The economics of vending machines • Hacker News Board

Re: The economics of vending machines

#101

Post by kpommerenke » Mon, Oct 05, 2020, 4:45 PM UTC

lordnacho wrote: post #10

zxcmx wrote: post #9

Earlier quoted context omitted.

It's good money for something accessible to almost anyone. It doesn't require much capital, doesn't seem very regulated and needs no deeply specialised skills to get started. No franchise. No middleman or supplier lock-in. No fixed rental payments. Easy to pull in friends & family labour if you need to scale, and if you miss restocking it's no biggie. Nobody yelling at you. Flexible hours. Rarely have to talk to peop…

If anything you should be surprised such a thing is profitable, it's a textbook case of "the free market should have squeezed profits to zero".

Parent says "the free market should have squeezed profits to zero." Theory says that the free market should squeeze economic profits (not accounting profits) to zero. That has already happened: $500,000 (annual revenue for 2 people) - $250,000 (COGS: 50% of revenue) - $50,000 (commissions: 10% of revenue) = $200,000 (gross profit) - $62,500 (cost of capital: 5% of 250 * $5,000) - $50,000 (economic depreciation: 250 x $5,000/25) - $100,000 (cost of labor: 2 x $50,000, including benefits) = - $12,500 (economic profit)

Re: The economics of vending machines

#102

Post by lorenzhs » Mon, Oct 05, 2020, 4:46 PM UTC

cfmcdonald wrote: post #66

mc32 wrote: post #26

Earlier quoted context omitted.

It also helps that it’s a high trust society and you don’t get a lot of delinquent kids breaking in to get cigs or beer. Obviously cameras help with that.

The U.S. used to have cigarette vending machines. I believe they were phased out due to the desire to enforce age limits for smoking more strictly, not because of theft. My general impression is that the U.S. used to have more vending machines in general ~30-40 years ago. I remember soda machines being outside of every grocery store, but I don't see that anymore. Newspaper vending machines also used to be common. But…

Germany still has ubiquitous cigarette vending machines You need some electronic proof of age (drivers license, ID card, bank card), but of course you could just "borrow" someone else's and use that. It's just a date of birth stored on the card.

Re: The economics of vending machines

#103

Post by asdff » Mon, Oct 05, 2020, 4:46 PM UTC

ComputerGuru wrote: post #71

xyzzy_plugh wrote: post #57

Earlier quoted context omitted.

If North America was speckled with machines vending hot canned coffee, I would use them far more often than e.g. Starbucks. I drank so many Boss coffees last I was in Japan, they're so convenient -- no line, not too-hot-to-drink, open 24/7, such as in the early dawn. Just a wonderful thing.

I’m not sure what you refer to as early dawn, but here in the Midwest all Dunkin’ Donuts and many Starbucks are open at 5am. Side note: it blows my mind each time I’m in California and I have to drive forty five minutes or more to find a Dunkin’.

california donuts is 24h

Re: The economics of vending machines

#104

Post by asdff » Mon, Oct 05, 2020, 4:50 PM UTC

cfmcdonald wrote: post #66

mc32 wrote: post #26

Earlier quoted context omitted.

It also helps that it’s a high trust society and you don’t get a lot of delinquent kids breaking in to get cigs or beer. Obviously cameras help with that.

The U.S. used to have cigarette vending machines. I believe they were phased out due to the desire to enforce age limits for smoking more strictly, not because of theft. My general impression is that the U.S. used to have more vending machines in general ~30-40 years ago. I remember soda machines being outside of every grocery store, but I don't see that anymore. Newspaper vending machines also used to be common. But…

In LA the newspaper vending machines are still there, very common for ethnic language newspapers in certain neighborhoods, but probably 50% are abandoned on the sidewalk and used for trash and the occasional arson. Its one of those things where seemingly it's no one's responsibility to remove it, so there it will remain until they rust into dust or someone plows over one with their car.

LA is stuck in a bit of a time portal, though. Local mom and pop shops reign supreme still, especially ethnic stores, and there are even payphones still in frequent use by bus stops.

Re: The economics of vending machines

#105

Post by asdff » Mon, Oct 05, 2020, 4:52 PM UTC

codeulike wrote: post #30

mc32 wrote: post #26

Earlier quoted context omitted.

It also helps that it’s a high trust society and you don’t get a lot of delinquent kids breaking in to get cigs or beer. Obviously cameras help with that.

Yes I thought that when I visited. A vending machine on the streets of a UK city full of beer and cigs wouldn't last 3 minutes.

In croatia they have tiny little 5'x5' walk up convenient stores everywhere that might as well be vending machines, but I'm sure the drunks would get in there in no time if they weren't manned.

