The Ultimate Guide to Mastering the Micro Market Industry
Micro markets are one of the fastest-growing trends in the foodservice and retail industries. Pushing the boundaries of what unattended technology can offer, micro markets are bringing in unparalleled levels of convenience to millennial and Gen-Z users who are always on the go.
Before we dig deeper into the new opportunities and future potential of this burgeoning industry, let’s first understand the evolution of micro markets and their appeal for both consumers and retailers.
Explained: The past, present, and future of micro markets
What are micro markets?
Micro markets are unattended retail environments that go one step beyond the traditional vending machine model. Sitting at the intersection of the labor-saving point of sale (POS) and self-service dining and retail, micro markets ditch closed kiosks in favor of temperature-controlled open shelves, reach-in coolers, and glass door freezers.
Consumers are free to pick up freshly prepared food and beverage products, review them for nutrition information and other details, and leverage robust self-checkout options to complete the purchase. Usually, cashless payment systems such as credit cards, mobile wallets, and prepaid cards are used in micro market shopping.
Micro markets rely on a system of honesty, where consumers are expected to pay for their own purchases without human intervention or supervision. Thus, they tend to be most commonly found in shared spaces of ‘closed’ environments, such as co-working offices, multi-family residential complexes, and hotel lobbies.
Customers often describe micro markets as ‘a 24×7 convenience store’ at the office or in the apartment building, where they can access and purchase healthy snack and beverage options around the clock.
By combining flexibility with variety and efficiency, micro markets have brought explosive growth potential to self checkout kiosk vending. By replacing drab and boxy vending machines with strategically placed snacks, meals, and refreshments in an open layout, micro markets have become artistic places where employees crave to spend their break time.
Understanding the appeal of micro markets with diet trends
Micro markets have largely emerged in response to the increased demand for healthy and fresh food options. More and more consumers today are gravitating toward healthy eating and are trying everything from eating smaller portion sizes with each meal to cutting back on fast food.
In a recent survey of over 1,400 US adults, 89 percent of the respondents admitted that that nutrition is important to them, but 56 percent found it difficult to eat healthily.
And let’s not forget that there is a direct correlation between healthy eating habits and higher productivity at the workplace. Research has proven that employees who eat a healthy and balanced diet are 25 percent more likely to have higher job performance and 27 percent less likely to take leaves of absence.
This is why forward-thinking organizations and multi-brand workplaces that are open at odd hours or operate in a shift-based system, are embracing fresh micro markets as an essential feature of the modern office.
Giving people healthy, grab-and-go style meal options on the job comes with multiple benefits. Adopting micro market vending on the office premises not only helps employees meet their healthy-eating goals, but this simple act also makes the workspace more cohesive. It gives a clear, recognizable, competitive edge to the employer.
Micro markets and the convenience of cashless self-checkout
One of the biggest allures of micro markets lays in the ability to provide a hassle-free, contactless self-checkout experience for consumers.
Since micro market vending is driven by cashless payments, this retail model allows customers to avoid the long queues typically found at checkout counters of conventional grocery stores. The checkout process becomes even faster because buyers no longer have to rummage through their wallets or bags to find the coins and banknotes they require.
They need not worry about whether they are carrying adequate cash either.
Instead, they get to enjoy a multitude of payment options such as contactless credit cards, debit cards, company or community prepaid cards, tap-and-go cards, and NFC bank cards. Other payment options include mobile payments and digital wallets like Apple Pay and Samsung Pay.
Furthermore, several large corporations with micro markets on their premises provide a preorder and prepay service for their staff. In this system, employees can access the daily menu options through a customized mobile app, and order and purchase different meals quickly and conveniently through their mobile devices.
Micro market placement opportunities
When micro markets began to emerge, the general perception was that the best placement opportunities would be in locations where populations were between 150 and 500. It was believed that for populations under 150, the profitability may not be adequate, while for larger populations, on-site dining or cafeteria services may be more effective.
But that was then. Today, industry experts have lowered the minimum threshold number to 75, and in some cases, 50 people – depending on the number of hours being spent on-site or other 24×7 dining options available in the area.
As a whole, the bulk of micromarket vending locations can be found on the premises of large manufacturing facilities. This is followed by local businesses, such as salons and local gyms, as well as government buildings.
Other popular micromarket locations include offices, hotels and motels, schools and universities, hospitals, residential communities, correctional facilities, and military bases.
Now, all these locations have also been popular spots for traditional vending machines. But operators in the industry say that compared to conventional vending, they have experienced better revenue growth through daily vends in micro markets. Most operators report revenue exceeding $1,000 per week in product sales from a location with an average population of 125 potential customers.
