How profitable are vape machines?
E-cigarettes also known as disposable vapes or simply, vapes, are very popular in the United States. In fact, the US vape market is over $15 billion, making it the largest vape market in the World. It continues to boom due to the innovation of new products and rising consumer demand. Additionally, China has seen advancements in their capacity to manufacture and improve quality control. Hence, wholesale prices on premium vapes (such as Geek Bar and Raz) are as low as $7-$8 per unit and they retail for around $25. After fees, the gross profit on selling a vape in a vending machine is is around $15. The impressive profit margins coupled with the electronic cigarette market surge is what attracted me to Vape Vending machines. I was determined to own and operate these machines like I did with ATM machines and Jukeboxes–same concept.
How to launch a vape vending business
I formed an LLC called Vape Box, LLC and partnered with VapeTM, the largest distributor of Vape Vending equipment and domestic software provider. VapeTM informed us that we needed to purchase vapes from a registered Ohio distributor and that we needed an Ohio Transient Vendor’s License. Additionally, we needed to submit traditional sales tax on a monthly basis. We also were informed about placement requirements in Ohio. In fact, most states have rules where these machines can be placed. Contrary to popular belief, very few states have rules concerning age-verification technology. Most states are not that current.
Once our paperwork was buttoned up with the state, we purchased two machines. One machine was a “training” VTM that I kept in my house (it is still there)! The other machine we deployed at my Uncle Greg’s bar, 1899 in Willoughby, OH. This account generates over $2500 in profit every single month. Yes, I got lucky that this was our first account, but to be honest, it is a tiny little dive bar that packs in youngsters and hipsters and sells a lot of booze–nothing special.
I got trained on VapeTM software through several phone calls and their YouTube training videos and they connected me with a couple of vape wholesalers. There are hundreds of them and they all work on high volume, small margin. This was the easy part.
So, what was the hard part?
Sales. Sales is the lifeblood of every business, and without top-line revenue, there is no profit, ie. no business. In my opinion, most people talk too much about accounting, operations, legal, financial analysis…you name it; at the end of the day, we should focus more time on sales strategy and downright selling –its a hustle, and the first account is the hardest..
I developed some simple marketing material and traveled by foot (well, I drove) from bar to bar to bar in NE Ohio. I went before lunch or after lunch and found out who the “boss” was and relentlessly got in touch with them. Additionally, I made several phone calls to people I knew in the industry (my family operated Jukeboxes at a lot of them). The market was virtually untapped and I quickly realized that I was sitting on a gold mine. I redirected my focus to the high quality accounts since they were there for the taking. These were the “young” bars that sold a lot of alcohol late night hours and went through cases of High Noon. Some states publish liquor sales by brand, and if so, go for the High Noon locations! When it came to selling, it is my strongest skill set, but the key to my success was the knowledge that I gleaned and developed early on. The main questions that bar owners asked me revolved around the law, taxes and nicotine taxes, compliance, licenses, and age verification. I became an expert on Ohio Vape Vending Law, so once these questions came up, the sale was over–I had the right answers! I will say that I couldn’t get many words in with a Marlboro Red old-timer. Those guys will come around next year.
Growth, Demand, and Deploying Machines
The young bars started to generate over $1500 in gross revenue which was about 60 transactions or 2 per day. You heard me… 2 per day–that is the sweet spot because of the high margins. A Vape Vending machine is a like an ATM, but instead of earning $1.50 in surcharge revenue plus (dwindling) interchange in exchange for fronting 5 x $20 bills (ie. a $100 dispense), we dispense a $8 vape for $25. To further analogize, VTMs require ~$1000 or so in vape inventory as opposed to $10,000 or so in ATM vault cash. The economics of VTMs or VapeTMs dwarf ATMs (and Jukeboxes) but only at the right locations–bars and clubs that sell a lot of alcohol late-night hours to the 21-40 year old demographic. Don’t over-complicate it.
How did I grow it so fast?
I treated the first few customers like gold–I provided exceptional service and fast-response time. Then, I called them and asked for help. I told them the truth–that I was trying to make a living and quit my day job and my wife is going to kill me if I wasn’t successful–literally, she would kill me. “Do you know any other bar owners that you could put me in touch with?” Almost every bar owner was not looking for $100 or a referral fee. In fact, when I asked them for help, it changed the vibe, it disarmed them, and they were happy to help me. But, this didn’t work right away. Nobody followed up with me. I needed a new plan
Coffee is for Closers
I asked a bar owner to meet me for coffee. I asked him to take out his cell phone and call a bar-owner friend on speaker with me there. Once again, game-over. Rinse and repeat. In 6 months, we placed over 40-50 vape vending machines in NE Ohio. Today, we are generating over $50,000 in recurring monthly revenue and after all expenses and merchant commissions, we profit >$20,000 per month. We have one part time guy that replenishes the machines and it is semi-passive income. I can’t call it passive because sales was and is a grind. If someone finds truly passive income, I will be the first to sign up.
Key Takeaways for Success in Vape Vending
-
Identify Profitable Locations: Focus on bars and clubs that cater to a younger, 21-40-year-old demographic, have late-night hours, and sell a lot of alcohol.
-
Become an Expert in Regulations: Understanding state and local regulations regarding vape vending, licensing, and age verification is critical for gaining trust and closing sales.
-
Build Strong Relationships: Treat your initial customers exceptionally well and ask for referrals. Networking is key to scaling your route quickly.
-
Leverage Your Expertise: Be prepared to answer questions about compliance, taxes, and legal requirements. Knowledge builds credibility and makes closing deals easier. To learn more about State and Local Laws, check out https://vapetm.com/pages/vape-vending-laws-state-by-state
-
Sales Are Key: Focus on sales strategies, from in-person visits to leveraging industry connections. Persistence and hustle are essential to success.
With the right approach and determination, it’s possible to grow a vape vending route rapidly and profitably. Good luck, and feel free to reach out if you have any questions!
If your looking to grow a route, feel free to email me at Jordan@vapeboxnow.com
If you want to learn from the best, check out https://vapetm.com/
