September 19, 2007
Vending Units Bring Luxury Goods to Supermarkets
In a shopping environment where more consumers seem ready to trade down from steak to chopped meat, will grocery store customers be willing to pony up hundreds of dollars to buy an iPod or other high-tech gadget from a vending machine?
ZoomSystems, the manufacturer of the said vending units, believes so and the company has installed its luxury product machines at 15 Vons in California. Fourteen of the units are stocked with consumer electronics while the other has a selection of Proactive skin-care products.
Stephanie Bowler, a marketing representative with ZoomSystems, told The Press-Enterprise of Riverside, Calif., ‘Supermarket shoppers often make the majority of a household’s purchases, including necessities and gifts. There is definitely an impulse opportunity here, but it is also about providing the products that shoppers want and need in locations that they already frequent, such as the supermarket.’
Shoppers who spoke to The Press-Enterprise seemed reluctant to use the ZoomSystems vending machine. Those quoted by the paper indicated a degree of intimidation when it came to working the vending unit.
Teena Massingill, a spokeswoman for Vons’ parent Safeway, said no determination had been made as to whether the ZoomSystems vendors would be rolled out to additional stores.
‘We’re still determining where we’re going to go from here with the system,’ she said.
Discussion Questions: Do you see an opportunity for vending units to bring items such as consumer electronics and luxury skincare brands into supermarkets even though those products would not normally be sold in those stores? What will these units help grocers learn about consumers in their stores?
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The question is not so much the grocery store setting, but the concept in general.
As many know, vending machines are used for a much, much wider variety of products in Japan. Will that model morph into the U.S. as well?
The iPod based machines have been sprouting all over the place–Sears stores, airports, etc. What Apple has as a huge advantage is the incredible consumer awareness and knowledge of the iPod, especially for upgrade/replacement purchases. If the specs and model differences are well communicated, who needs a sales rep?
The machines offer labor-less sales, and almost no worries about shrinkage. They also probably do to some extent stimulate an impulse purchase behavior in some.
Whether the concept can work for products not as well known and branded as the iPod is a different story. I also think there must be some resistance to using such a machine for a relatively expensive purchase, when we have all had problems getting our darn candy bar out of one of these contraptions.
But as commerce generally becomes less and less personal–and I think that is really the key point–this is a trend that will expand over time.
I’m not skeptical about the idea of such goods in vending machines, but I am about their success in the average supermarket. Those machines are a great idea in airports, for example, where a well-heeled executive would indeed grab an iPod or a Mont Blanc pen, or maybe even a decent watch from a vending machine on a business trip. For someone who knows exactly what they’re getting, it’s convenient. One hitch might be explaining how to return an item, so manufacturers would need to make that info very clear in the packaging for these items, or on a printed receipt that spits out.
Ed’s idea about Costco may be true as well. I think success will hinge on the percent of store traffic that are potential sophisticated purchasers of the products offered, and whether that represents enough potential revenue to justify the floor space.
I guess I always thought Americans were the epitome of creativity, especially as it relates to marketing and retail. Yet in many ways we are very set in our ways as it relates to how we perceive product should be merchandised and sold.
Japan isn’t alone when it comes to vending and kiosk sales, these concepts can be found all over Europe and Asia. American shopping tends to be insular and is only now beginning to accept retailing concepts used outside the U.S.
The real point concerning todays discussion, to me, is less about what can be sold in vending machines, it is about how vending machines can evolve past traditional concessions. I believe that given the opportunity, consumers will respond to an expansion of offerings and purchase locations for vending concessions.
The luxury vending segment is looking for a venue and I believe that Costco might be the answer. Costco offers high end products to those who know what they want, but don’t want to throw away money. This is the perfect location for vending. Costco would have to decide if the system makes sense for their concept. Would it allow better inventory control, and for fewer sales people?
This is a failure waiting to happen, since it is contrary to the reason why shoppers go to a grocery store. The vending units are large and only carry a limited number of items. For this reason they do not represent a good return on the gross margins, gross dollars, ROI per square foot and sales velocity that a grocery store is looking for. Also, their customers, are looking for a certain type of item that they can use for their “shopping basket.” Perhaps most importantly, these vending kiosks will be offsetting other items that should be placed in the grocery store instead. Best Buy cannot meet Safeway in this type of atmosphere. Products can be differentiated by segmenting their markets, but there are still basic tenets of marketing that need to be followed from both the consumer as well as the retailer’s expectations.
My gut instinct is “not on your Nellie” or “no way Jose” depending on where you come from. I do appreciate Nikki’s point about it being a cheap and easy way to sell high end goods but generally I think that luxury non-food products from a vending machine in a grocery environment is a total non-starter.
