4 ms·

If anything you should be surprised such a thing is profitable, it's a textbook case of "the free market should have squeezed profits to zero".

zxcmx 6y ago
Agree. Also surprised it hasn't been feudalised somehow. Some company owning all the machines and then uber-ing out the hard work of siting them and restocking them. Gamifying the process of monitoring, "your fleet", the "ching" on your phone when someone buys a bottle of water or candy bar. Special deals for site owners. Branded supplies. An app for customers to talk to the vending machine. Loyalty points. A snack radar. Etc. I think it's great the market is mostly independent operators.
- bluGill 6y ago
  The parts that can be feudalised already are. The big companies make the machines and sell them. Big companies make the software. What is left is the physical efforts of finding a location, putting the machine in place, and then tending it regularly. There isn't much to be gained by adding a layer of management over the top of that, so big players can't really skim off the top by good management making things better. Also big companies have too much to lose to fraud. The route operators are alone with big piles of cash. It is very easy for someone who knows what they are doing to "discover" a broken a machine (read they break it) and it was dispensing the J row without payment, then take the extra cash. All in all it is best to leave route operations to little players.
- Cthulhu_ 6y ago
  I dunno, I'm fairly sure Coke machines are all owned / franchised by Coca Cola; after all, you can't just use their brand on the outside of your machine. I think.
  - toast0 6y ago
    I've seen plenty of branded machines for sale at auctions and craigslist. They may have been connected to Coca Cola at one point, but they aren't necessarily connected now.
- rconti 6y ago
  I would imagine locations are somewhat "sticky". Your local auto repair shop isn't interested in booting their vendor for another one that charges 65c for a soda instead of 75c, as long as they're not getting bad service. And they're not interested in the conflict and confusion of allowing a 2nd operator to put a competing machine right next to it at a slightly lower price.
skelseys 6y ago
Everything seems to suggest that this has already happened. The reason this works as a 'side hustle' is because it's only lucrative if you ascribe a very low value to your time (and your car mileage, and the stress of doing admin for your 'business'). The fact the big players don't bother, the number of 'entrepreneurs' doing this in their spare time, the fact that they repair, move and restock the machines themselves, the calculations which ignore the presumably high risk of vandalism or theft, the presence of a landlord who can charge you as much as they like. And finally, the existence of 'mentors' who will charge you to be taught how to replicate their business.
- ghaff 6y ago
  I'd add that what people here are calling a "side hustle" is something that quite a few people without a lot of marketable skills would call a job/income stream. And, yes, there are a lot of jobs/income streams that work for individuals who lack a lot of alternatives that don't work for companies that have offices, accountants, etc.
  - skelseys 6y ago
    There are a lot of opportunities like this. However, when you look at many of them in detail, they pay very very poorly.
    - bluGill 6y ago
      As a sole operator though the pay is better because you don't have overhead. If you pay a helper, some of the net income goes to you as the manager, and some to them (you can split that up however you choose). In some businesses management is hard and so the manager can skim off the top of their employees and yet their great management skills can pay the employees more than they would get along. This isn't one of those business where skilled management is required though, so a manager is just skimming off the top and a good employee will soon figure out they can start their own business and make more money without the manager.
  - ska 6y ago
andjd 6y ago
Slightly pedantic comment here, but in economic theory, even in a perfectly competitive market, profits never drop to zero. Profits need to be high enough that owners of an enterprise don't decide to do something else with their time and money. These businesses may not make enough in profits to attract venture capital, but that doesn't mean they aren't more lucrative to the people running them than their other options.
- iudqnolq 6y ago
  Even more pedantic, but in economic theory in a perfectly competitive market (edit: at equilibrium) economic profit exactly equals zero. This is because the owner not doing something else with their time (called opportunity cost) is accounted for as a cost. What you're describing would be called "accounting profit" instead of "economic profit" by an economist to specify it only takes into account costs on the books, not opportunity costs. Edit: See https://en.wikipedia.org/wiki/Zero-profit_condition https://en.wikipedia.org/wiki/Zero-profit_condition
- colinmhayes 6y ago
  Economics includes opportunity cost, so yes, in competitive markets profits will drop to 0.
kpommerenke 6y ago
Parent says "the free market should have squeezed profits to zero." Theory says that the free market should squeeze economic profits (not accounting profits) to zero. That has already happened: $500,000 (annual revenue for 2 people) - $250,000 (COGS: 50% of revenue) - $50,000 (commissions: 10% of revenue) = $200,000 (gross profit) - $62,500 (cost of capital: 5% of 250 * $5,000) - $50,000 (economic depreciation: 250 x $5,000/25) - $100,000 (cost of labor: 2 x $50,000, including benefits) = - $12,500 (economic profit)

zxcmx 6y ago

Agree. Also surprised it hasn't been feudalised somehow. Some company owning all the machines and then uber-ing out the hard work of siting them and restocking them. Gamifying the process of monitoring, "your fleet", the "ching" on your phone when someone buys a bottle of water or candy bar. Special deals for site owners. Branded supplies. An app for customers to talk to the vending machine. Loyalty points. A snack radar. Etc. I think it's great the market is mostly independent operators.

