The Va Va Vooming of Vending Machines


Aimed at young shoppers and wealthy frequent fliers, luxury vending machines are cropping up with more than Sprite and Skittles. Perfume or an iPod anyone?

Cheetos, M&Ms, pretzels…iPods? Forget the dusty, poorly lit vending machines selling stale peanuts and Rice Krispies squares pumped up with preservatives. The vending machine is going glam. Consumers are using their plastic instead of their spare change to snap up luxury items such as digital cameras, cologne, and even software from automated machines in airports, malls, supermarkets, and other high-traffic areas.

ATMs, flight check-in kiosks, and subway ticket machines have made consumers much more comfortable with using their credits cards at self-serve machines. And, of course, the growth of online retail has resulted in many people shelling out hundreds, if not thousands, of dollars without first touching their purchases or dealing with a live salesperson.

Some shoppers even prefer no-touch to high-touch customer service, which is often a euphemism for pushy sales clerks. "When I go to buy perfume at a department store, I come out of there smelling like everything under the sun," says Madeline Wallace of Long Island City, N.Y. Instead, she prefers the new Coty vending machine that sells Jennifer Lopez and David Beckham fragrances in New York's Queens Center .

Automated shopping takes no-touch service to the next level. "The appeal is similar to an online purchase but with immediate gratification," says Gower Smith, CEO of ZoomSystems, which created the software and machines to sell Apple (AAPL) iPods in airports and Macy's (M) stores. Macy's had such a strong response from flush female shoppers since the company started testing the concept in 2005 that it's now rolling out automated machines in 400 stores.

This past fall, Elizabeth Arden (RDEN), Coty, and Rosetta Stone, a language-learning software maker, signed on with ZoomSystems as well. The machines let these companies hawk their wares in places where they wouldn't set up standalone stores or where existing stores have been shuttered.

A Self-Service Upgrade

Self-serve machines cut labor costs and often remain open long after traditional stores close. That was the appeal of the early 20th century coin-operated "automat" (BusinessWeek.com, 1/17/08). The glass-and-chrome curiosity sold stewed lamb and chicken pot pies to hungry Philadelphians and New Yorkers, including artist Edward Hopper, who in 1927 created his famous Automat painting. In the 1990s, vending machines sprouted up throughout Japan, fueled by rising wages and spiraling real estate costs. The majority sold food and beverages, but some also offered business shirts, umbrellas, flowers,& and pornography.

The new luxury machines in the U.S. use a robotic arm to retrieve the products and are much more slick, high-tech, and interactive than the machines peddling soda and snacks. The gold-and-silver Coty machine in Queens Center, for example, has larger-than-life pictures of J.Lo and Becks plastered all over it. Instead of pushing buttons, shoppers use touchscreens to make their selections and get instructions on how to return purchases. A flat-panel TV continually plays a demonstration video with music.

Certain machines have additional high-tech bells and whistles such as a "virtual beauty consultant" at the Elizabeth Arden kiosk, which suggests the best product for a given skin type. The Coty machine lets customers sample the perfumes by pushing a button that releases a scented puff of air through a quarter-sized hole below a picture of the fragrance.

Calling All (Young and/or Wealthy) Customers

Coty is trying to use its automated machines to attract new customers, particularly younger shoppers who don't spend time in department stores where Coty scents are sold, says Dennis Keogh, a senior vice-president of marketing. Although judging by the shoppers who used the Coty machine in Queens Center on a recent Friday afternoon, the early adopters are mostly those already loyal to a brand. Wanda Sutton, a mother from Queens, recognized the Jennifer Lopez perfume her daughter likes, J.Lo Glo. Next time she needs a gift for her, Sutton plans to avoid the store line and head to the machine.

Delayed, bored, and affluent air travelers have been by and large the biggest buyers so far. It's a great "get out of the doghouse" gift for those stranded in airports who need to produce a "peace offerings" for their children or spouses when they arrive late, says Paco Underhill, founder and CEO of Envirosell, a consumer market research and consulting company.

McCarran International Airport in Las Vegas has been selling an average $42,000 worth of iPods, Coty's celebrity fragrances, and Rosetta Stone's language software per square foot per year, according to ZoomSystems CEO Smith. Airports usually average $1,000 per square foot for traditional specialty stores.

The Novelty May Wear Off

Airports may be a lucrative venue, but some retail experts are skeptical about more wide-scale adoption of such automated retail machines. Marker researcher Underhill, author of Call of the Mall: The Geography of Shopping, has studied self-serve machines for the past 20 years.

There have been wild successes including ATMs, he says, but also oodles of flops, such as printer cartridge machines on college campuses. The idea was to appeal to students working late into the night, long after the local office supply stores closed. "It was conceptually great, but in the end the problem wasn't that acute," says Underhill.

And young consumers, the primary target for many brands offered by ZoomSystems, are fickle. Says Lars Perner, an assistant professor of marketing at the University of Southern California's Marshall School of Business: "Much of the appeal comes from novelty—what happens when the novelty wears off?"


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