Why not? There are upwards of a million items in warehouses from which the store has selected 40,000 to put in the store, while the typical household only buys 300 in an entire year, and only half of those on a regular basis. So what’s wrong with adding iPods in a vending machine?
Pervasive retailing. We are entering a phase where shoppers will be able to buy whatever they want, wherever they are. Vending machines will be smarter and provide deeper assortments. They’ll be able to remember you. Vending machines will morph into kiosks which will morph into web stores which will morph into PDAs which will morph into cell phones which will morph into credit cards which will morph into wallets.
The question is whether traditional retailers like Safeway will be able to maximize on this trend. Almost always, technical innovation is introduced into retail by outsiders. We see it now with Apple–which, by the way, has become one of the great retailers of our time.
Vending machines may work for some luxury products but not most. Selling high end merchandise requires knowledgeable associates who are well versed in providing exceptional customer service. iPods and cell phones and certain other portable electronics may work and will probably sell well in a self serve vending machine. But I can’t see a Breitling watch or Mont Blanc pen sets hanging in a vending machine. Stores need to assess who their customers are and what they will be willing to spend. If they created a machine that was interactive with an interesting (if not dazzling) marketing message, I could see iPods and the like being sold this way. But otherwise, most luxury goods require that human touch to sell.
I really don’t think this is going to fly. (Although who thought we needed cell phones?…just kidding.) My point is that if you are ok with making an impersonal purchase, why not just do it over the internet and have it arrive in the mail? On the other hand, if you are looking for service and want someone to go to if everything doesn’t go as planned then you’re not going to use a vending machine in the supermarket. It is a stretch to think that a vending machine in the corner is going to drive impulse buying.
That’s the short answer. The longer answer has to do with the vast amount of “dead” shelf space in a store that could be liberated by a kiosk. The kiosk offers many of the features of a vending machine without carrying inventory. The impulse purchase can be made and the product delivered to either the customer’s residence or the store for later pick-up. I really think kiosks do have potential and the ability to put “full service” retail outlets within a smaller footprint that means lower setup costs, less overhead, and leads to more convenient locations. Just what we need as energy prices continue to rise.
On one level, I like the idea–it’s the perfect solution for carrying and protecting high-theft items without having to worry about having staff on hand who know enough to sell the products. The balance with theft deterrence is that you want to make it hard for thieves to steal, but not so hard to get to that you kill sales of the product to legitimate customers, and Zoom definitely helps with that.
I think there are problems in execution–Zoom has yet to find the right combination of products and locations when it comes to putting these in retail stores. Albertsons tested the Zoom boxes here in Denver, and I went to a store that had one and spoke to the customer service manager. The Zoom box was located in a little alcove next to the customer service desk in the front of the store. It sat in between a soda machine and a toy crane–not exactly the best positioning for something selling higher-end electronics. The manager kind of shrugged–it was “something corporate did,” and they had seen people look at the machine, but not seen anyone use it.
Macy’s is using them too–I’ve seen them in CA stores, where they are on the aisle, kind of in between departments. The one I saw was between bridal/fine china, and women’s intimates. I have no idea how well that’s doing. I think Zoom has had more success in airports, where people may be willing to spend $300 on a Play Station Portable because they know they’re going to get immediate use out of it and they’re facing a 4 hour flight with nothing to do. I guess.
It has potential–I just don’t think it’s found quite the right products and places yet.
I’d be surprised if vending machines become a major profitable way to sell luxury goods in supermarkets. It might work in a few select locations for a few unusual items, but there seems to be no substantial cost lever (vending machines are major capital expenses) and certainly no marketing lever from the shopper’s point of view.
There’s a tremendous opportunity for vending. But the idea really hasn’t taken off in the U.S. the way it has in Japan. For years, consumers were using them to buy expensive cameras and even Kobe beef.
In the past, part of the problem was technology. People simply didn’t trust vending machines for higher priced goods and didn’t feel comfortable buying high end electronics without some input from sales associates. Maybe Zoom will work better.
There have also been some interesting tests of food vending machines in the UK and France where huge vending machines were used when the supermarkets they were attached to were closed. It would be interesting to find out how they were doing.
I guess I reside in the cynic’s camp. High-end products out of a vending machine makes those products seem…well…less high end. It’s also hard to ask a machine questions before you plunk down several hundred dollars. Add to that the whole “feel” being wrong (buying products in an environment you wouldn’t normally buy them) and this all adds up a stunningly dark future.
I had time to kill on a recent layover in DFW airport, so I had a chance to play with two of these machines. One offered a range of AT&T cellphones, the other offered Sony entertainment products. Each had a flat video monitor mounted high to attract attention, and a separate touchscreen built-in, where users could dive into more product information and complete transactions.
