallons. External water vending units dramatically change this. Customers are able to drive right up to the machine(s), reducing the distance the water has to be carried. Filling is fast with the average five-gallon container taking about 90 seconds. The savings are undisputed.
A problem experienced in the northern United States and Canada is the freezing of outdoor machines.
Window-mounted vending machines solve this problem by being heated from the inside of the building. A spring-loaded door, open only for a short time during filling, prevents freezing. The use of incandescent bulbs in the filling cavity provides additional warmth to protect against freezing. Some operators choose to install a vestibule for placement of machines, providing greater comfort to customers.
Coin acceptance requirements are different between the United States and Canada. The United States has minted a dollar coin while Canada has both the $1 and $2 coin. In addition, Canada also has several different versions of most coins, some being solid nickel and others plated. This results in the requirement for more sophisticated electronic coin mechanisms. Operators should ensure that machines selected come with an electronic coin acceptor. This safeguards the capital investment against change.
There are several ways to accept money through the machines. The simplest and most trouble free is a straight coin acceptor. Many operators choose this method as the cost to purchase and maintain equipment is low. There are few moving parts and service requirements are rare. A downside is exact change is required. But most customers are repeat customers and know the coin requirements. Coin changers offer the ability to provide change to the user. The upgrade expense is fairly significant at an average of $500-$700 (United States). A bill validator can be used in conjunction with coin changers for more convenience at a cost of $450-$600 (United States).
Some operators also offer prepaid cards. This provides cash up front and allows the operator to offer volume and frequency incentives to increase customer loyalty. Prepaid cards and the card readers required to use this technology are extremely varied, with multiple platforms that usually are not interchangeable. Operators should consider a card system carefully. Purchasing a machine with a card system often can restrict the owner to a single manufacturer's system. Some systems allow programming through the machine's card reader itself, while others require a separate programming unit. Programming can be cumbersome if different card values need to be programmed. Problems with cards include complexity of programming, the requirement for operators to buy and stockpile cards for programming as well as loss and damage to cards by customers. Customers frequently forget cards in machines at the end of a fill. Unfortunately, operators have no way to know the remaining value left on a card should they choose to replace it. Many operators will not replace lost cards, which often can mean disgruntled customers. Database systems that manage the value of a card (similar to a bank card) typically are cost prohibitive. Credit cards are not considered viable as a payment option. The merchant fee per transaction is disproportionate to the value vended and makes a phone or cellular connection at each vending location a requirement.
Business owners considering water vending machines also should be aware of the impact of the machine's electronic design. Most machines on the market use more-than-15-year-old cigarette vending machine technologies. Typically, four different control boards are linked together inside the machine, resulting in more than 150 wire connections. Servicing of machines using outdated technology can be both difficult and expensive with no local technical people trained to work on them.
Another consideration is safety. For obvious safety reasons, machines with a 110-volt power bar located in the base of the machine, where water could run into live outlets, should be avoided. Check for companies that offer machines with a single control board to manage all coin and water management functions.
Interest in water vending is exploding in Canada. Businesses that express interest in such technology include water stores, water delivery operators, auto parts stores, U-Brew stores, vacuum stores and car washes.
Potential operators wanting to select the best water vending machine need to consider a number of factors. One of which is the number of different vend sizes a machine can handle. If a machine is capable of handling only 5-gallon containers, customers wanting to fill 1-, 2- or 3- gallon containers will go elsewhere. Selecting a basic mechanical coin mechanism can prove costly in the long run. These cheap mechanisms often are capable of accepting only one coin denomination (e.g. $0.25). This will prove problematic with the increasing demand for the dollar coin. This could prevent an operator from running special promotions or easily changing pricing to remain competitive should another vending operator start up in the near vicinity.
Additional machine features also should be considered. Audit controls allow the operator to compare money deposited against that collected. This allows added security if employees have access to the machines. Audit controls also allow operators to place machines in alternate locations and pay a commission on sales through the machines. Information also is provided for specific vend sizes, thus allowing operators to target their marketing efforts more effectively. Other features include an inactivity flush function that flushes water thru the unit if the machine is inactive for an hour or more. This serves to cool the ultraviolet unit and prolong bulb life.
Inevitably, all equipment will require servicing at some point. Potential operators should ensure that the machine is simple enough for them to work on themselves or with minimal assistance from any competent water or vending technician. Simple electronic board replacement should be possible as well as easy access to plumbing parts and assemblies.
Ensuring that a machine can be upgraded to deal with the future growth of a business is another factor to consider. Operators may choose to purchase a coin acceptance only unit at the outset, but may need to upgrade to a coin changer and bill validator later on.
Route operators in the United States have integrated technologies that allow for the remote monitoring of vending machines. These usually are employed by the largest operators with many machines. Some utilize cellular or telephone connections for each machine. This can be expensive. Some have chosen to use radio transmitters. This requires that a route be built from the inside out as each unit transmits the information back through a neighboring machine. There is no end to the sophistication that we will likely witness in this emerging facet of the water industry. However a simple, well-designed machine usually is sufficient for most operators and is without a doubt a profitable addition to a retail location.