Re: The economics of vending machines

#106

Post by IkmoIkmo » Mon, Oct 05, 2020, 4:53 PM UTC

NikolaeVarius wrote: post #88

de_Selby wrote: post #63

Earlier quoted context omitted.

Climbing Mt Fuji in Japan is a reasonably serious climb (for ordinary people). At 3600m you need to think about altitude acclimitisation and it's best to sleep overnight on the way up. The achievement is only undermined by the fact that there is a literal queue of people in front of you for the entire ascent, and by the fact that after completing the climb you are greeted with a vending machine at the summit!

Thats about 12,000 feet. You dont need altitude acclimatization for that, it'll just suck a decent bit more than normal. I just went backpacking at 13k+ feet without any prep, it was fine outside of needing to take more breaks.

That's not true. Plenty of people get sick on this mountain, it's not the norm and plenty of elderly and children climb this mountain, but there's definitely a not-insignificant number of people who could not handle the altitude without acclimatisation, among which many who're in perfectly fine health. Your personal experience does not refute any of that, just google Mt Fuji Altitude Sickness.

Re: The economics of vending machines

#107

Post by asdff » Mon, Oct 05, 2020, 4:55 PM UTC

AQXt wrote: post #32

It might not be a good investment, according to the article: - Many of the best locations — places with heavy foot traffic, or large worker populations — are already saturated with machines. - Some owners have to make 100+ calls before landing a decent location. In the end, they often end up paying the owner a commission of 10%-25% of gross sales to drive home the deal. - And these figures are pre-expenses. The busin…

That might not matter if these are passive investments. If you have a company servicing your machine, so what if your profit is low? Save your money and buy a second machine, then another one, then enjoy your exponential growth on your vending empire. If things are making money you aren't doing poorly, especially when you might not ever have to visit one of your machines and can work another job or pursue your interests.

Re: The economics of vending machines

#108

Post by kpommerenke » Mon, Oct 05, 2020, 4:55 PM UTC

deadmetheny wrote: post #58

ZephyrBlu wrote: post #4

The juice doesn't seem worth the squeeze. 40% margin, maybe less and you need a shit ton of machines to make decent money. You also have to restock all the machines, so it seems like a difficult business to scale that actually gets harder the larger scale you are. 250 machines with 500k in revenue for 2 people doesn't seem like that much. With 40% margins, that's 200k and assumes you have no employees which seems unl…

This is a bit myopic - $200k for two people for what's basically a no-skill gig is a pretty decent income in most of the country. At that scale it's not a side gig anymore, it's your primary income, and I can imagine the hours are probably comparable to a normal job. And really, I can think of way less appealing jobs that pay worse with less flexibility.

It's not really $200k in income. That number ignores the initial investment (and thus its associated cost of capital) as well as the economic depreciation of the machines (since you have to replace them after, say, 25 years). As I calculated in a different comment, the actual economic profit is negative.

Re: The economics of vending machines

#109

Post by cehrlich » Mon, Oct 05, 2020, 4:58 PM UTC

greggman3 wrote: post #60

Tor3 wrote: post #20

Earlier quoted context omitted.

I counted 16 vending machines side-by-side outside a random shop I visited in "my" town (the town where I stay when I'm in Japan). And yes they're everywhere. I appreciated them particularly the first couple of years I visited, as at that time shops insisted on you paying as accurately as possible, they tended to refuse accepting banknotes if that implied returning a lot of coins. Strange thing, and that has since ch…

Been here since 98, never ran into the issue of not being able to pay with banknotes because of returning lots of coins. In fact quite the opposite. Go into a convenience store, buy a pack of mints for $1.04 (104 yen) hand them an $100 bill (10000yen) no one blinks an eye. Most convenience stores in the USA won't accept $100 bills AFAIK. I can see if it was some tiny store and they couldn't make exact change then yes…

Alcohol vending machines are rare, but still exist. There’s one outside of my in-laws house (rural Shiga-ken).

Re: The economics of vending machines

#110

Post by asdff » Mon, Oct 05, 2020, 4:58 PM UTC

ZephyrBlu wrote: post #4

The juice doesn't seem worth the squeeze. 40% margin, maybe less and you need a shit ton of machines to make decent money. You also have to restock all the machines, so it seems like a difficult business to scale that actually gets harder the larger scale you are. 250 machines with 500k in revenue for 2 people doesn't seem like that much. With 40% margins, that's 200k and assumes you have no employees which seems unl…

Why wouldn't you just contract a service company to stock and maintain your machines? I don't see how this isn't an excellent entirely passive opportunity. If the returns are low, that's still money you didn't have last month and money you could potentially spend on another machine to exponentially increase your business. If you are contracted with a service company you could scale infinitely.