From a functional perspective, the machines are neat and seem to do the job they were designed for rather well. The interface is pretty easy to use, and I like the option to view detailed product descriptions before making a selection. I didn’t make a purchase–and neither did anyone else who stopped and looked during a long wait.
But while prepaid cell phones may sell well to the likes of Jason Bourne (traveling hero of spy novels and film), I would anticipate rather low rates of turnover among the rest of us civilians. As for portable music players and video games–these are useless without the content to fill them, ruling out any value as impulse purchases for travelers.
So the issue–both in airports and in supermarkets–comes down to whether the products offered for sale are compelling enough to generate turn. Both types of locations have lots of traffic. The machines function well. But they cost a bit to install and maintain and they take up floor space that could be productive in other ways. So far, at least, I see these vending machines as a very sophisticated solution in search of a compelling market need.
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The question is not so much the grocery store setting, but the concept in general.
As many know, vending machines are used for a much, much wider variety of products in Japan. Will that model morph into the U.S. as well?
The iPod based machines have been sprouting all over the place–Sears stores, airports, etc. What Apple has as a huge advantage is the incredible consumer awareness and knowledge of the iPod, especially for upgrade/replacement purchases. If the specs and model differences are well communicated, who needs a sales rep?
The machines offer labor-less sales, and almost no worries about shrinkage. They also probably do to some extent stimulate an impulse purchase behavior in some.
Whether the concept can work for products not as well known and branded as the iPod is a different story. I also think there must be some resistance to using such a machine for a relatively expensive purchase, when we have all had problems getting our darn candy bar out of one of these contraptions.
But as commerce generally becomes less and less personal–and I think that is really the key point–this is a trend that will expand over time.
I’m not skeptical about the idea of such goods in vending machines, but I am about their success in the average supermarket. Those machines are a great idea in airports, for example, where a well-heeled executive would indeed grab an iPod or a Mont Blanc pen, or maybe even a decent watch from a vending machine on a business trip. For someone who knows exactly what they’re getting, it’s convenient. One hitch might be explaining how to return an item, so manufacturers would need to make that info very clear in the packaging for these items, or on a printed receipt that spits out.
Ed’s idea about Costco may be true as well. I think success will hinge on the percent of store traffic that are potential sophisticated purchasers of the products offered, and whether that represents enough potential revenue to justify the floor space.
I guess I always thought Americans were the epitome of creativity, especially as it relates to marketing and retail. Yet in many ways we are very set in our ways as it relates to how we perceive product should be merchandised and sold.
Japan isn’t alone when it comes to vending and kiosk sales, these concepts can be found all over Europe and Asia. American shopping tends to be insular and is only now beginning to accept retailing concepts used outside the U.S.
The real point concerning todays discussion, to me, is less about what can be sold in vending machines, it is about how vending machines can evolve past traditional concessions. I believe that given the opportunity, consumers will respond to an expansion of offerings and purchase locations for vending concessions.
The luxury vending segment is looking for a venue and I believe that Costco might be the answer. Costco offers high end products to those who know what they want, but don’t want to throw away money. This is the perfect location for vending. Costco would have to decide if the system makes sense for their concept. Would it allow better inventory control, and for fewer sales people?
This is a failure waiting to happen, since it is contrary to the reason why shoppers go to a grocery store. The vending units are large and only carry a limited number of items. For this reason they do not represent a good return on the gross margins, gross dollars, ROI per square foot and sales velocity that a grocery store is looking for. Also, their customers, are looking for a certain type of item that they can use for their “shopping basket.” Perhaps most importantly, these vending kiosks will be offsetting other items that should be placed in the grocery store instead. Best Buy cannot meet Safeway in this type of atmosphere. Products can be differentiated by segmenting their markets, but there are still basic tenets of marketing that need to be followed from both the consumer as well as the retailer’s expectations.
My gut instinct is “not on your Nellie” or “no way Jose” depending on where you come from. I do appreciate Nikki’s point about it being a cheap and easy way to sell high end goods but generally I think that luxury non-food products from a vending machine in a grocery environment is a total non-starter.
Why not? There are upwards of a million items in warehouses from which the store has selected 40,000 to put in the store, while the typical household only buys 300 in an entire year, and only half of those on a regular basis. So what’s wrong with adding iPods in a vending machine?
Pervasive retailing. We are entering a phase where shoppers will be able to buy whatever they want, wherever they are. Vending machines will be smarter and provide deeper assortments. They’ll be able to remember you. Vending machines will morph into kiosks which will morph into web stores which will morph into PDAs which will morph into cell phones which will morph into credit cards which will morph into wallets.
The question is whether traditional retailers like Safeway will be able to maximize on this trend. Almost always, technical innovation is introduced into retail by outsiders. We see it now with Apple–which, by the way, has become one of the great retailers of our time.
