Entrepreneur Aims to Make Change in Vending Machines
COMPANY: Real Time Data
TYPE OF BUSINESS: Makes wireless monitoring systems for vending machines
HEADQUARTERS: Bellevue, Wash.
FOUNDER: Kit Eldredge, 42, a 13-year veteran of Motorola
CAPITAL: Recently completed a $35-million high-yield debt offering, underwritten by Smith Barney
KEY COMPETITION: Skywire, a Memphis company whose system is called Vendview
COMPETITIVE STRATEGY: Lease, rather than sell, service to make it affordable and turnkey
Real Time Data (RTD) is hoping to give vending machines the push they need to become a modern, technologically enhanced distribution channel.
In 1995 the eight-year-old company began installing an electronic black box inside vending machines. The box records every item that drops down the chute; keeps track of coins available for making change; detects power outages and unauthorized entries; monitors the cooling system (where applicable); and transmits all the data via wireless modem to the vending operator's home office. What the company's VendLink system adds up to, says Nancy Pfund, general partner at the technology fund of Hambrecht & Quist (not an investor), is "an inventory-control tool that redefines the vending business."
Well, yes--for starters, claims founder Kit Eldredge. Eldredge envisions a whole new industry: unmanned convenience centers, finely tuned to their customers' needs and buttressed by reams of sophisticated point-of-purchase data. Somewhere in the gulf dividing his vision from reality lies a vast opportunity for RTD, or so Eldredge is convinced.
But how to capitalize on that? Even Scott Drum, RTD's vice-president of marketing, generously describes the industry as "extremely primitive." Vending is dominated by more than 8,000 independent operators, straitjacketed by ancient equipment, and woefully undercapitalized. Skywire, RTD's rival, aims to win over one well-heeled segment: beverage bottlers. Skywire's Vendview system was initially compatible only with late-model soda machines and is expensive to buy: about $300,000 for the hardware and software to handle a typical 800-unit operation. RTD, by contrast, has from day one sought a bigger slice of the market. Its strategy has three parts:
One, retrofit the masses. The vending-machine population is said to number 5 million and includes more than a thousand species, each requiring its own unique interface with the VendLink system. RTD didn't go to market until it could guarantee compatibility with almost all of them.
Two, be affordable. RTD doesn't sell anything. Instead it offers a service. For $25 per month per machine, customers get a long-term lease, plus a dedicated marketing manager to help interpret the data. RTD, in turn, gets a contract it can take to the bank to finance equipment purchases, plus the use of the data, with their potentially valuable insights into mass munching habits.
Three, nudge nervous customers to try it. At $25 per month, RTD is asking more for its services than some machines now make. Which is why RTD shows customers how they can expect revenues to increase by at least 10% (no more sold-out Snickers bars) and lower labor costs by 30% (no more unnecessary service trips).
RTD finished 1996 with about 1,500 boxes implanted and revenues of less than $500,000. Profits won't come until deployment reaches the "hundreds of thousands" of machines, says Drum. "We're betting on a significant part of the industry's adopting this technology," he adds.
Resources: REAL TIME DATA, Scott Drum, 400 112th Ave. NE, Suite 400, Bellevue, WA 98004; 206-451-1783; firstname.lastname@example.org
SKYWIRE, 2600 Thousand Oaks Blvd., Memphis, TN 38118-2469; 901-363-9535