Can Vending Machines Improve Retailers' ROI?

In the last two weeks, I was travelling to high-end department stores and jewelry boutiques across the US.  I wanted to personally visit some of ZYDO Italian Jewelry closest retail partners ahead of Mother's Day. 


In one of the malls I noticed a Proactiv vending machine.  As you might know, Proactiv is a treatment for acne, which is typically distributed via infomercials and mall kiosks.  This was the first time that I saw their products in vending machines, despite, it turn out, that they introduced this channel already a few years ago. 


I started to consider the merits of selling products with vending machines.  Soda and snack companies have been doing it successfully for decades.  However, can this practice be as beneficial for more expensive non commoditized products?


Proactiv is not the only premium brand that has utilized vending machines.  Others include mostly technology and beauty companies like Best Buy, Ipod, Sephora, and Clinique.  



The vending machines that they all employ are similar and provide a useful service when located in niche areas. I found particularly useful Best Buy's vending machine selection when placed in airports to provide travellers with products to kill time or with items that they might have forgotten, like chargers.  Other travellers must have liked their utility too, as Best Buy's airport vending machines and especially Ipod vending machines have proven successful in selected airports.


However, I am skeptical about placing these vending machines in malls and shopping areas, essentially as substitution to a proper retail presence.  Despite a cost reduction compared to a typical retail store, these machines do not provide the necessary customer experience that should be expected in a retail setting.  These machines cannot customize their product presentation to fit the customer, offer suggestions, or create a comfortable and compelling buying experience.  Therefore, retailers should adopt the vending machine concept only in very specific settings to avoid negative effects on brand perception and ultimately on sales.


This is going to hold true at least until vending machines will be able to offer a customer experience that more closely resembles a store shopping experience.  I would venture to say that that day is still far away, even though vending machine technology is improving fast. 


The vending machine pictured below is a new state of the art machine developed for JR East Water Business in Japan to distribute their beverages in train station throughout Tokyo and nearby cities.




From afar, the vending machine looks like a digital billboard, flashing ads on a large screen. Three motion sensors detect when someone is near suddenly displaying three rows of drinks.  A tiny camera just above the 47-inch touch screen estimates a buyer's sex and age, using the data to recommend a few things that he or she might like.  The buyer touches the image of the chosen drink, IC-chip readers below the display respond to the swipe of a commuter card or cellphone filled with electronic cash, and your choice drops into the dispenser below.


At the end of the transaction, all the collected data is transmitted over a citywide wireless network to the company's central computer servers (http://www.fastcodesign.com).  The real-time information allows the company to observe and learn from each customer's buying behaviors and to eventually refine its recommendation process.  The same data could be used in the future to deliver a different ad experience and a more targeted product presentation.


Intel, most typically known for its microchips, is also developing a vending machine.  Called Intelligent Vending System, it contains similar features as those that characterize the JR East Water Business vending machines, including the large touchscreen display, the camera with facial recognition technology, and the wireless connectivity.


Both of these vending machines are certainly a step forward compared to the systems that are commonly used in the US.  However, as I mentioned above, they are still far from being capable of delivering a truly exceptional customer experience.  Retailers seeking to improve ROI, should not turn to vending systems just yet.  The should rather develop an innovative and unique in-store concept that would ultimately increase sales, as I have showed in my other posts in this blog.

13 comments:

  1. These machines cannot customize their product presentation to fit the customer, offer suggestions, or create a comfortable and compelling buying experience. NDT Machine

    ReplyDelete
  2. Retailers are trying to find ways to reduce shrinkage and, in reality, better serve their customers. Now use of square footage and linear space is one driver. Security is the next. Many of the IVMs are actually quite "intelligent" and interactive, particularly in Asian markets.

    Too many big box retailers carry product they must keep under lock & key, attempt to "man the area" combined with high turnover staff who really can't tell you much, and this evolution in vending makes good sense.

    Ask a 40-50 year old if they want a live person they'll say "yes". Ask a 20-29 year old and they don't care. Likelihood is they'll get more information from a well-designed IVM than any vest carrying staff person on floor.

    ReplyDelete
    Replies
    1. Dear Anonymous,

      Thanks a lot for your well written comment. I agree with you that well-designed IVMs will progressively be more widespread and important in retail. As the technology improves, IVMs will be a valuable tool that retailers will be able to utilize without any substantial decrease in the customer experience. They could be particularly useful after hours or in industries that value most of all expedited service.

      However, at the present time, IVMs are not yet able to read, interpret and understand customers' reactions. Therefore, they are unable to modify their product presentations accordingly. It is painful to say that this inability to successfully service diverse clients is prevalent in many retailers even when they staff regular sales personnel.

      Interestingly you mention that younger consumenrs would likely prefer an IVM over a sales associate. I have to agree that that is often the case. I believe that the reason for it is that many retailers fail to design a customizable retail experience and likewise fail to train and empower employees to modify the experience to properly exceed expectations of a wide-ranging clientele. It is undeniable that different age groups would require a different experience and to be serviced in a different way. Retailers need to improve in that aspect to appeal to all age groups. Retailers that have done so, for example Apple, have developed store concept that prove successfull with all segments.

      All that said, I have to point out that even retailers that are able to create an exceptional customer experience might want to integrate IVMs in their operations. As I wrote above, IVMs could be successfully utilized in conjunction to a retailer's regular selling activities to maximize sales and eventually customer satisfaction, as the technology improves.

      Thanks again for your comment.

      Best Regards,

      Eli Zybert

      Delete
  3. this is such a nice and useful information for us...i appreciate urs word........Semi automatic soda machine

    ReplyDelete
    Replies
    1. Dear Reader,

      You are welcome. Thank you for reading the blog and for your comment. I continuously try to develop posts that could be helpful and useful for all businesses. I send you my best wishes on your business.

      Best Regards,

      Eli Zybert

      Delete
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