What is Micro Market Vending
You’ve probably shopped in a micro market without realizing it. In fact, you may not even be familiar with the term, however it’s time to get familiar quickly since this market is expanding quicker than ever. Simply, a micro market is a small but sustainable market, such as a vending machine, a mini-convenience store or even an employee break room. It’s here were individuals purchase products (often for cash) and the micro-store has to restock. While some different municipalities and states treat micro markets differently, most consider them to be on par with retail food establishments. By developing an understanding of, and a definition for this unique high growth retail business channel, manufacturers, operators and suppliers are in a unique position to capitalize on this niche market.
There are some key differences between micro-markets and typical brick and mortar retail stores, like C-stores. For instance, micro markets are not your standard convenience store. Similarly, they shouldn’t look or feel like one. One of the primary distinctions other than their smaller size and more focused customer base, is that they tend to offer “better for you” products. This means, rather than just offering cookies, candy and soft drinks, micro markets tend to have a greater selection in the fresh fruit and food categories.
As you might suspect, “better for you” items tend to use higher quality ingredients, and as a result may be a higher quality product. They often yield greater profit margins, which satisfies both suppliers and operators. For this reason, food manufacturers are advised to consider what they sell and use micro markets as a channel to introduce or promote their highest quality products. By only including fresh and high quality food, manufactures and operators are raising the bar for the consumer experience.
Interestingly, research suggests that micro markets experience lower sales when they sell the same salads, sandwiches and other fresh products that are sold in convenience stores. Therefore, it is important for micro market suppliers and operators to know their customers’ tastes and bring in new products that their customers will want.
Manufacturers need to understand micro market customers as well, for through this channel they can offer proprietary products.
Another difference between C-stores and micro markets is the foot traffic each receives. Generally, convenience stores are in an area of dominant influence, or ADI, which nets them a high volume of traffic. Conversely, micro markets have a much more niche market. They receive less traffic although see more repeat customers. This leads to a different definition of success for each outlet. For convenience stores, success may be defined by the number of customers or the amount of product sold. Where as, for micro markets, success may be measured by the quality and variety of the products offered. This new definition of success requires a paradigm shift for many manufacturers, suppliers and operators.
For a micro market to be successful, manufacturers, suppliers and operators have a shared understanding of the customer and definition for success. With this, they can offer products with a greater perceived value for the customer. In other words, they can sell a similar product to what may be found in a C-store at a higher price by using better quality ingredients. Customers will not only make more frequent trips to the micro market, but they will also pay more for the products.
There are a few proven strategies to these health-conscious customers. For instance, by expanding product lines to appeal to meal times and day parts, customers associate the food with a meal rather than a snack and feel healthier buying it. To this point, micro markets should focus on meal items that can be consumer anytime and sold throughout the day. Breakfast items are perfect for this category.
Marketing has been shown to persuade even the most leery of consumers, and packaging is part of marketing. Products that sell more tend to showcase the product more and minimize graphics. Consumers are more likely to buy fresh fruit or hard boiled eggs if they can see what they’re purchasing rather than an image of the proposed product.
Finally, bundling products with complimentary items generates higher per purchase sales. For instance, if a customer sees his breakfast “bundled” he’s more likely to purchase the entire suggested breakfast, or bundle than if he has to select the individual items. Bundling can be completed by placing suggested items next to each other, offering a discount on a bundled purchase, or with a sign that shows the products together.
Combining these techniques: offering meal time foods, showing the item rather than graphics and bundling products together, allows micro markets to charge more. It may seem counterintuitive, although these products can be sold at higher prices. This yields greater contribution margins, or profits, for the micro markets.
Micro markets are changing the retail landscape, and not everyone is prepared or committed to the niche channel. Suppliers may sell less product at a single time. This makes sense, for vending machines hold less product than convenience store shelves and may experience less traffic than a corner store, so naturally the operator would need less product in a full order. Operators need to understand their unique set of customers for each location. By stocking a micro market with the same products as a C-store, the operator effectively communicates that his micro market is the same as a local convenience store. Operators typically can’t price compete with C-stores in a significant way. Therefore although they are trying to be a competitive retail channel, they may send their customers the opposite message. Manufacturers need to dedicate resources specifically for product development and package design to sell in micro markets. Without this level of commitment, manufactures may stray from their goals of producing higher quality items.
