Retail Notebook: Making millions, one quarter at a time

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Saturday, September 24, 2005

Retail Notebook: Making millions, one quarter at a time
Sticking to gum pays off big

By KRISTEN MILLARES BOLT
SEATTLE POST-INTELLIGENCER REPORTER

As a middle-schooler, Tal Moore didn't belong to any clubs.

He didn't much care for them. But he was envious of one thing: the cash they got from selling candy bars.


		Dan DeLong / P-I
	Tal Moore, founder of Gumballs.com, revels in the sweet confections dispensed by the machines that his company sells.

One day, as the 12-year-old shopped with his mother at Sears, he saw a large plastic candy cane filled with gumballs, did a quick calculation of their individual resale value, and bought it.

"Within two months, I was pulling in $12 to $15 per day, selling two gumballs for a quarter," Moore said. "To a kid, that's a lot of money."

With that, the president and founder of Gumballs.com -- a multimillion-dollar-a-year Seattle-based online retailer of gumball machines -- began his career in the vending industry.

Now, his 4-year-old company is posting 50 percent annual growth after doubling in size several times since he launched the Web site from the bedroom of his mother's home in Rainier, southeast of Olympia.

Moore's success story -- the eldest son of immigrants from Israel, the first in his family to graduate from high school, then college -- now unfolds from an unassuming building in the shadow of the Magnolia Bridge, but it began when times were much harder for him.

His father drove a taxi in Brooklyn, where Moore was born in 1976. In fits and starts, with savings scrimped from long hours of roaming around the city, his father bought his own taxi with a partner, then bought out his partner and added more taxis.

His mother, also business- minded, had a series of hair salons throughout their moves from Brooklyn to California and finally to Rainier.

"Entrepreneurship is in my blood," Moore said. "But it was a real struggle -- at one point, after my parents were divorced, my mom and I lived in her salon in Rainier, literally sleeping on the floor."

He worked the whole time -- flipping burgers at Red Robin, cooking at Taco Bell, and eventually establishing Talron Auto, his own used car dealership, in 1996 at the age of 20.

"I hated it," he recalled. "People would call me two weeks after I had sold them a $3,000 car -- I was in the low-end car business -- and tell me something had gone wrong with it.

"I wasn't a mechanic or anything, so I couldn't really help them," Moore said. "I felt horribly guilty."

Finally, something broke for him.

"I had always had a phobia of computers -- didn't know how to use them and felt stupid around them," he said. "But I thought, I can either keep getting by on crappy jobs, or I can learn something new."

The best classes he ever took, he said, were Typing 101 and Microsoft Office, begun at South Puget Sound Commun- ity College in Olympia. But as he was studying and running his dealership, his mind cast around for something else.

Gumballs were to become his salvation.

He began as a part-time vendor, knocking on countless business doors to find places to station a gumball machine while still going to classes and running his auto dealership.

Eventually, his vending route stretched from Rainier to Seattle, and he was able to leave his auto-dealing days behind him, graduating from The Evergreen State College in 1998 with a bachelor of science degree in parapsychology, of all things. Not that he has ever used it to scare up business.

"Who uses their undergrad degree?" he joked.

Still, he felt there was more out there.

"For a while, I was going after big national vending accounts," Moore said. "I thought I would just become a large vendor, but then I realized -- hey, it doesn't seem to be that easy to buy the machines ... why don't I sell those?"

Bulk vending in the United States, of goods such as gumballs, bouncy balls, candy and fake tattoos, added up to $411 million in 2004, less than 0.9 percent of vending's $44 billion in total 2004 revenues, according to a 2005 industry survey by the Vending Times.

The survey shows that each gumball machine, on average, makes $119 per year. "String a bunch of those together -- some vendors have upwards of 300 spots -- and you've got a pretty sweet job," Moore said. "It's all cash, and you can do it part time, on your own schedule."

It was a lack of money that pushed Moore into the business, but it was the prospect of even more cash that led him to call up manufacturers to get deals on his Web site's current offerings: 100 different types of vending machines for gumballs, candy, soda and snacks, and more than 60 different gumball flavors.

And, as the chief executive of T&M Enterprises Inc., an e-commerce consulting company he runs from the same office as Gumballs.com, Moore credits his leaps of faith for his success, including moving to Seattle a year ago from Rainier to be in the big city and closer to the ports for his import business.

Moore doesn't like to get specific about his annual sales because "vending is a cutthroat business," but he says he sold several million dollars' worth of gumballs and equipment last year.

"It's amazing what you can do when you face your fears."

GUMBALL VENDING

A 5-foot spiral gumball machine will hold 3,300 1-inch gumballs.

The vendor's cost is about 4 cents per gumball.

The customer pays 25 cents for one gumball (plus the entertainment value of watching it roll down the spiral track ... woo-hoo!!).

The vendor realizes a 21-cent gross profit per gumball, a more than 500 percent markup.

The vendor then pays the location's owner/manager a cut of the gross sales, typically in the range of 25-33 percent of gross.

Restocking frequency depends on sales volume. In a high traffic location (e.g., pizza restaurant, bowling alley, skating rink, Capitol Hill tattoo parlor), the machine can drain in a month or two.

Don't forget about gas -- transportation from one machine to another is a large cost in the vending business.

Remember, as the general counsel of the National Bulk Vendors Association said, "This is not a get-rich-quick kind of business. It is slow and steady, and all in change."

On the Net:
Tal Moore's site: www.gumballs.com
Vending Times: www.vendingtimes.com
National Bulk Vendors Association: www.nbva.org
P-I reporter Kristen Millares Bolt
can be reached at 206-448-8142

or kristenbolt@seattlepi.com.

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