11 replies to this topic

[BVI]

I've been noticing that with soaring fuel costs, vendors who have employees out there servicing accounts - in other words, medium to large vendors - are really cutting back on how often they service accounts. I can understand why. Rising product cost, cost of the gas that goes into a truck or van, distance to drive to an account - all have a part in draining our profits.

Specifically, I'm noticing that accounts that average, say, $200 per week or less between soda and snacks, just are not getting serviced and are likely to be unhappy with their current situation. In many cases, the account was not getting "great" service to begin with. Combine bad service with bad equipment and it becomes very difficult to ask for higher prices. That makes it worse for the vendor... if they service a little less frequently in order to save on overhead, they are lose sales (and money), and maybe even the account.

Sometimes, a big vendor, such as Canteen, will just go ahead and pull-out of an account like this if they just are not making money at all. However, sometimes I think it's their own fault they don't make money on these accounts because these guys are not adept on service or even offering products that people actually want to buy. That alone can make the difference between a good account and a bad account.

In other words, vendors who were just getting by (before gas prices and product cost started going crazy) on old, unreliable equipment and mediocre service are probably in a pinch right now because their accounts will likely reject all price increases.

For some, this will be a good opportunity for growth.

Anyway, I have implemented new price points with almost all of my accounts, and so far so good. I still have a couple of accounts to do, but don't anticipate any problems.

Has anyone else resorted to price increases to help defray higher operating and product cost?

[bcron]

I am a small vendor, just started up last August by purchasing an existing route. I have been concerned about these things recently even being small. I haven't changed any prices yet, but have tried to do even better at minimizing driving around to the accounts. I have just noticed within the last month or so the price of chocolates in particular going up, and not just one or two cents. In some cases it has been a nickle or more. I have not raised my prices in response because it seems in my accounts, the chocolates aren't the biggest sellers anyway, it's more the chips and other items which have not changed in cost for me yet. I'm sure they will soon with the fuel going up.

One question I have for you guys that have been in it for a while is do the prices ever come back down after a sharp rise like this? OK, OK, you can quit laughing now. I'm sure that once they're up, they're up for good, but I thought I'd ask anyway.

[BVI]

I am a small vendor, just started up last August by purchasing an existing route. I have been concerned about these things recently even being small. I haven't changed any prices yet, but have tried to do even better at minimizing driving around to the accounts. I have just noticed within the last month or so the price of chocolates in particular going up, and not just one or two cents. In some cases it has been a nickle or more. I have not raised my prices in response because it seems in my accounts, the chocolates aren't the biggest sellers anyway, it's more the chips and other items which have not changed in cost for me yet. I'm sure they will soon with the fuel going up.

One question I have for you guys that have been in it for a while is do the prices ever come back down after a sharp rise like this? OK, OK, you can quit laughing now. I'm sure that once they're up, they're up for good, but I thought I'd ask anyway.

I've been in this business for 2 years and 3 months, and when I was buying primarily from Sam's Club, I noticed that once in a while, the price of a particular item I'd been buying would come down. But for the most part, no - once they go up, the best you can hope for is that they stay where they are for a while.

After the first of the year, I switched over to Vistar (a distributor), and they are a bit more expensive than Sam's (although they do deliver), but they are geared up to cater to vendors such as myself much more than Sam's. However, you need to be at a certain volume before buying from them makes sense.

But because of the price differences, some of the things I offer had to get bumped up in terms of price in order to maintain 50% profit margin.

Obviously, prices will continue to climb... I'm just wondering what kind of response vendors have been getting - the ones who have gone ahead and raised prices. Some of my local competitors are still at $0.50 for can soda and $1.00 for bottles, and I think it's because they do such a shotty job that they know if they raise prices, they'd probably get kicked out. I know they can't sustain those prices and provide good service for very long, but most are not providing good service anyway, so they have nowhere to go except out the door.

[coinvestor]

I've been in this business for 2 years and 3 months, and when I was buying primarily from Sam's Club, I noticed that once in a while, the price of a particular item I'd been buying would come down. But for the most part, no - once they go up, the best you can hope for is that they stay where they are for a while.

After the first of the year, I switched over to Vistar (a distributor), and they are a bit more expensive than Sam's (although they do deliver), but they are geared up to cater to vendors such as myself much more than Sam's. However, you need to be at a certain volume before buying from them makes sense.

But because of the price differences, some of the things I offer had to get bumped up in terms of price in order to maintain 50% profit margin.

Obviously, prices will continue to climb... I'm just wondering what kind of response vendors have been getting - the ones who have gone ahead and raised prices. Some of my local competitors are still at $0.50 for can soda and $1.00 for bottles, and I think it's because they do such a shotty job that they know if they raise prices, they'd probably get kicked out. I know they can't sustain those prices and provide good service for very long, but most are not providing good service anyway, so they have nowhere to go except out the door.

