Convenience Vending

Convenience Vending
Jeff Rogut
CEO AACS

The article below appeared in ‘The Age’ newspaper last week so I thought that it was worth visiting this new store. ‘Mind boggling’ is probably far too strong a description of the range. It is a small store with a number of vending machines, offering an array of products. Yes, cans of soft drinks are marked $1 [not 0.99cents as in the article] but the range is quite diverse – not quite sure what the aim of the store is. 

Having said that I have long believed that vending is a legitimate aspect of our convenience industry – taking products to where customers meet, travel, or pass by. Vending is Japan is ubiquitous and done really well,  with over a million vending machines throughout the country and on almost every street corner.

There is an opportunity to extend an established convenience brand in Australia by locating branded vending machines with a selection of volume selling, convenience items in train stations, universities, hospitals, main streets etc where locations allow. Snacks and beverages offer a terrific opportunity as well as fresh sandwiches, healthy options eg fruit etc. The economics swill need to stack up, but certainly worthwhile exploring as time poor consumers, on the go, seek credible options.

Certainly worthwhile exploring the opportunity and no doubt the ranges etc in this first ‘vending store’ will be refined to meet customer needs.

Spotting a slot in the market led to Australia’s first vending-machine-only shop
Liam Mannix
FEB 3 2017
The Age

In a small shopfront in St Kilda, Hari Shotham thinks he’s found the future of Australian retail.

Mr Shotham’s new shop, which opened in late December, stocks a mind-boggling array of products: vitamins, perfumes, mobile phone accessories, bandages, medicine, Coca-Cola.

All from 13 vending machines. No shop assistants, no managers. Open 24 hours a day.

Mr Shotham does not even bother turning up there most days – he just monitors the store’s CCTV on his mobile phone.

It is, Mr Shotham claims, Australia’s first vending-machine-only shop, and he says its making a killing. Each machine is turning over $1000 a week.

“With a target of 20 machines we are on target to $20,000”, he says. 

There are plans to expand quickly, with Mr Shotham hoping to have 10 more vending-machine-only shops open by mid-year.

“Surprisingly, the numbers have been amazing. We haven’t even got a proper sign out.”

Among the biggest sellers so far? Perfume for young women looking for a fragrance top-up while partying at one of Fitzroy Street’s nightclubs.

For now the store is called Vitamin Warehouse, but considering the enormous range of products sold Mr Shotham acknowledges a name-change may be needed.

Mr Shotham’s store on Fitzroy Street is set up near direct competitors, including one of the newest shopfronts of discount behemoth Chemist Warehouse.

But he says he is able to significantly undercut their price on similar items, in part because he spends very little on staffing costs. Plus theft costs are essentially zero.

“The highest problem in pharmacies is everything has to be under lock and key. Theft is a massive problem. In a vending machine you cannot steal.”

He cheerfully boasts of selling St Kilda’s cheapest can of Coke – only 99 cents.

Mr Shotham has been in the vitamin business for 40 years, working first with Chemist Warehouse – now his major competitor.

The chain used to stock his own brand of vitamins until what he describes as a “slight misunderstanding” saw them getting pulled from shelves. 

A stint working in Hong Kong was when he first realised the potential for vending-machine retail.

Many Hong Kong railway stations feature highly-popular umbrella vending machines; why not expand the concept, Mr Shotham pondered.

Back in Australia, he originally tried buying vending machines, filling them with vitamins and healthcare products, and renting leases in shopping centres.

But centre management was unwilling to allow his vending machines in because they might compete with the pharmacies that already tenanted the store and paid higher rents, he said.

Frustrated, he hopped in his car and drove about the suburbs, looking for a good spot for his machines.

“And as luck had it there was a shop in St Kilda right next to a 7Eleven,” he said.

Fitzroy Street has been in decline in recent years according to local shopkeepers and politicians, with a high turnover of businesses and many closed down and boarded up shopfronts.

But Mr Shotham is confident his venture is the start of something huge. After all, as he points out, how can he go wrong – where else can you get a can of Coke for 99 cents?