Renting a vending machine and selling your products is one of the methods of earning passive income. It does not require anyone to man the machine, unlike a physical store where the overheads are higher. The overall cost of renting the machine, maintenance cost and space rental is most likely lower than running a brick and mortar store. One can also rent a vending machine and place their products as a way to test the market at a much lower cost. A close alternative will be to rent a box space in shopping centres as a way to test the market or to earn some side income. Another reason for renting a vending machine instead is due to the difficulty of getting good retail staff for their retail stores. Hence, rental of such vending machines is seen as a fix to their manpower issues.
The Advantages of Vending Machine Business
Lower cost as compared to a brick and mortar store
Taking into account the cost of the machine rental, space rental and electricity costs, it is definitely much cheaper than renting a physical store. In the hopes of generating more sales, businesses compete to obtain the prime locations. With a vending machine business, isn’t it better to get your foot in the door of a prime location at a fraction of the cost? Also, given the relatively high cost of employing retail staff together with the trust issues with your staff, you are better off “working with a machine” instead.
A cheaper way to test the market
If you are starting out and are not sure if the side hustle will take off, it is safer to mitigate risk by spending a minimal amount. Having a vending machine to place your products and monitoring the sales and response is a good way to test if the market likes your product. The body of the vending machine can also be used as a space for advertising your products. If not, it is a good space to sell the ad space for some cash to cover the cost of the vending machine rental. An alternative method is to rent a box space from the shopping centres, though cheaper, you will have to compete with dozen other cubicles to stand out.
Flexibility with your schedule as you are not required to be physically present at all times
Having a vending machine has its benefits in not requiring anyone to be physically present to man the store. Though Singapore is generally a safe country, it is still wise to be smart about choosing your location to avoid damage or vandalism to your vending machines. It works out as you are able to get about your day to day activities and only check it out when you need to top up the products.
Able to get sales at any time of the day
The beauty of venturing into a vending machine business is that you are able to get sales at any time of the day, provided that the products are in stock and the vending machine is working. This is applicable to vending machines that are placed outdoors. For machines placed indoors such as shopping centres, the duration to get a sale is limited and subjected to the shopping centre’s opening hours.
The Disadvantages of Vending Machine Business
Don’t expect to make much money quickly, especially if you are starting with one machine
Depending on your profit margins and the amount of sales, the gross profit after taking into account the operating costs may not be much. It can take months for you to break even so please be aware that this is not a venture for those wanting to make a quick buck. In addition, most landlords will have rental agreements with the minimum duration and notice period in place. With this in mind, you have to be patient and plan long term.
Not exactly a passive income venture
You might have to change the vending machines’ location, product offerings or adjust prices to find the right mix before you are able to scale. This involves money, time and effort. Not forgetting the cost of transporting the vending machine every time you switch locations and the possibility of forfeiting your rental deposit with the landlord. Before you get the right balance, there is so much work to be done in the background to get your side hustle off the ground.
Time required to stock up on products
You may not be required to be physically present as compared to a physical store at all times, but time is still needed to stock up on your products. If inventory levels are low or empty, you will lose potential customers hence, potential revenue. The time spent can be substantial especially if you stay far from the vending machine or have multiple locations to travel to.
The products may expire
Sometimes your products may not sell as fast as expected. Depending on the type of products being sold, they may spoil or expire before they are sold to consumers. A vending machine displaying stale products is a big no-no and will most likely not have return customers. Therefore, it is crucial to decide what kind of products you intend to sell, also check on them regularly to ensure the freshness and quality of your products.
Competition for prime locations
When it comes to doing business, there will always be competition for the prime spots due as there is more foot traffic and have a higher chance of making sales. As the name suggests, these locations are tougher to get and cost more. Getting a pricier location can eat into your profits if you are not earning as much as projected.
Vandalism of the vending machines
Singapore is generally a safe country. However, this does not mean your vending machines are in safe hands. Make sure that the vending machines are placed in a brightly lit area, preferably with security cameras around. Generally speaking, vending machines placed indoors are safer and less susceptible to damage.
What Products Should I be Selling?
There is a plethora of products available to be displayed and sold in vending machines. You can use this platform to sell your products or choose to source the items from a wholesaler. High profit margin items include drinks, snacks and candy. However, these are common items that are readily available hence the tough competition. You can also go for selling niche items, such as family planning products, pharmaceutical products or even feminine products.
Where should I place the Vending Machines?
The locations available to place your vending machines can range from shopping malls, community centres to schools, offices and hospitals. What you can do is to identify a few places of interest where you observe high foot traffic and low level of competition for the products that you are offering and write in to the management of the place asking for a rental quotation. Based on my personal experience, the popular shopping malls do not have any space to rent out. So it is definitely a first mover advantage for the highly sought after places.
Cost Breakdown (based on a sample vending machine provider)
Supplier of your products: depends on the products
Cost of Machine rental: SGD $400/month
Cost of Space Rental + Electricity: Varies depending on the location and rental agreement with the landlord. It can be a fixed cost or as a percentage of your revenue.
Cost of Maintenance: N/A (included in package)
Cost of Installation/ Removal: SGD $500
Some of the Vending Machine Rental Companies in Singapore:
Conclusion
Having a vending machine is one of the side hustles one can utilise to earn passive income. There are countless methods to do so too. Having share ownership in listed firms is one easy way to earn money, provided you make sound rational decisions when investing.
As you can see from above, having a vending machines business is a side hustle that can require as much work as a full time job. It takes months to breakeven and make a profit, the time scale depending on how actively you are testing the market and also how many machines at different locations you have. As with any business, it is also wise to know when to withdraw or change the price product place promotion mix (The 4P’s of Marketing) should the situation arises.
Addendum:
With the Covid-19 situation going on and no vaccine available, it seems like a pretty good idea to set up a vending machine selling PPE (Personal Protection Equipment). I am sure there will be potential revenue for those people who needs a spare mask, hand sanitiser or wet wipes on the go.
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What a brilliant idea for start-ups with a small budget! Fantastic 👍
Thanks Klaudia!