My sales Rep from Vistar is convinced that many of the vendors will not make it though this economic slowdown for the reasons that you mentioned. I have been raising prices too, but it was mainly motivated by the switch to buying from Vistar.

I have spent alot of time recently checking out other vendors in my area. I have been going to any machine that I can get to to collect info on selection, pricing , and what company is in what account. I went to all the car dealership service areas, communtity colleges, snuck into breakrooms in retail stores, and asked friends to get me into where they work. I don't know if its helpful, but it sure is fun. I got kicked out of the Sams breakroom before I could get to their machine:)

I found a car dealership that does there own vending and is getting $1 for a can and .65 for 1oz chips. I also found that Canteen has gone to $1 for regular size candy in many locations. I found another place that had candy for .50 (heck I'm paying .47).

THe day I spent doing this was not a waste since at the end of the day I decided I would raise my prices. I am about half way through. THe only things I am not changing is my can price .60-.65 and chips .50-.55.

JD

[BVI]

My sales Rep from Vistar is convinced that many of the vendors will not make it though this economic slowdown for the reasons that you mentioned. I have been raising prices too, but it was mainly motivated by the switch to buying from Vistar.

I have spent alot of time recently checking out other vendors in my area. I have been going to any machine that I can get to to collect info on selection, pricing , and what company is in what account. I went to all the car dealership service areas, communtity colleges, snuck into breakrooms in retail stores, and asked friends to get me into where they work. I don't know if its helpful, but it sure is fun. I got kicked out of the Sams breakroom before I could get to their machine:)

I found a car dealership that does there own vending and is getting $1 for a can and .65 for 1oz chips. I also found that Canteen has gone to $1 for regular size candy in many locations. I found another place that had candy for .50 (heck I'm paying .47).

THe day I spent doing this was not a waste since at the end of the day I decided I would raise my prices. I am about half way through. THe only things I am not changing is my can price .60-.65 and chips .50-.55.

JD

I had been selling can soda at $0.55. When I bought soda at Sam's, I could get a unit cost of $0.26. At that price and cost, margin is good - above 50%.

Now I buy directly from Coke and Pepsi, and while Coke has me on a special program where I am back down to less than $0.28, my unit cost for Pepsi products is $0.32. I took my can prices up to $0.60 across the board, so I'm back up to a 50% margin.

Getting back to why some vendors won't make it through the economic slowdown - this is why I prefer to stay small. This is a business that is difficult to control what happens out there. Service reps who quit because they thought this is an easy job, employees who steal cash or product from you, machines that don't get stocked all the way or cleaned... there are so many ways that having more than 3 people (including yourself) out in the field can really bite you in the a_s. At the end of the day, I'm not convinced that being big will make you any more money than being small.

In my opinion, you need to be big enough so that everyone can get their vacations in without everything falling apart. For me, that will be one other full time worker and a part-time swing person who can step in there when a vacation is needed.

[coinvestor]

At the end of the day, I'm not convinced that being big will make you any more money than being small.

In my opinion, you need to be big enough so that everyone can get their vacations in without everything falling apart. For me, that will be one other full time worker and a part-time swing person who can step in there when a vacation is needed.

Vacation? I didn't know we get vacations:)


I agree about the being big thing with the exception of the value of the business if you go to sell.

JD

[scottgtt]

One nice thing about being big, we have appx. 130 accounts is that losing an accout will not kill you. No one is so big you can't survive if you lose an account. We are a medium size company in terms of cash flow ($500,000-1,000,000). As we have grown, I have been able to get off the route and focus more on prospecting and taking care problems more quickly. The issues on prices and costs are real for everyone. However, most accounts understand this and if you explain that you will not raise any one price by more than 10 percent and that you will raise prices in groups over a few months you will get a more positive response. Raise chips one month and candy bars another and cans another etc... Another thing you can do is get creative on commissions. Say you owe a commission of $350.00. If the company drinks $500.00 in coffee and that coffee would cost you $200.00, why don't you give them their coffee for free, they get a $150.00 benefit and you save $150.00 on commission. This way everyone comes out ahead. Approach your customer and tell them you want to help them and yourself in these difficult times and they will appreciate you thinking about how you can help them and yourself.

[BVI]

One nice thing about being big, we have appx. 130 accounts is that losing an accout will not kill you. No one is so big you can't survive if you lose an account. We are a medium size company in terms of cash flow ($500,000-1,000,000). As we have grown, I have been able to get off the route and focus more on prospecting and taking care problems more quickly. The issues on prices and costs are real for everyone. However, most accounts understand this and if you explain that you will not raise any one price by more than 10 percent and that you will raise prices in groups over a few months you will get a more positive response. Raise chips one month and candy bars another and cans another etc... Another thing you can do is get creative on commissions. Say you owe a commission of $350.00. If the company drinks $500.00 in coffee and that coffee would cost you $200.00, why don't you give them their coffee for free, they get a $150.00 benefit and you save $150.00 on commission. This way everyone comes out ahead. Approach your customer and tell them you want to help them and yourself in these difficult times and they will appreciate you thinking about how you can help them and yourself.