Micro market revenues and ROI
Micro markets are major growth multipliers. According to trade analysts, the average profit in the old-school vending model is 1.15 percent. A micro market, meanwhile, gives back 17 percent in profits.
This is because of two reasons:
- The upfront investment in micro markets is considerably lower than in traditional vending machines (nearly $14,000 lower)
- Operators are able to charge more for the same products because buyers are willing to pay more for a higher quality customer experience that micro markets provide
Also, since customers have the convenience of cashless self-checkout unrestricted by the availability of cash, they almost always end up buying more than one product at a time at a micromarket kiosk. Studies have shown that credit card buyers are willing to spend twice as much as those who have only cash payment options available. Behavioral economists explain this phenomenon through the psychological cost of spending a dollar. On a credit card, it’s only 50 cents!
Micro markets are also more profitable because research has proven that while a traditional vending kiosk receives 1.9 daily visits from a customer, a micromarket location enjoys 2.3 daily visits. Similarly, the daily purchase frequency for vending machines is 0.7, while for micromarkets, it is 1.2. One of the biggest reasons behind this trend is the open and inviting layout of a micromarket.
Navigating the micromarket display landscape
A micro market is typically divided into four distinct zones: hot and cold beverages, fresh meals, snacks and candy, and impulse buy items. Access to a power supply is essential for coolers and self-checkout systems.
Broadly, in a micromarket environment, operators desire easy-to-install fixtures that they can move or even add to in case of future expansion. As such, free-standing display units are the most sought-after. These units can easily be placed anywhere and do not require an operator to drill into a wall.
Lightweight, durable, and portable are the keywords here. So, using free-standing baskets and easily movable spinning racks can also be an option to give the market a fresh look.
And since one of the most important aspects of merchandising is having an appealing aesthetic, it’s a good idea to add internal lighting to the displays and highlight the products. A high-end look can also be brought in by using professional signage and ensuring that different colored products are grouped and placed effectively.
To catch the customer’s attention, new products should always be placed at eye level. If two products are a part of a promotional campaign – such as a breakfast sandwich and coffee combo – they must be within easy reach of each other.
Most successful micromarket products
While a traditional vending machine has the capacity to hold about 40 different products, an average micro market can easily stock anywhere between 150 and 400 products.
According to an Automatic Merchandiser report, cold beverages, food, and snacks are the largest revenue-generating categories in micromarket vending. When different categories of consumers were queried about their snacking preferences in a recent survey, ‘wanting to eat healthier while snacking’ and ‘eating on the go’ emerged as major themes.
While Boomers and Gen-X go to micro markets for healthy, low-fat, sugar-free, or reduced-sodium snacks, Millennials typically seek out fresh micro markets for a complete afternoon meal.
Interestingly, non-food items also sell well in micro markets. Electronics (cell phone chargers), toiletries, and health and wellness products, such as antacids and aspirin, have been known to be popular among consumers.
Experts recommend introducing new, seasonal, and trendy products frequently to ensure that the market doesn’t feel stale. Since micro markets can offer a much wider number of stock-keeping units (SKUs) compared to traditional vending machines, it’s prudent that operators have an open dialogue with customers and understand their demands and desires.
Product diversification is one of the top trends impacting the success of micro markets today.
Management technology for micromarket industry
Like any unattended retail, a shrinkage of 1 to 2 percent is considered normal in a micromarket. To ensure that people don’t misuse the concept, many operators like to strategically place video camera systems on the premises.
However, video surveillance can only dissuade theft and prevent food tampering. To manage inventory effectively and to maximize profits and performance, operators like to integrate their systems with a vending telemetry solution.
This technology provides deep insights into vending operations and allows micro market operators to manage their business remotely. Operators receive warnings of adverse events that need real-time resolutions, such as a micromarket kiosk getting unplugged, which allows them to preempt operational malfunctions and prevent revenue loss.
Now, streamlining operations in such a manner is certainly a plus for operators, but the true benefits of telemetry management technology are actually availed by the end customers.
Through an in-depth analysis of sales, operators can gain insights into consumer behavior and discover the areas that need attention. They can ensure that the right product is available at the right place at the right time and deliver a superior customer experience that can help build brand loyalty.
Role of customer loyalty programs
An Oracle study has found that increasing customer retention by just 5 percent can improve profits by as much as 95 percent. This is because loyal customers spend an average of 67 percent more on each transaction and also increase their visit frequency by 35 percent. As such, an engaging loyalty program can be instrumental in the growth of a micromarket.
Better yet, capitalizing on the popularity of a loyalty reward program in closed environments is not difficult.
Through a vending telemetry solution, organizations can establish different price points for different payment methods and offer discounts to their employees if they pay via company prepaid cards. Discounts can also be set up for specific products, based on an analysis of best- and worst-selling products.