bluGill 6y ago
The parts that can be feudalised already are. The big companies make the machines and sell them. Big companies make the software. What is left is the physical efforts of finding a location, putting the machine in place, and then tending it regularly. There isn't much to be gained by adding a layer of management over the top of that, so big players can't really skim off the top by good management making things better. Also big companies have too much to lose to fraud. The route operators are alone with big piles of cash. It is very easy for someone who knows what they are doing to "discover" a broken a machine (read they break it) and it was dispensing the J row without payment, then take the extra cash. All in all it is best to leave route operations to little players.
Cthulhu_ 6y ago
I dunno, I'm fairly sure Coke machines are all owned / franchised by Coca Cola; after all, you can't just use their brand on the outside of your machine. I think.
- toast0 6y ago
  I've seen plenty of branded machines for sale at auctions and craigslist. They may have been connected to Coca Cola at one point, but they aren't necessarily connected now.
rconti 6y ago
I would imagine locations are somewhat "sticky". Your local auto repair shop isn't interested in booting their vendor for another one that charges 65c for a soda instead of 75c, as long as they're not getting bad service. And they're not interested in the conflict and confusion of allowing a 2nd operator to put a competing machine right next to it at a slightly lower price.

skelseys 6y ago

Everything seems to suggest that this has already happened. The reason this works as a 'side hustle' is because it's only lucrative if you ascribe a very low value to your time (and your car mileage, and the stress of doing admin for your 'business'). The fact the big players don't bother, the number of 'entrepreneurs' doing this in their spare time, the fact that they repair, move and restock the machines themselves, the calculations which ignore the presumably high risk of vandalism or theft, the presence of a landlord who can charge you as much as they like. And finally, the existence of 'mentors' who will charge you to be taught how to replicate their business.

ghaff 6y ago
I'd add that what people here are calling a "side hustle" is something that quite a few people without a lot of marketable skills would call a job/income stream. And, yes, there are a lot of jobs/income streams that work for individuals who lack a lot of alternatives that don't work for companies that have offices, accountants, etc.
- skelseys 6y ago
  There are a lot of opportunities like this. However, when you look at many of them in detail, they pay very very poorly.
  - bluGill 6y ago
    As a sole operator though the pay is better because you don't have overhead. If you pay a helper, some of the net income goes to you as the manager, and some to them (you can split that up however you choose). In some businesses management is hard and so the manager can skim off the top of their employees and yet their great management skills can pay the employees more than they would get along. This isn't one of those business where skilled management is required though, so a manager is just skimming off the top and a good employee will soon figure out they can start their own business and make more money without the manager.
- ska 6y ago

andjd 6y ago

Slightly pedantic comment here, but in economic theory, even in a perfectly competitive market, profits never drop to zero. Profits need to be high enough that owners of an enterprise don't decide to do something else with their time and money. These businesses may not make enough in profits to attract venture capital, but that doesn't mean they aren't more lucrative to the people running them than their other options.

iudqnolq 6y ago
Even more pedantic, but in economic theory in a perfectly competitive market (edit: at equilibrium) economic profit exactly equals zero. This is because the owner not doing something else with their time (called opportunity cost) is accounted for as a cost. What you're describing would be called "accounting profit" instead of "economic profit" by an economist to specify it only takes into account costs on the books, not opportunity costs. Edit: See https://en.wikipedia.org/wiki/Zero-profit_condition https://en.wikipedia.org/wiki/Zero-profit_condition
colinmhayes 6y ago
Economics includes opportunity cost, so yes, in competitive markets profits will drop to 0.

kpommerenke 6y ago

Parent says "the free market should have squeezed profits to zero." Theory says that the free market should squeeze economic profits (not accounting profits) to zero. That has already happened: $500,000 (annual revenue for 2 people) - $250,000 (COGS: 50% of revenue) - $50,000 (commissions: 10% of revenue) = $200,000 (gross profit) - $62,500 (cost of capital: 5% of 250 * $5,000) - $50,000 (economic depreciation: 250 x $5,000/25) - $100,000 (cost of labor: 2 x $50,000, including benefits) = - $12,500 (economic profit)