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[Vending] Machines are Taking Over the U.S.: The Evolving Retail Channel

Written by Jessica Piccola
Edited by Sarah Mejia

At 2 a.m. in Beverly Hills, California, hungry customers can walk up to a large metal Sprinkles Cupcake machine and get a fresh cupcake by just pressing of a few buttons and swiping of a card. With the typical American consumer’s desire for convenience and instant gratification, it is no surprise that U.S. companies are embracing vending machines as a new sales, marketing, and distribution strategy. As Micheal Feuer, CEO of Max-Wellness self-service centers, simply put it: “The reality of retailing today is it’s changing.”

Sprinkles Cupcake ATM @ Sprinkles 24 hour Cupcake ATM
Photo credit: http://www.foodspotting.com/reviews/1765932

In the last decade, America has seen the specialization of vending machines evolve into automated retail kiosks, most evidently in the video renting industry. Redbox, a subsidiary of Coinstar, has over 42,000 kiosks positioned at grocery stores, mass retailers, convenience stores, pharmacies, and fast food restaurants. Through their red machines, customers can rent DVDs, Blu-ray Discs, and video games with just a credit card, without needing a membership or subscription. As their brick-and-mortar and online competitors lost market share, Redbox became a success by offering a high volume product, with no labor required, and a “cool experience” at convenient places consumers already frequented.

Companies capitalizing on “location, location, location” have helped spread automated retailing, with kiosks populating heavily trafficked areas, including airports, malls, and supermarkets. In airports, ticket and rental car check-in kiosks tested the market for acceptance of automated self-service stands and transitioned customers who wanted to avoid long lines to the concept. Following in the success of these service providers, Best Buy introduced their Best Buy Express automated retailing machines. Travelers, who often find they need or have forgotten a camera or charger, were the perfect market for the company’s electronics products via vending machines. When it comes to particular location not meeting expectations, though, the kiosk model is very flexible: if one place is not very profitable, the machine can simply be moved to another locale.

Advancements in technology have perpetuated the evolution of the bubblegum dispenser into automated kiosks that can stock any essential grocery item, from fresh eggs to toilet paper. Modern vending machines contain laser beams to ensure customers receive their purchase or a refund if the machine is unable to dispense their selection. Also, many are equipped with cashless readers that eliminate the need for correct change as well as allow higher-priced items to be sold and purchased with a credit or debit card. For management and decision makers’ convenience, kiosks with telemetry can transmit sales and inventory data. This information can be accessed in real time, unlike traditional stores, to constantly maintain inventory levels by sending the data to a headquarters location or even a delivery truck on route for restocking. Wireless technology and better Internet access has made this possible.

Automated retail also can benefit companies by saving money and reducing overhead expenses. Besides cutting inventory and distribution costs, automated kiosks provide higher sales-per-square-foot metrics – up to “20 times the average per-square-foot than in the same space in traditional retail,” according to ZoomSystems, a manufacturer of these types of machines. They also replace the need for personnel with automation, which cuts the huge expense brick-and-mortar stores bare by having service employees on their payroll. Market research costs can be reduced as well. Now, companies have the ability to test demand by allowing customers to sample or trial new products through a kiosk before opening an entire store.

Even companies who practice traditional selling strategies find automated retail as an inexpensive mean to propel their brand beyond “bricks and clicks.” Kroger, for example, has created Kroger Shop24, which are kiosks set up on college campuses that stock food and household items for students to buy around the clock. According to NCR, “86% of consumers said they are more likely to do business with companies that offer self-service.” One of the main advantages of self-service kiosks is the convenience of 24-hour, 7 days a week accessibility. In addition, “there’s no hassle or sales pitch. It’s simple, and they can go on their way,” says Ashley Ross, who is one of the business owners presently pioneering the U.S.’s automated retail industry.

The concept of vending machines, though, has flourish more in foreign markets, particularly Asia. There, these machines are popular not only out of convenience, but also because of necessity and culture. Japan has the highest number of vending machines per capita, at over 5.2 million machines, which generated about $65 billion dollars in 2009. The country’s high population density, limited space, and relatively high labor cost have made this form of selling highly profitable. Japanese culture has also helped vending machine specialization thrive with Japan’s low rates of vandalism and petty crime coupled with their citizens’ practice of shopping on foot or by bicycle. While the majority of Japanese vending machines sell drinks, snack foods, and cigarettes, it is very common to see liquor, fried food, live lobsters, potted plants, pet rhinoceros beetles, or even iPods stocked in their machines.

Photo credit: http://www.buzzfeed.com/scott/ipod-vending-machine

America is just beginning to see a mainstream increase in nontraditional items being sold through automated retail channels, including everything from 24-karat gold, sold in Las Vegas by the company GOLD to go, to fresh-cut flowers, available at North Carolina’s 24-Hour Flower. Across American coastlines, The Sandbox’s Beach in a Box dispenses summer essentials like sunglasses, beach balls, towels, and sunscreen. Automated retail has especially soared in Los Angeles, Las Vegas, and New York because each is heavily trafficked with tourists and citizens and has a thriving nightlife.

Last year, vending machines were a $42 billon dollar industry in the U.S., though 95% of that revenue was from the conventional sale of snacks and beverages, according to the National Automatic Merchandising Association (NAMA). Many companies, who have found automated retail to be successful in a few trial locations, plan to increase their kiosk presence across the U.S. As a result, specialized vending machines should become more mainstreamed within the coming years. Business partners Ashley Ross and Lindsay Klimitz currently sell Rollasole ballet flats out of four vending machines in Los Angeles and Las Vegas. They plan to almost triple their business just this year by introducing additional machine locations in New York, Miami, Chicago, Los Angeles, and Las Vegas.

NAMA president and CEO Carla Balakgie believes that constant advancements in user technology, coupled with unique products always coming to market, will continue to propel automated retailing’s growth. As she sums it up, “Gen-Y is driving much of the innovation in the industry. They love the anonymity and to be able to get what they want, when they want it.”

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**Due to technical difficulties we recently had to switch domains and transfer all of our website content.  Please keep in mind that while we have been publishing articles for two years, the published dates shown may not reflect the initial publish date.

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“Automated Retail.” ZoomSystems. ZoomSystems, 2010. Web. 30 Jan. 2013.
Frechtling, Daniel. “Goodbye Kiosk, Hello Automated Retail.” Shopper Media. Shopper Media, 12 June 2012. Web. 30 Jan. 2013.
Johnsen, Micheal. “Retailers Think inside the Box.” Drugstore News. Drugstore News, 8 Mar. 2012. Web. 30 Jan. 2013.
Morran, Chris. “Are Automated Kiosks The Future Of Retail Shopping?” The Consumerist. The Consumerist, 18 Aug. 2010. Web. 30 Jan. 2013.
Ohngren, Kara. “Automation Nation.” Entrepreneur Dec. 2012: 77. Print.
“Redbox.” Wikipedia. Wikimedia Foundation, 16 Jan. 2013. Web. 30 Jan. 2013.
“Vending Machine.” Wikipedia. Wikimedia Foundation, 27 Jan. 2013. Web. 30 Jan. 2013.osed

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