According to a new report from the Wall Street Journal, vending machines have become an unexpected and popular investment trend.
On paper, the side hustle seems simple. Buy a secondhand vending machine, which the WSJ estimates would cost about $1,500, fill it with candy and soda from wholesalers like Sam’s Club and Costco, mark up the price by up to 100% per unit, and collect cash.
A vending machine owner can usually start with less than $2,000 and expand at their own pace, giving the side hustle the benefit of low startup costs. The owners replenish products into the machine and collect revenue a few times a month, then set their own hours and have a relatively passive source of income.
A small business owner wouldn’t feel out of place in the vending industry, which consists mostly of small, independent operators making less than $1 million a year, according to Vending Locator. According to Vending Market Watch, the number of vending machines in the United States increased by approximately 4.5% from 2021 to 2022.
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Vending machines have made a big comeback during the pandemic, with the rise of contactless shopping.
“It’s contactless, it’s considered safe and it’s pre-packaged,” Carla Balakgie, CEO of the National Automatic Merchandising Association, told the Washington Post.
However, the landscape can be competitive. The United States has seven million vending machines, or one in every 50 Americans, according to Vending Locator, and the machines are at risk of damage due to disgruntled users, environmental conditions or other factors.
Profits per machine can vary greatly, but the average weekly revenue from a machine is usually around $75 per week, according to N2Go.
Operating costs can also increase. According to a recent report by business daily The Hustle, taxes, transaction fees for card purchases (around 5-6%) and service fees can impact profits. The outlet says about half of its revenue goes towards the cost of items in the vending machines.
Zach Downey, owner and CEO of cotton candy vending machine company Distinctive Vending, said Entrepreneur in March, around the time two of its machines stopped working at the same time at a resort.
“I remember driving from Virginia to Texas in one stretch just to make sure I didn’t miss the resort business,” he said. “It was a stressful time, but I learned a lot.”
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Downey is on track to make $500,000 in revenue this year with 10 cars.
There have also been some issues regarding new technologies. Adaria Vending Services recently came under scrutiny over the facial recognition technology that University of Waterloo students glimpsed on its smart vending machines. Although Adaria said its vending machines detected faces to trigger payments, the university still requested that the machines be removed from campus.
Additionally, a February report from Transparency Market Research shows that the smart vending machine industry is expected to grow to $8.2 billion by 2031 (from $4.9 billion in 2022).
Related: A college is removing its vending machines after a student discovered they were using facial recognition technology
The increase in vending machine traffic may be due to necessity. According to Bankrate, 39% of Americans currently have a side hustle, and 28% think they will always need one to make ends meet. Among those who have a side business, about one in three say they need money to pay for essentials, for daily expenses, not for entertainment.
“Side hustles have become more common, but like so many things in this inflationary environment, people are working harder but not necessarily getting ahead,” Ted Rossman, a senior industry analyst, told Bankrate.