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Suraya's Experience with Doing Vending Machine Business
Most of the readers of this newsletter are in their mid-20s. As mid-life crisis has preponed from mid-30s to mid-20s, I'm sure most of you are starting to think about how long will your 9-5 regime continue and start finding side hustles to do. On your quest in finding the most suitable side hustle, you might come across the business of owning vending machines. That's why in this week's One Thing, I'm going to share with you the economics of vending machines and whether you should own one.
The Economics
- In 2020, vending in Malaysia recorded 12% in growth as sales reached RM520 million
- 45% of those sales came from packaged drinks, 4% came from packaged food and 50% came from other packaged goods like beauty products, mystery box and claw machines etc.
- In the ready-to-drink category, around 50% is owned by large entities like Coca-Cola Bottlers and Atlas Vending while the other 50% is owned by small independent operators
The Pros
- Relatively low startup costs: You can find a decent machine on mudah.my for RM15k to RM30k
- Scalability: Revenue can be reinvested in expansion to leverage economies of scale
- Low maintenance: If you're selling packaged goods, you only need to do restocking maybe once every week
- Good margin: Depends on the item you're selling and where you're selling, on average, vending machines can yield around 50% in gross margin
The Cons
- Location: Getting the machine is the easy part, location is the factor that can make or break your machine's success. Many of the good locations - places with heavy foot traffic are already saturated with machines. Even if you manage to find a good spot, you still need to give a cut of the revenue to the owner of the location
- Competitions: 50% of the market cap is already owned by large corporations and unless you have connections, newly built hospitals and factories will often opt for a more established player like Atlas Vending
- Relative high operating costs: Gross margin may be good but you still need to take into account the operating cost associated with it that may eat into your margin like transportation costs, maintenance cost, commissions paid to the location owner etc.
There's a reason why when you search "vending machine" on google, a lot of ads will pop up, claiming that they can help you to set up your own vending machine business. If it was really that easy and profitable, they would have done it themselves.
In my opinion, the cons outweigh the pros, the risk/reward ratio doesn't make sense for me. Unless you managed to get a good location with heavy foot traffic, there's no reason for you to start a vending machine business. If you have experience in the vending industry, DM me, I would love to learn more or be proven wrong.
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