An Insight into the
Vending Machine Market and the Neo-Indian Consumer
The Indian economy continues to
register respectable growth rates, given the predicament of a sluggish global
economy. Consequently, with a substantial increase in the levels of disposable
income, consumption trends have also undergone a gradual metamorphosis both in
urban and rural India. Urban India in particular has spawned a new generation
of educated, dynamic, globally sensitized, highly aspirational and ever
burgeoning socio-economic collective that I call the Neo-Indian consumer.
Within the age demographic of 15-35 years and drawing upon its predominantly
middle and upper middle class background, the Neo-Indian consumer is more
receptive to the morphing socio-economic scenario, both on a domestic and
global level. For him, consumption is fueled by an amalgam of demand, need,
curiosity and comfort. Quality is of vital consequence. This rapidly growing
consumer base in an emerging economy propelled by sound free market ideals
provides more than a fabulous window of opportunity for companies to suitably
position themselves by offering a diverse and demand specific range of products
and services. Set in this backdrop, I have chosen to view the Vending Machine
market in India through a more discerning lens with an accent on the Neo-Indian
consumer profile.
Ever wondered how much potential the
Vending Machine that gives you a steaming cup of Coffee at the Railway Station
every morning or evening holds? Well, I certainly gave it some thought! The
Vending Machine market in India has been around for more than a decade and a
half but has shown uninspired growth as such. The initial rudimentary machines
gradually gave way to more sophisticated and reliable setups but the market as
such failed to take off. However, off late, in the backdrop of the emergence of
the Neo-Indian progressive consumer and other favourable socio-economic
undercurrents; the market has begun to show great promise. Given the potential
target consumer base primed for consumption, sale of products through Vending
Machines is touted to reach $ 1 billion by the end of 2012. Estimates suggest
that only 12 – 15 % of the entire market has been tapped thus far. Furthermore,
a majority of the revenues generated accrue through the sale of hot beverages
such as Tea and Coffee and Soft Drinks. This presents Vending Machine
manufacturers, operators and FMCG companies as such with a huge opportunity to
target a largely untapped market.
Automated Vending Machines in
particular are becoming increasingly popular in the Indian context. These
compact setups that are generally 4 – 6 ft. in height, occupy an area of 4 – 6
ft. These cost Rs.1,40,000 – 10,00,000; depending upon the level of
refrigeration and order customization. These are generally stocked with a
relatively diverse product range inclusive of packaged snacks, food items,
candy, confectionary, beverages, stationery and certain other high consumption
FMCG items. Predominantly installed at Railway Stations, Airports, Colleges and
other Educational Institutions, Petrol Stations, Malls, Offices and Hospitals;
the Automated Vending Machine presents a lucrative option for market players to
effectively cater to an existential latent demand.
So, what is it that makes these
machines a hugely viable and enticing proposition? The following are the merits
of Vending Machines as efficient marketing channels –
- The Neo-Indian Consumer Factor: For starters, the emergence of the Neo-Indian consumer driven by changing lifestyle and consumption patterns and the percolating consumerism effect has created a burgeoning market and increased demand
- Greater Distribution: Manufacturers and companies alike benefit by utilizing Vending Machines as an efficient distribution channel for their products by appropriately locating them in spaces liable to see high footfall from the target demographic
- Increased Market Penetration: At a fraction of the cost incurred, these machines provide companies with the chance to penetrate new markets without the hassle of hiring too much labour. These machines bring the company one step closer to the eventual consumer; thereby, serving an intermediary role
- Enhanced Visibility: Companies willing to sell their products through Vending Machines stand to gain from increased visibility in an already cluttered market. Hence, the machines not only serve as a distribution unit but also serve as a display unit; creating enhanced visibility and brand recognition
- Effective Advertisement Platform: In addition to just merely offering products for sale, the machines also serve as an effective advertisement vehicle; thereby, aiding companies to establish a more holistic interface with the consumers and ensure higher brand recall in the long run
- Silent Salesman: Bereft of any human intervention whilst selling, the machines negate the adverse implications of low productivity as a consequence of employee leave, holiday or strikes. These machines function 24 hours a day, 365 days a year serving customers
- Guaranteed Quality: Vending Machines store quality products in a quality, safe, secure and hygienic environment. This also reduces the chances of adulteration and duplication that can hurt the prospects and credibility of the company per se.
Now despite the many advantages that
this avenue presents to multiple stakeholders; the market is fraught with
myriad challenges that have hindered its progress and may continue to do so
unless addressed at the earliest. Some of these developmental impediments
include –
- Availability of relatively cheap labour that fuels the proliferation and operations of Stores and Canteens. These serve as indirect competition
- Lack of usage despite access to automated machines owing to absence of technical know-how, trust and other psycho-social variables
- Issues pertinent to currency recognition; prices of products within the country is such that making payment through coins is inconvenient and unfeasible at times. A proper currency recognition system which accepts and gives back currency in both notes and coins is vital. Also, alternate payment channels via cards and mobiles could be explored later
- Threat posed by vandalism and inconsiderate usage
- Lack of regular repair and maintenance and replenishment of these machines can render them unfit for operation; thereby, undermining the entire endeavour
Indubitable is the fact that the
Vending Machine market in the country as well as other emerging economies such
as China, Mexico, Brazil and South Africa is poised for significant growth in
the years to come. However, the industry will be able to fulfill its latent
potential only if the aforementioned challenges are taken cognizance of. It
will come down to handling the Neo-Indian consumer transition from curiosity to
convenience to habit driven consumption through Vending Machines. What it boils
down to is whether the market players are able to leverage their core
competencies with a strong customer orientation and expand market coverage in
the future.
A Vend in the Road is certainly here.
We just have to tread on it productively now.
Pradyut Hande
The Writer is presently pursuing his Bachelors in Business Administration at NMIMS, Mumbai. He attempts to address myriad issues of both domestic and global consequence, ranging from Business and Economics to Geopolitics...from Sports to Arts and Culture.
The Writer is presently pursuing his Bachelors in Business Administration at NMIMS, Mumbai. He attempts to address myriad issues of both domestic and global consequence, ranging from Business and Economics to Geopolitics...from Sports to Arts and Culture.