Vending machines may work for some luxury products but not most. Selling high end merchandise requires knowledgeable associates who are well versed in providing exceptional customer service. iPods and cell phones and certain other portable electronics may work and will probably sell well in a self serve vending machine. But I can’t see a Breitling watch or Mont Blanc pen sets hanging in a vending machine. Stores need to assess who their customers are and what they will be willing to spend. If they created a machine that was interactive with an interesting (if not dazzling) marketing message, I could see iPods and the like being sold this way. But otherwise, most luxury goods require that human touch to sell.
I really don’t think this is going to fly. (Although who thought we needed cell phones?…just kidding.) My point is that if you are ok with making an impersonal purchase, why not just do it over the internet and have it arrive in the mail? On the other hand, if you are looking for service and want someone to go to if everything doesn’t go as planned then you’re not going to use a vending machine in the supermarket. It is a stretch to think that a vending machine in the corner is going to drive impulse buying.
That’s the short answer. The longer answer has to do with the vast amount of “dead” shelf space in a store that could be liberated by a kiosk. The kiosk offers many of the features of a vending machine without carrying inventory. The impulse purchase can be made and the product delivered to either the customer’s residence or the store for later pick-up. I really think kiosks do have potential and the ability to put “full service” retail outlets within a smaller footprint that means lower setup costs, less overhead, and leads to more convenient locations. Just what we need as energy prices continue to rise.
On one level, I like the idea–it’s the perfect solution for carrying and protecting high-theft items without having to worry about having staff on hand who know enough to sell the products. The balance with theft deterrence is that you want to make it hard for thieves to steal, but not so hard to get to that you kill sales of the product to legitimate customers, and Zoom definitely helps with that.
I think there are problems in execution–Zoom has yet to find the right combination of products and locations when it comes to putting these in retail stores. Albertsons tested the Zoom boxes here in Denver, and I went to a store that had one and spoke to the customer service manager. The Zoom box was located in a little alcove next to the customer service desk in the front of the store. It sat in between a soda machine and a toy crane–not exactly the best positioning for something selling higher-end electronics. The manager kind of shrugged–it was “something corporate did,” and they had seen people look at the machine, but not seen anyone use it.
Macy’s is using them too–I’ve seen them in CA stores, where they are on the aisle, kind of in between departments. The one I saw was between bridal/fine china, and women’s intimates. I have no idea how well that’s doing. I think Zoom has had more success in airports, where people may be willing to spend $300 on a Play Station Portable because they know they’re going to get immediate use out of it and they’re facing a 4 hour flight with nothing to do. I guess.
It has potential–I just don’t think it’s found quite the right products and places yet.
I’d be surprised if vending machines become a major profitable way to sell luxury goods in supermarkets. It might work in a few select locations for a few unusual items, but there seems to be no substantial cost lever (vending machines are major capital expenses) and certainly no marketing lever from the shopper’s point of view.
There’s a tremendous opportunity for vending. But the idea really hasn’t taken off in the U.S. the way it has in Japan. For years, consumers were using them to buy expensive cameras and even Kobe beef.
In the past, part of the problem was technology. People simply didn’t trust vending machines for higher priced goods and didn’t feel comfortable buying high end electronics without some input from sales associates. Maybe Zoom will work better.
There have also been some interesting tests of food vending machines in the UK and France where huge vending machines were used when the supermarkets they were attached to were closed. It would be interesting to find out how they were doing.
I guess I reside in the cynic’s camp. High-end products out of a vending machine makes those products seem…well…less high end. It’s also hard to ask a machine questions before you plunk down several hundred dollars. Add to that the whole “feel” being wrong (buying products in an environment you wouldn’t normally buy them) and this all adds up a stunningly dark future.
I had time to kill on a recent layover in DFW airport, so I had a chance to play with two of these machines. One offered a range of AT&T cellphones, the other offered Sony entertainment products. Each had a flat video monitor mounted high to attract attention, and a separate touchscreen built-in, where users could dive into more product information and complete transactions.
From a functional perspective, the machines are neat and seem to do the job they were designed for rather well. The interface is pretty easy to use, and I like the option to view detailed product descriptions before making a selection. I didn’t make a purchase–and neither did anyone else who stopped and looked during a long wait.
But while prepaid cell phones may sell well to the likes of Jason Bourne (traveling hero of spy novels and film), I would anticipate rather low rates of turnover among the rest of us civilians. As for portable music players and video games–these are useless without the content to fill them, ruling out any value as impulse purchases for travelers.
So the issue–both in airports and in supermarkets–comes down to whether the products offered for sale are compelling enough to generate turn. Both types of locations have lots of traffic. The machines function well. But they cost a bit to install and maintain and they take up floor space that could be productive in other ways. So far, at least, I see these vending machines as a very sophisticated solution in search of a compelling market need.