Micro markets seem ideal for health conscious shoppers, although there are a number of price-sensitive consumers who are looking for good products at competitive rates. Micro markets can capture these customers as well through a marketing campaign. The marketing strategy for this channel should highlight that micro markets are different than mainstream retail outlets. Micro markets offer a unique shopping experience that is geared toward the customer. The marketing strategy may promote that the products are higher quality, are available in greater variety than at a corner store.
It may seem like micro markets should limit the size of their products if they are selling meal time or “better for you” foods. However, it may be tempting to increase the size to match the higher price. This would also seem logical since many convenience store customers seek larger quantities at cheaper prices. It’s important not to fall into this trap or compete with this demand.
It’s important for micro market operators to recognize that their main goal is not to compete for the customer who wants the any-quality products at the lowest prices. Rather, operators should acknowledge that higher quality products can be sold for a higher price. They should keep this in mind when developing their marketing plan and running their outlet.
The foundation of success in a micro market is the same as you would find in any business: know your customers’ preferences, wants and dislikes for products and categories. This means, the personal likes and dislikes of manufacturers, suppliers and operators are less important. In other words, operators should steer clear of products that are simply convenient or low-cost. They should stock products their customers want.
Micro markets are in a unique position to sell products from regional and national manufacturers, and from local vendors. Operators may partner with local restaurants, delis and bakeries to provide fresh, wholesome items. Offering locally made products allows customers to feel good about their purchase since they’re buying local and supporting their community. This gives the operator a chance to enhance the customer’s experience and make a profit. Depending on their relationship with the manufacturer, operators may also work with manufacturers to ensure the packaging reflects the quality and freshness of the products.
Using local brands to show a micro market’s customer base that they are unique, special and not a “cookie cutter” operation, further sets the micro market apart from convenience stores and helps justify the higher prices in the customers’ minds.
As different as a micro market is to a C-store, operators still need to remember that they are competing for the same dollars. In addition to convenience stores, they compete against Quick Service Restaurants (QSRs) and other food facilities.
To compete effectively, operators should focus on the purchases that occur in the morning and evening, as 25% of convenience store sales come from customers who are on their way to and from work. However, micro markets near hospitals and factories that rotate employees on three-shifts, should focus on the hours before, during and after shift changes. Operators can improve their product offerings by observing what items – both sizes and price points – customers purchase during these times from corner stores and configure their offerings based on the results. Operators may work with their suppliers or manufactures to hone in on these products, improve them and then prepare the higher quality products for retail in their micro market. Operators should note, this is the most important time to compete with C-stores.
However, before and after work shouldn’t be the only focus for an operator. They need to focus on the time when employees are at work, which makes up 75% of the sales. Rather than breakfast in the morning and drinks and snacks in the evening, these customers may purchase lunch, drinks and mid-day snacks. In fact, walking to the micro market may be the employees’ only time to stretch their legs, get some fresh air and talk with a non-work related person. Therefore, the customer experience is crucial to their return visit.
Savvy operators will know their customer base so well, that they will be able to determine if hot beverage category out performs cold beverages during the day. In other words, they’ll know if coffee and team sell better than energy drinks and soft drinks during work hours. They will also know that typically single servings achieve greater sales than larger quantities of these products. Promoting and providing what customers want will help increase traffic during slow times.
To further set your market apart from a C-store, ditch the open pots of coffee and water, and the large bottles of mustard and ketchup. Instead, opt for single servings of food and beverages and condiments that are sealed and packaged for individual use. Markets with busy customers may offer take home meals that are either fresh, frozen or a combination of fresh-frozen. This makes the market competitive with fast casual dining, another high growth food segment.
In all, a micro market’s success depends on its ability to compete with convenience stores and food segment markets, offer higher quality and local products not found in C-stores, and improve the shopping experience. Micro markets are experiencing high growth and have major potential to take over local niche markets.