Offering different loyalty membership types can be another way of introducing loyalty rewards in a micromarket. Each membership level could be customized to offer varying benefits and users can then be encouraged to spend more to achieve a higher status.
A micro market operator may also consider a credit card reader app that would seamlessly integrate with digital wallets and reward regular customers with loyalty discounts, daily specials, and other benefits.
Micromarkets in the COVID-19 era
In a world where food safety and sanitization protocols became more stringent overnight, micro market operators soon discovered that they were uniquely poised to be efficient last-mile suppliers in many communities. As the COVID-19 pandemic swept across the world, many micro markets began to (and continue to) stock face masks, hand sanitizers, and other personal protective equipment.
Operators took advantage of micro markets’ open concept and robust cashless payment systems to boost physical distancing and minimize the need for customers to touch the same surfaces as everyone else.
To make micro market vending an oasis of safe shopping for consumers, floor decals advise shoppers to maintain appropriate distance and signs placed within the premises remind users to keep their hands sanitized throughout the shopping process. It’s also now common to see disinfectant wipes placed near touchpads.
Many operators have added new COVID-inspired solutions to fresh micromarkets, such as individually wrapped condiments, cups, and utensils, as well as touchless coffee brewing, dispensing, and vending equipment.
To remind employees that they can use no-touch self-checkout options and make payments directly from their mobile apps, many organizations took to adding free credits to their workers’ prepaid cards and encouraged them to take advantage of employee membership benefits.
Major growth for micromarkets is imminent
From an estimated market size of $134 billion in 2020, the global vending machine industry is expected to cross $146 billion by 2027. Micro markets will play a major role in this growth.
Statistics show that between 2012 and 2020, the micromarket industry has almost doubled in size. Today, there are more than 30,000 micromarket locations globally, bringing in more than $7 billion in sales. Industry analysts are convinced that in the next 5 years, another 30,000 micro markets will be launched.
The record growth in micro market kiosks can be attributed partly to the ongoing COVID-19 pandemic. Micro market vending eradicates the need for a customer to physically interact with grocery store employees or other shoppers. There is also no need to exchange ‘dirty’ paper currency. As such, people can shop locally, even as they maintain social distancing guidelines.
And let’s not forget that many organizations are now giving employees the option to either work remotely or are introducing a hybrid working model where an employee would not be required to report to the office every day.
With fewer people on-site, conventional catering options will not make financial sense for most firms. Employees would also prefer hygienically-packed grab-and-go food items compared to fully-exposed meals in cafeteria-style dining.
Designing safe spaces for the future
One of the biggest allures of micro markets lays in the ability to provide a hassle-free, contactless self-checkout experience for consumers.
Since micro market vending is driven by cashless payments, this retail model allows customers to avoid the long queues typically found at checkout counters of conventional grocery stores. The checkout process becomes even faster because buyers no longer have to rummage through their wallets or bags to find the coins and banknotes they require.
They need not worry about whether they are carrying adequate cash either.
Instead, they get to enjoy a multitude of payment options such as contactless credit cards, debit cards, company or community prepaid cards, tap-and-go cards, and NFC bank cards. Other payment options include mobile payments and digital wallets like Apple Pay and Samsung Pay.
Furthermore, several large corporations with micromarkets on their premises provide a preorder and prepay service for their staff. In this system, employees can access the daily menu options through a customized mobile app, and order and purchase different meals quickly and conveniently through their mobile devices.
Flexibility and reassurance in a post-COVID world
As the world looks set to change forever, micro markets could become the only on-site solution for many consumers. Businesses and communities looking to limit the exposure of their employees and residents alike would want to provide a diverse mix of high-quality products inside their premises.
Having everything that you need available on-site is not just about convenience anymore. It’s also hugely reassuring and comforting – and that’s an emotion most of us can relate to after experiencing panic-buying induced shortages in grocery stores.
Let’s not forget that the needs of the customer can change unexpectedly in uncertain times like these. The beauty of micromarkets, by design, lies in the ability to offer operators greater flexibility to pivot and supply top-quality products to users at a moment’s notice.
In the times to come, operators may even consider offering non-traditional products and services also via micro market vending. Including, for example, teleshopping products or flowers and plants to cater to the burgeoning trend of ‘plant parenthood’ among millennials.
As far as services are concerned, examples could include dry-cleaning pick-up and drop-off, as well as locker facilities for online deliveries.
Looking forward
While the future remains unpredictable, operators can make informed decisions by staying on top of micromarket trends. Innovations in the industry have made micro markets the perfect last mile solution for a multitude of communities, and leveraging technology solutions to provide a frictionless experience to the customer will remain key in their continued growth.
Want to know more about how your unattended retail space can navigate the new challenges presented by the COVID-19 pandemic? Contact us here.
