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Distributors Can Grow Wallet Share with Vending

Distributors Can Grow Wallet Share with Vending

June 19, 2019

Industrial vending combined with inventory control software provides your customers with many benefits, including lower carrying costs, reduced shrinkage, fewer stock outages and reduced inventory costs. 

Vending machines are also a win for distributors. Having a physical non-retail vending machine onsite often results in increased customer loyalty and satisfaction. Distributors are often surprised by how much new business customers are willing to commit to in exchange for a vending machine and vendor managed inventory (VMI) capabilities.

That’s why we don’t recommend selling the vending machines and related software, but placing them for free in exchange for additional customer spend. In many cases, an increase of around $250 a month in additional profit margin (roughly $1,000 in additional spend) can justify the cost of placing the machine.

And, a distributor is never getting 100% of a customer’s spend. Here are two ways to ensure vending is worth the distributor’s time and money:

1) Grow Wallet Share Through Product in the Vending Machine
When you place a vending machine in your customer’s facility, you are offering them 24/7 access to mission-critical items. With that inventory on hand, they can continue operations without delay, which leads to increased productivity. Vendor-managed inventory software triggers purchase orders when items hit designated minimums, reducing stockouts and cutting down on in-person inventory counts and quote generation. It’s the definition of a win-win.

So, by combining vending with top-notch customer service (which is critical), distributors will naturally capture more spend as customers experience the benefits and, over time, request more products be placed within the machines.

We recommend a proactive approach to growing spend through the vending machines. When in negotiation to place a vending machine, ask upfront for additional items that may benefit from placement within a vending machine. If a customer wants to vend gloves, offer to also vend safety glasses or earplugs. Or identify product they are using that they may not have considered for placement in a machine. Locker vending machines, for example, can provide control of and accountability for hand and power tools.

2) Grow Wallet Share from Sales Outside the Vending Machine.
When a distributor asks for enough new business to justify the cost of placing a machine, this doesn’t have to be purely sales from within the machine itself. 

Think outside the machine. This is frequently an untapped opportunity for distributors who enter vending. Ask the customer to turn over business they may be spending elsewhere, perhaps with products that don’t require any additional support. This is something most customers are willing to do, and many are looking to consolidate suppliers. For example, if a customer is spending $5,000 a month on coolant, and has already settled on a brand, they can turn that over to the distributor with no impact to their ongoing operations. Depending on the brand, this may require some communication between the customer and manufacturer, but with the right approach, this transition can go smoothly.

Another area of opportunity is asking the customer to commit to moving spot buys to the distributor.

Distributors should look to vending as a way to secure current business, as well as grow new business. It doesn’t take much to get the additional business to make vending make sense, even for smaller independent distributors and in lower-cost product lines. In fact, we’ve seen upward of $10,000 in additional business secured each month by distributors who have prioritized growing wallet share with customers.

The key is to ask upfront and make it part of your agreement with the customer.

Read more about the ways distributors can use vending to offer their customers better inventory control in my MDM blog: How Distributors Can Win with Vending.

Mark Hill has 40 years' experience in industrial distribution and vending. He is the founder of vending machine and inventory control software company 1sourcevend. Learn more at 1sourcevend.com or contact him at mhill@1sourcevend.com.

© 2019 Gale Media, Inc.

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