The rising popularity of vending machines in Dhaka
The use of vending machines is gaining popularity, according to a company which already set up 110 vending machines across Dhaka city. But how viable is this business?
On a late evening in January, 21-year-old Mahbubur Rahman along with two other friends went to Happy Arcade Shopping Mall to buy a vape. On his way out of the mall, he spotted a vending machine in front of the building.
The vending machine is filled with soft drinks, water bottles, chips and biscuits. He needed to buy a bottle of water. So, he inserted a Tk10 note and then a Tk5 note. And intently looked at the bottle of water as it made its way down to the dispenser.
A few moments of silence while the bottle whirred out, and the young boys shouted in joy. "This is the first time I used the machine. I saw it in films. I am happy with the system," said Mahbub with excitement. "Actually, I gave it a try whether it works or not and it worked."
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Like Mahbub, many people in the city now use vending machines to buy snacks and beverages. Its popularity is on the rise.
However, vending machines are nothing new in Bangladesh.
There have been several vending machines on the premises of the Hazrat Shahjalal International Airport for a couple of years now. Some businesspeople brought four to five vending machines and set them up at different points in the city but those did not take off because customers have to buy "special coins" from the man attending the vending machine to use the facility. Also, they would sell products at their vending machines at a premium price, meaning more than the maximum retail price.
Shohel Ibne Sattar, the chief executive officer and managing director of Germania Holdings Limited, set up 110 vending machines across Dhaka city.
Shohel began the business with 14 vending machines in 2020 by setting up the machines on the premises of Birdem General Hospital, Shimanta Square in Dhanmondi and Al-Noor Eye Hospital at the end of Dhanmondi 27.
"People think that the sale of products in vending machines is high in the shopping malls. But it is not right. The sale is higher in the hospitals," said Shohel.
This is because a patient's attendant has to look after the patient keeping awake at night and if the attendant needs to buy something, they do not want to go far. The vending machine placed at the Birdem General Hospital sees one of the highest sales, averaging at Tk4,000 daily.
On the other hand, the vending machine at the Confidence Tower on Badda Link Road sees sales averaging Tk400 daily. As such, the company recently relocated the vending machine.
The daily sale at the vending machines depends on the season as well.
The sale of soft drinks and bottled water picks up during the summer season compared to winter sales. Even the time of day plays a factor, "during the daytime, the number of customers is lower than that at night," said Shohel.
However, he said that daily sales are on the rise with time. In the beginning, the daily average sale per machine was around Tk500 to Tk600. Now the daily turnover has increased by threefold. But still, he is incurring a loss.
"We are not making any profit yet, we hope that it will take a few years to make a profit. If we add 100 more vending machines, we will come to a breakeven," said Shohel, who plans to achieve this goal by December 2023.
Currently, the daily average turnover is around Tk1.5 lakh. In summer, the turnover crosses Tk2 lakh.
Shohel is holding out hope for this summer because of the renewed popularity of the vending machines. "I think this summer, the daily turnover will reach Tk3 lakh," said Shohel.
Shohel envisions setting up 5,000 vending machines in Dhaka city alone and 5,000 more across the country in the next decade.
But to do so, he will have to invest more. He said that it takes around Tk4 lakh including tax to import a vending machine.
Besides cash, people can buy products from these vending machines using bKash as well as credit cards. Mobile financial services and credit cards now amount to 50% of the payment.
The beginning
Born in Cumilla and raised in Kakrail in Dhaka, Shohel Ibne Sattar did his Master's in marine science from Chittagong University.
He worked for different companies as a senior executive. Before he quit his job in 2020, he was the CEO of Paragon Group. And even earlier, he worked with Beximco Group and the Saudi-Bangladesh Industrial and Agricultural Investment Company Limited.
Shohel has been importing bulk raw materials of animal feed. In fact, he continues to work in that business. He has also set up a shrimp fry hatchery in Kuakata.
Shohel was toying with the idea of setting up vending machines about three years before the pandemic arrived in Bangladesh. However, the countrywide lockdown in March 2020, when shops were asked to keep shut after dusk, triggered the launching of the vending machine business.
"I thought this is the time, if I can do it now, I will be able to make it work," said Shohel, who often visits foreign countries for business purposes and has a habit of buying things from vending machines even in the dead of night.
"But in Bangladesh, you will see that all shops are closed after 11 pm. If you feel like buying a bottle of water or a soft drink, you cannot," said Shohel.
Before importing the vending machines, the IT team of Germania Holdings Limited developed software for the vending machines and did backend work which took around a year. Basically, the IT team chose the European design of vending machines, but manufactured them in China to make them cost-effective.
At first, Shohel thought of selling the products at the vending machine at a premium price. But found that it would not be feasible because people will buy the same products from conventional shops. So, he decided to sell the products at the MRP price.
Then he talked to Akij Group, PRAN-RFL Group and Meghna Group officials and told them that he would buy a large quantity of products and would expect 1-2% more commission to make the business economically viable.
The company pays a monthly rent for space for the vending machines at different points in the city, which varies between Tk5,000 to Tk10,000.
They faced a problem in the beginning after setting up the vending machine because many people did not have the faintest idea what the machine was. To resolve this, Shohel employed attendants for a month to make people understand what the machine is and how to use the machines.
"After a month, we stopped keeping attendants at the vending machines. If one goes to the vending machine, the display on the vending machine guides one on how to buy and make a payment," said Shohel.
A launch into an automated future?
Shohel said that it is commonly assumed that labour is cheap in China, but now it is no longer the case. He predicts that one day labour will no longer be cheap in Bangladesh either. "So, people will look for alternatives like automation. Businessmen will be compelled to go for automation. There is no other way," said Shohel.
He believes that ultimately all shop owners will use vending machines in future. "If I stop, someone else will do it." explained Shohel.
There are problems too
The vending machines cannot accept more than Tk50 in cash. In fact, it can only accept Tk50, Tk20, Tk10 and Tk5 coins in cash. However, customers can buy products worth Tk100 or Tk500 with bKash or a credit card.
The vending machine also does not accept the commemorative note of Tk50 celebrating the Golden Jubilee of Independence 1971–2021.
Shohel said that it is definitely a limitation. When asked about the commemorative note, he said that it is a small problem and they will resolve it soon.
Another problem is that sometimes, the vending machines stop working due to unstable internet connections and customers' money gets stuck in the machine. Then the customer has to make phone calls to the company's customer care.
"There were some customer complaints about the transaction. If someone does not get the product after paying money and complains to our customer care, we give back the money through bKash usually within one day," said Shohel.