Good points made. JBL has stated more than once that no account should make up more than 20% of your total gross for the very reasons you stated. I have one that grosses about 25%, but I'm still adding accounts and hope I can bring that percentage down to less than 20% this year.

Without necessarily explaining it to my accounts, I have raised prices by categories just like you described. The only feedback I got was that customers got the impression I was always raising prices. Just goes to show you can't please everyone. However, I've never let prices get so behind that I've had to raise multiple groups of products. A few, but never everything at the same time.

Regarding size, it would be nice to get off the route, just like you've been able to do - without getting too big and not being able to directly control the quality of service. There seems to be a problem around here with my competitors being able to retain service reps... lots of turnover and crisis route runs often leading to less-than-satisfied customers. I really don't want any part of that. If you have a big family or lots of close, dependable friends who want to be in the business with you that will be in it for the long haul, it would be much easier than trying to hire people off the street.

[scottgtt]

I agree with the family involvement (or close friends). The only problem is that when something goes wrong it is hard to discuss it with a family member or friend. I have had this happen with a employee that goes to Church with me. He is very trustworthy, but screws things up all the time and it creates a very delicate situation. If I had it to do all over again, I would not hire a friend in this business because route drivers just don't make that much and because of that your never going to get a consistently good driver and you will always have to stay on them, it's not fun doing this with family and friends. Also, when you raise prices, keep the managers in the loop, that way when people go and complain, they already know and don't feel bombarded and like you tried to keep somthing secret.

[Emcar Vending Machines]

Something that hasn't been mentioned up to now.

Your costs are rising, gas & product prices and other things. The guy in the street is suffering the same increases. Gas prices go up and everything delivered by road goes up. It costs the guy in the street more money to get to work and more money to feed himself and his family.

If he feels the pinch then the first thing he will cut down on is the non essentials. The candy & soda at break time will be likely to go, and more likely to go if it's at a higher price.

Have you considered the effects of declining sales when you increase your prices?

It's a tough time out there and sometimes it pays to maintain sales at lower margins, but that's a decision only you can take, because only you know your business model.

[jblvending]

One nice thing about being big, we have appx. 130 accounts is that losing an accout will not kill you. No one is so big you can't survive if you lose an account. We are a medium size company in terms of cash flow ($500,000-1,000,000). As we have grown, I have been able to get off the route and focus more on prospecting and taking care problems more quickly. The issues on prices and costs are real for everyone. However, most accounts understand this and if you explain that you will not raise any one price by more than 10 percent and that you will raise prices in groups over a few months you will get a more positive response. Raise chips one month and candy bars another and cans another etc... Another thing you can do is get creative on commissions. Say you owe a commission of $350.00. If the company drinks $500.00 in coffee and that coffee would cost you $200.00, why don't you give them their coffee for free, they get a $150.00 benefit and you save $150.00 on commission. This way everyone comes out ahead. Approach your customer and tell them you want to help them and yourself in these difficult times and they will appreciate you thinking about how you can help them and yourself.

Wow Scottgtt, 130 accounts, you have really grown since April 18th post of 80 accounts, great job.BVI your dead on about the state of vending. I do disagree with the rasing prices in phases, do it all in one time, that way you get all your negative feed back out the way, and in about 2 weeks all is good, and people get over it, and go back to there normal routine.If you do raise prices on different products at different times, it gives the appearance that your always raising prices, and no amount of good service will save you, just look at Walmart, there service sucks, but there the biggest , because there the cheapest.Guys, if your not growing, your going to have problems, because if you remain small some one esle more hungry than you in this business will eventually out grow you, stay hunger, but smart, get rid of the 50.00 to 100.00 a week accounts, upgrade these accounts to 250.00 to 500.00 a week accounts, put bigger machines at account you going to more than once, put 2 machines if you can, this will cut down on fuel.

[scottgtt]

We have grown, picked up a chain of nursing homes and a large insurance company with 850 employees. With respect to rising prices, the cheaper type of businesses do better in poor economic times than the more expensive stuff. For example, McDonalds does great when times are bad while starbucks does not. I have found more and more people eating out of my machines instead of going out for lunch etc... My energy drink sales are down a little, but water etc... are definitely up. I also agree about grow or die. Someone is always starting in this business, just see this website to prove it to yourself. There are not lots of new accounts popping up everyday so the only place to get more business for the most part is to get it from someone else. Even if your service is great there will be someone that will offer more. Mabee they will put debit card readers on their machines or offer ice cream etc... anything to get the business, you better have as many accounts as possible to absorb the inevitable losses.