A claw machine business can be started with a low investment, as one may buy machines at cheap prices—3,000 to 6,000 RMB each. Look for places with high foot traffic, such as entrances of large malls. After finding such places, one may discuss matters with the venue owner about revenue sharing instead of paying a fixed rent, which accounts for about 20-30% on average, to decrease the cost at the very beginning.
Research and Planning
First and foremost, market research and planning should be carefully done before starting a claw machine business. You have to understand the demand, traffic distribution, and competition in your target market. For example, you can pay a visit to local malls, cinemas, arcades, or any other crowded places to observe the types and quantity of the claw machines already running there, and factors like how many people are engaging with these machines.
Different locations will attract different target customers. For example, the primary consumers going to family entertainment centers are children and families; for cinemas and shopping centers, the main customers will be young people and couples. According to the different classes of customers, it is necessary to choose and plan the types of claw machines and prizes. Meanwhile, in this process of research, one has to understand the business models of competitors, estimate the machine configurations and prize settings they use, and avoid falling into intense competition or severe homogeneity while entering the market later on.
Developing a Business Plan
A business plan is a guide to comprehensive business development. In preparing the business plan, you need to detail the actual startup capital, equipment procurement, venue rental, daily operating costs, staffing, and directions for future expansion.
General startup capital will involve purchasing the machines and prizes, and renting a store if there is no rent-free agreement. For commonly seen claw machines on the market, the machine price usually ranges between 3,000 to 6,000 RMB, while a brand new machine costs between 8,000 and 15,000 RMB. Investors with limited initial budgets are advised to consider purchasing from suppliers like Leonamusement, who can provide higher cost-effectiveness. In addition, choosing an installment payment method can decrease the initial capital investment pressure.
It is recommended that, from a financial planning point of view, clear profit targets and payback periods should be set. Assuming each machine will face a daily traffic of about 50 persons, at a game price of 2 RMB each with an average of 2 plays per person, the daily revenue per machine will be around 200 RMB. This amount will then be subject to the subtraction of venue profit-sharing, which is 20%-30%, prize cost about 30%-40% of the revenue, and machine depreciation to arrive at a net profit of around 2,000-3,000 RMB per month. With such detailed computation, it becomes simple and easy to compute the payback period and estimated monthly earnings per machine.
Other key ingredients of the business plan are risk control and contingency planning. In identifying the various potential problems that may be encountered, such as equipment failures, fluctuations in customer flow, and inventory backlog in prizes, strategies corresponding to these problems must be developed. For example, a long-term after-sales service and maintenance agreement with the machine supplier could ensure that operations are promptly restored in the event of any equipment failure.
Choosing the Right Location
Everything is about finding the right location for a claw machine business to flourish. The effective increase in usage rate and revenue would be possible at high-traffic and long-dwell-time locations.
Shopping centers and supermarket entrances are usually very good places to put a machine because there is always high foot traffic, and the customers can be easily attracted by the presence of a claw machine when entering or leaving. In addition, waiting areas in restaurants and leisure establishments are good, as customers usually have more time and entertainment needs while waiting; thus, people are easily attracted to a claw machine. Places near movie theaters and other entertainment centers are also ideal, especially because young people and couples tend to play with the claw machines as part of their additional interaction and entertainment either before or after watching a movie.
In site selection, you can negotiate a profit-sharing agreement rather than pay fixed rent. This will effectively reduce cash flow pressure at the beginning and allow for flexible cost control. The proportion of sharing is generally in the range of 20%-30% of the monthly income according to the negotiation between both parties.
Depending on your budget and resource availability, install claw machines at various locations concurrently to start a network of machines within the region. This will present you with better opportunities for building up greater revenues through distributed management. On the other hand, you can add new types of claw machines, such as rotating or light-up machines, to those locations that have higher profits in order to add different types of machines and player experiences.
Purchasing Claw Machines
When choosing a claw machine, you should consider not only the price but also the quality, operability, and durability. For initial investors, choosing machines that are cost-effective with high cost-effectiveness and low investment risk is more critical. Leonamusement, being one of the most famous suppliers, sells machines whose reliability in quality has been tested through professionals, hence a good choice for a beginner.
When buying, pay special attention to the machine’s claw, grip strength, and control system. The flexibility of the claw, the adjustability of the grip strength, and the player’s gaming experience directly affect the winning probability. Also, the accuracy of the coin acceptor and game counter has to do with the efficiency of subsequent operations. It is better to choose a machine with data statistic functions. It can directly monitor the operating status of the machine in real-time, providing data support for the adjustment of difficulty and adding prizes.
The target audience will also determine the type of equipment: for a general audience, traditional claw machines will be fine, while for more challenging models, such as pressure rod or grabber types, a venue that attracts a higher proportion of young people is more suitable.
Choosing and Replenishing Prizes
The most critical aspects of operating a claw machine involve prize selection and prize display. Prize attractiveness will directly affect player participation. While selecting prizes, the preferences of the target audience and the trend of current consumption should be considered. For children and family-oriented customers, plush toys and cartoon character dolls will do; for young people and couples, trendy figurines, small electronics, or popular items on the internet should be considered.
Prize cost needs to be controlled. Usually, each prize cost should be controlled at 30%-50% of the game price per play. That is to say, if the game price per play is 2 RMB, then the average prize cost should be around 0.6-1 RMB in order to guarantee high profitability while strengthening player participation.
Also, the prizes’ display should be meticulous. That is to say, the prizes’ appearance should be attractive and laid in neat array so that one can clearly see their value at a glance. Pay close attention to the update frequency of prizes; for instance, on holidays, one can add limited seasonal thematic items such as Christmas or Valentine’s Day objects to attract more players.
Setting Reasonable Pricing
Setting reasonable pricing will surely stimulate player enthusiasm and maximize revenue. Normally, the price per game should be set between 1 to 5 RMB, considering the local consumption level and value of prizes. Attract more people to try with a lower price in the beginning, like 1-2 RMB/game, then raise the price after players develop stable interest and loyalty.
Introduce the “multi-game discount” strategy: for example, fix the price for 3 games at 5 RMB, which is much cheaper compared to a single play. This effectively enhances the quantity consumed by one player. For high-end prizes, set a higher unit price per game—say, 10 RMB/game—and raise the winning rate so that the value of the prize can be perceived by the player while increasing the revenue of the machine.
Maintenance and Operation
Although claw machines are low-maintenance self-service devices, they require some level of periodic maintenance. Frequent cleaning of the machine’s exterior is necessary to attract customers. The mechanical parts need periodic checks to see that the claw, track, and motor are in order; the coin acceptor and prize compartments also need cleaning to avoid coin jams or pile-ups of prizes.
For minor issues, like coin recognition or other small problems with the claws, take immediate action and track the frequency. If the machines have remote monitoring and data upload functions, then it is possible to monitor in real time each machine’s status and revenue, thus being able to centrally manage maintenance.
Marketing and Promotion
The purpose of marketing is to increase brand exposure and attract more players. Offline publicity can be done by placing prize display boards with a dazzling appearance or setting up guide signs in visible positions in malls or supermarkets, which will inform customers that exciting claw machine activities are going on. Cooperate with businesses for promotional tie-ins: for example, “Spend XX amount, get a free play of the claw machine.”
Online promotion may involve sharing videos of winning prizes on social media to capture players in winning moments and organizing events with themes such as “Challenge the Toughest Prize.” You also may hold raffle activities on platforms to increase interactivity and participation, attracting the attention and participation of potential players.
