7 Mistakes Of The Micro Market Novice

January 23, 2019

light bulb

Micro markets have many advantages. Consumers prefer them to vending machines for the wide selection they offer, as well as the sophisticated checkout experience that more closely resembles other point-of-sale self-checkout and smartphone interfaces. For operators, the ability to assign prices by the penny, charge for sales tax, use robust reporting and save on transaction fees by using micro market accounts all make micro markets an inviting choice. It can be a profitable segment once you make it through the learning curve. If you plan to venture into operating a micro market, here are some commonly made missteps to avoid.

1. Merchandising like a vending machine

How products are organized in a vending machine, especially a glass front machine, is tried and true. Airy products go at the top as they can fall the farthest without damage. Drinks are lower, to avoid shaking. Gum and mints squeeze in at the bottom. Research has shown that this is not the most effective way to set up a micro market. Instead, operators should take their cue from convenience stores with gum and candy by the checkout, high market items at eye level with strong sellers above and below. The areas should be organized, centered on the customer’s ability to identify the product and create an easy shopping experience.

2. Adding too many micro markets without adding staff

When a vending operator first begins installing micro markets, it’s common to use the existing staff, growing only when needed. However, because the micro market business is very different than vending, delaying the creation of a separate micro market division with the addition of employees can put an unreasonable strain on the service line and ultimately affect profitability. Micro markets involve managing a greater variety of products and sizes, increased purchasing and servicing onsite. With as few as 10 micro markets, the benefits of hiring new employees and spinning off resources begins to pay off.

3. Putting vending products in micro markets

While many vending products sell well in micro markets, operators that only place vending size items miss out on increased sales. Micro markets present the opportunity to place unique items, local favorites and better-for-you offerings that command a higher price because the end user both wants the item and can’t get it anywhere else. This was a concept some operators used in vending, but it works even better in micro markets.

4. Skipping fresh food items

Fresh food has a short shelf life. It also represents a small portion of vending machine sales when compared to the snack and beverage categories. Therefore, it’s tempting for operators who want to try micro markets to skip this category or make it small. However, food is a strength in a micro market, pulling in around one-third of overall sales. It is what brings people in who would never have visited the vending machines. It also drives up the dollar amount they spend in the breakroom, as people buy snacks and beverages that go along with the entrée.

5. Undervaluing promotions

With vending machines, operators have few opportunities to create product deals or inspire customer loyalty. Some micro market first-timers take the “set it and forget it” mentality from vending merchandising and try to use it in micro markets. It fails. Promotions continue to draw customers in. They can also be a great way to partner with product manufacturers for launches or product testing. The sales information from micro markets makes them a valuable resource. Promotions done correctly can bring in elevated sales long after a promotion ends as well.

6. Ignoring the need to inventory

With the spike in same-store sales most micro market operators see when they install a market, worrying about theft and backend processes can seem unimportant. Already staff is being stretched thin with the greater assortment of SKUs, coming up with promotions and supporting the technology needs of micro markets. However, without regular physical inventories, it is impossible to really protect profits by knowing the shrink rate or theft rate. A rate of 2 to 4 percent may be acceptable if the operator raises prices. At what point is the loss too high, however? That is what an operator must find out through inventorying. In addition, a driver doing regular inventory is the front line of defense against new theft. Conducting inventory regularly can narrow down the timeframe of when a theft may have occurred, which makes for a more efficient review of security footage and greater likelihood a thief can be prosecuted.

7. Using free or miscellaneous equipment as fixtures

There are operators who launched micro markets using refurbished retail shelving and free coolers provided by bottlers. Some of these look professional to end users, while others do not inspire users to enter or linger in the space. Using ad hoc displays and fixtures means there is no brand identity to the micro market. With a great-looking design, the operator can instead show his or her commitment to the location, keeping it as a valuable customer. The operator can also feel secure in offering food in a safe environment. Beverage coolers were not meant to hold food and won’t pass health inspections for food sales. Instead, food coolers need to have a locking mechanism tied to the internal temperature to ensure food that reaches unsafe temperatures can’t be purchased.

Learn from those micro markets operators who have already installed micro markets. These systems are not vending machines, and need different plan-o-grams, committed staff, greater product variety, fresh food, regular promotions, inventory management and well-designed displays.