8th January 2019 by Jason Vincent
Why Vending and Automated Retail will thrive amidst the 'death of the high-street'
I recently came across an interesting article on vending (link at the end of the article) which looked at the prevalence of vending machines in places like Japan (crazy stats time: there’s 1 machine for each 20 citizens, and the average turnover is $15,000 per machine!). For anyone operating vending machines in the UK and most of the western world at the moment, these are insane numbers. The article made a great point though:
Vending machines could be the next big retail disruptor – if we manage to get it right
The key part here is whether we can get it right, and there are a number of challenges that need to be overcome in order to do so. Perhaps surprisingly one of the largest challenges we need to contend with is transforming the current perception of vending machines by the general public. We need to shift away from the idea that these are “unreliable” machines, selling a fairly limited range of “unhealthy” drinks and snacks. Let’s face it, it’s not a great image. Unfortunately, it’s also hard to shift.
Adding to this, most machine’s typically look old – dated even. Walk into any train station around the UK today and you’re confronted by vending machines (most likely run by the vending behemoth Selecta), half empty or even entirely empty, and with a design that wouldn’t look out of place in a movie from several decades ago.
This is epitomised by some of the ergonomic constraints which are baffling at best. Our transport network goes out of it’s way to make platforms and train travel accessible for all, and then we place cashless payment devices on vending machines at head height, and ask customers to bend down and explore the depths of a never ending product chute in the hope of finding their product (which hopefully dispensed).
And this is where things get even worse. Should the machine take your money and not dispense the item, leading to the ever-frustrating mental image of a bag of crisps sandwiched between the spirals and the glass, contacting someone for a refund or support is somewhere between hopeless and infuriating.
Deep breathe… Let’s park that negativity for the rest of this article, and instead focus on what should – and most importantly what can be done – to change this.
But first, why is vending so perfect positioned to disrupt the current retail market? There are a few key reasons:
- Relative to a bricks and mortar store, it’s an extremely low cost way of establishing a physical retail presence.
- The ongoing running costs are minimal. With the right equipment you can vend virtually anything, and can limit staffing costs to fulfilment which is an almost negligible cost
- It ticks the ‘I want it now’ desire that online retailers won’t for many years
- You have a digital platform, at point of sale, through which to interact with customers. This could be rewarding a customer to build loyalty, making product recommendations, or up-selling a meal deal to name a few
Some people seem to react defensively at some of these points – particularly the diminished interaction between ‘humans’ in a retail environment. However, I believe we need to park these emotional reactions momentarily. Most purchases are already happening online whether we like it or not.
Would we rather live in a society where people don’t talk to retail staff and sit at home making endless purchases on Amazon prime? Or one where we can engage customers through a myriad of digital and in-store activities, and sell them something there and then, whilst enabling them to experience the brand?
Instant gratification isn’t going anywhere – and judging by the chaos at Gatwick Airport recently, it will likely be many, many years before we have drones delivering our goods across London on-demand. This is the time to capitalise on the opportunity and establish reliable, high tech and visually stunning automated retail outlets (let’s stop calling these vending machines). To do so, I believe we need to achieve a few core goals:
- Each vending machine needs to look the part. Selling fresh food? Clad it in wood, cover it in grass, finish it with brushed stainless, and let’s add some fresh white lighting to the mix too. This isn’t a one-size-fits-all solution. Each brand needs to be build out their automated retail network the same as they would design a store, their packaging, or their marketing content. It needs to reflect the brand, be instantly recognisable, and resonate with the target customers.
- Deliver excellent customer service. No automated solution will ever be as reliable as being able to grab a product off a shelf. However, technology is evolving rapidly, and customers are usually willing to overlook the odd mis-fire as long as they can talk to someone. We can’t stress enough the important of an actual phone number, email address or just some way for customers to contact support and get a refund. With the right vending machine technology operators will know when a product fails to vend or something goes wrong – they can instantly provide a refund and re-assure their customer that they are in safe hands. Tie this in with a loyalty scheme by rewarding the customer with a free salad the next day and you have an understanding customer for life.
- Deliver an engaging digital experience. The same level of care and attention that goes into an e-commerce website should go into the digital user experience on a vending machine. This is an excellent opportunity to communicate with your customer, build loyalty, and up-sell. This is where a seamless tie-in with a mobile application becomes incredibly valuable. Suddenly you know who your repeat customers are, can re-market to them, offer them deals on new products, and get feedback on products purchased. “What did you think of our latest kombucha drink from 1 to 10?”.
These key points form the basis of what we think is essential to run a reliable, profitable and sustainable automated retail network. It also forms the basis of how we go about working with our clients.
The next step is to drive customers to this network of machines, and in the early stage of launching an automated retail network which is fundamentally “new” to customers, this can’t be taken for granted. I’ve listed a few ideas below that we’ve explored, and feel are effective in achieving this. With many of these, there is a clear parallel with online retail stores and platforms.
- Reward existing customers for using your network. This doesn’t need to be too high tech (though we have some fantastic solutions to achieve this). The tried-and-tested method of collecting stamps in a coffee shop to receive your free coffee springs to mind, and rightly so. Each purchase can give the customer a ‘stamp’ towards their next one. These can be collected through a basic user login on-screen (eg: typing a customer number), scanning a customer card (which in itself provides a reminder that the machine is there), or using a mobile app. The latter is possibly our preferred solution, as it opens numerous doors.
- Incentivise new users. Again, there are so many examples we can draw on to incentivise referrals and drive new customers to the vending machine network. If it’s a food service, why not ‘invite a friend’ to ‘collect’ a free meal each? Send out – or even hand out – discount vouchers, entitling first time users to 50% off their first purchase (but only if they download your app first of course!).
- Be active and run promotions. Introduce new products, but remember to let customers know! If you have a branded app that works with the vending network, this is fantastic – send push notifications when a new product is introduced. Notify customers if they are physically walking by the vending machine and haven’t used it for a while “Hey! We’re feeling lonely over here – given up on our healthy salads?”.
- Introduce a subscription service. If you’re selling healthy food, why not leverage the health craze and incentivise customers to sign up for a subscription? Health meal every week day for a month for a fixed monthly price? Yes please. If you’re selling power banks, you can provide a power-on-demand service – never run out, wherever you are for a small monthly fee. This can again be tied in to an app, providing all the benefits of targeting and promotional marketing in point 3 above.
Reading through these points, it’s probably clear that these are not your ‘traditional’ vending machines. We would agree. The way forward is to use the technology, build a network and achieve those 3 key points mentioned earlier – Reliability, Profitability and Sustainability. That takes more than just dropping machines in places, but done correctly, can deliver an extremely high performing vending network.
If you already operate vending machines, or are looking to start up, get in touch – we’d love to work with you to achieve all of this, and we already have most of the technology live and working!
Here’s the article mentioned earlier (it’s worth the read): https://www.thegrocer.co.uk/stores/store-design/vending-could-be-the-next-big-retail-disruptor-if-we-can-get-it-right/572997.article