Americans Look to Vending Machines for Passive Income
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Here's your Money Briefing for Tuesday, March 12th. I'm J.R. Whelan for The Wall Street Journal. More people hoping to generate some extra cash to help pay the bills are launching their own vending machine businesses.
Vending machines have a relatively low startup cost. So unlike the idea of buying a whole business, like a laundromat or something, you can get going with vending machines for just a couple thousand dollars. The other thing is just that this is a pretty intuitive business model to people. Most people have come across a vending machine in their life, but just the basic premise of... You put this box somewhere, you stick some food or drinks in it, and you have people sell it. It just seems to make sense.
How are vending machines being used as a source of passive income?
So how does it work? We'll talk to Wall Street Journal personal finance reporter Joe Pinsker after the break.
Vending machines have become a popular source of generating passive income. Wall Street Journal personal finance reporter Joe Pinsker joins me. Joe, when we say passive income, what does that mean?
It's a compelling term, and it's also a bit of a tricky one. The purest form of passive income is that you aren't working at all and just letting cash flow in from some source you've set up, maybe like owning a rental property or something. In practice, there are many things that end up under the umbrella term of passive income, and some of them are sort of more low effort than no effort, and vending machines sort of fall under that category.
So how big is the vending machine business in the U.S. ?
There are about 3 million vending machines in the country. That's according to a trade group called the National Automatic Merchandising Association. Together, they all sell about $18 billion a year in products. And that means the average machine is generating about $525 in revenue per month.
Oh, so this could be a lucrative business.
Oh, sure. But like any business, it can kind of succeed or fail based on how you operate it. And there are really two reasons why people are drawn to this in particular. One of them is that vending machines have a relatively low startup cost. So unlike the idea of buying a whole business like a laundromat or something, you can get going with vending machines for just a couple thousand dollars. The other thing is just that this is a pretty intuitive business model to people. Most people have come across a vending machine in their life, but just the basic premise of you put this box somewhere, you stick some food or drinks in it, and you have people sell it, it just sort of seems to make sense.
Well, I'm no economist, but I love pretzels, and I guess snacking and getting a case of the munchies is recession-proof.
This is something that people in the vending world remark on often, how there's sort of bottomless demand for these things. Sort of like somebody who gives haircuts for a living. Lots of machines actually do really well, particularly at workplaces where people are sort of a captive audience if they're hungry and want something to eat.
How does somebody acquire a vending machine? Do they have to buy it?
Yeah, the most commonplace sort of everyday person would go and get one is something like Facebook Marketplace. You just sort of go online and buy one. You can get a range of different qualities there. Some of them may be less reliable than others, but that's where a lot of people get started.
One of the people you spoke with who has started a vending machine business touted his success in several YouTube videos. Here's a listen.
All right, you guys, we made it to the Vending Bytes headquarters. I actually have all the money that we collected today. So let's go inside and let's count it and see exactly how much the four machines made, which turns out that the first location made $122 with 60 cents and the second location, $164 with 25 cents, bringing the grand total to about $300 after seven days.
Now, Joe, he's had some success with his vending machines, but what are the costs and challenges involved in starting this kind of business?
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