iPhones from vending machines: Stoney Creek’s U-Vend building a kiosk kingdom, but is there enough Canadian demand?

Dave Young has audacious aspirations for U-Vend, a Stoney Creek-based vending machine company that develops and sells self-serve electronic kiosks across southern Ontario.

His goal: become Canada’s top kiosk business within a year.

“We can get there,” says Young, the company’s vice-president and director of sales and marketing.

The five-person business specializes in vending machines selling sports memorabilia, watches, cell phones and other merchandise. Three years old and primarily funded by its founder — Paul Neelin, founder of the St. Catharines-based Canadian Concession Cart Company — the business isn’t making many sales, and it’s running out of money fast.

Young makes three or four hundred cold calls a week, but has failed to grab the attention of owners and operators of stadiums, shopping malls and airports. Part of the problem is that the U-Vend technology — self-serve retail vending kiosks, as opposed to traditional food vending machines,  is relatively new to Canada.

“They’re becoming big in the U.S. and they’re huge over in China and Europe,” where retailers like Best Buy and Macy’s successfully hawk their products with kiosks in high-traffic areas, says Young. “But in Canada we’re nowhere close.”

As such, retailers and other middlemen are wary of spending between $18,000 and $25,000 for a unfamiliar machine. Additional sales staff, advertising, and cash for travelling to trade shows would help U-Vend attract more clients, but the company is too cash poor at the moment to afford such luxuries.

And, to make matters worse, when Young does hook a potential buyer, and they inevitably want to try a test run, he can’t create something from scratch for them to use.

It’s because all the kiosks are custom built in order to display and vend the specific merchandise of that retailer. Providing a test unit means putting a machine together on spec — a near impossibility for the revenue-strapped company.

But U-Vend is still moving forward. It’s in the midst of negotiating licensing deals for the exclusive right to vend branded merchandise from the UFC, the Hamilton Bulldogs and Snap Infusion, makers of “super candy.”

Those companies are enthusiastic about the new retail approach. All kiosks have a Wi-fi-connected computer system that lets owners monitor inventory via touchscreen monitor. That same touchscreen lets customers peruse products, payment is made by credit, debit or cash, and the machines require minimal labour — even e-mailing operators for refills.

And, despite housing some expensive items, such as iPhones, watches and perfumes, they aren’t susceptible to theft. The showcase is made of unbreakable plexiglass, and an online inventory management system prevents staff from skimming off the top.

“You can’t steal from these machines,” says Young.

It’s a big step up from the ‘insert coin, get bag of chips’ variety of vending machine currently prevalent in Canada, and Young knows the kiosks have potential. Despite the steep price tag, he says, they’re still far cheaper than investing hundreds of thousands of dollars into a brick-and-mortar location. Plus, their track records are strong in other countries, with global research firm the IHL group forecasting that sales from kiosks will grow to $1.1 trillion worldwide by 2015. The problem is hooking the owners of venues where lots of foot traffic will lead to high sales.

“We just need to raise awareness of our brand, not only to the general public, but the business owners and the middlemen out there,” says Young, adding that, “our biggest hurdle is money.”

U-Vend founder Paul Neelin is currently seeking investors, and has raised about a quarter of the funds he needs.

Lisa Shepherd, president of The Mezzanine Group consultancy, says the company can overcome this problem without having to build machines on spec.

“He needs to get these machines into a few locations as a pilot project,” she suggests. “He’s got to have case studies and data to demonstrate to prospective customers that this product can create results.”

In the short term, U-Vend is trying something entirely different — expanding into the U.S.

“We’re coming down to crunch time — we have to get money in the door and get some sales,” says Young, adding that he hopes tapping a market ten times the size of Canada’s will change his company’s fortunes.

It might be a good bet — middlemen in the U.S. are more familiar with retail kiosk technology, and U-Vend has sold three machines since establishing a south-of-the-border distributor four months ago. But those sales numbers are still low, and the U.S. market already hosts several established kiosk companies. Still, the opportunity is there, and if sales pick up, the company just might be able to sustain itself, pique the interest of Canadian business owners, and gain a country-wide, first-to-market advantage.

That’s the ultimate goal, says Young, adding that U-Vend won’t abandon its home and native land.

“Canada is still our baby,” he says. “But I can only make so many phone calls a week.”