A vending machine for iPods?
Old-school vending machines, bulky bastions of high-calorie snacks and sodas, meet your new-school challenger: chic upscale gadgets stocked with consumer electronics and pricey cosmetics. As more of these machines pop up in high-traffic areas such as airports, the old quarter-chuggers may someday find themselves out-vended.
The new vending machines sell iPods, cellphones, USB drives, headphones, DVDs, and a host of other gadgets.
This latest development in the $30 billion-a-year vending industry (a figure that only includes food and beverage sales) is a natural outgrowth of consumer clamor for control and round-the-clock convenience, say industry observers.
Pushing this trend are the computerization and networking of machines, as well as growing consumer confidence in cash alternatives. To put it another way, the more Americans are willing to swipe their transactions, the better vending does.
"Automated retail is in the midst of an explosion," says Michael Kasavana, a professor specializing in vending commerce at Michigan State University. "Self-service applications have become prevalent is all aspects of business, especially where labor costs have become excessive."
As the executive vice president for Zoom Systems, a vending machine seller in San Francisco, Mark Mullins loves automated retail. Self-checkout aisles at grocery stores, ticket kiosks, vending machines – you name it – if Mr. Mullins can control it, he'll fiddle with it in no time. "Anything that's automated, I say 'Let's give it a try,' " he says.
American society has given birth to "Generation P" (for plastic), says Mr. Kasavana, and paying with plastic is good business for Mullins. A Zoom machine in the Atlanta airport recently sold in the neighborhood of $50,000 in merchandise, Mullins says, without revealing the actual figure.
Before vending machines could expand into high-tech products, they had to overcome three roadblocks. They are:
Gravity. Most machines drop sodas and snack foods several feet before a consumer can access them. But who wants to watch a $350 music player go through the same experience? Today's machines are equipped with robotic arms, conveyor belts, and baskets. No more drops.
Payment. "It was fine when we were selling lower-end products for $1 or less, but now we've reached the next level of inconvenience," says Jim Turner, a vice president for USA Technologies, a vending company in Malvern, Pa.
Feeding a few quarters into a machine is a fairly simple process, but inserting a couple hundred dollars in small bills is prohibitive, he says. Given that option, consumers prefer to swipe.
Consumers will spend on average 32 percent more per vending transaction if a machine accepts credit cards, according to a survey by USA Technologies. Further research indicates that credit-card transactions happen twice as fast as when cash is used.
Freshness. Vending-machine junk food has been demonized for contributing to childhood obesity. To change people's perception of vending, the National Automatic Merchandising Association (NAMA), the industry's premier trade group, launched a campaign to promote "better-for-you products" such as fruit and hot food. To assure customers that food is fresh, some machines display expiration dates, while others do basic cooking, such as grilling hot dogs, baking pizza, even making french fries.
The Internet has also given vending a boost, says William Swift, president of Business Traveler Services, an Atlanta company that, together with Zoom, operates machines at the city's Hartsfield- Jackson Airport. As consumers grew more comfortable shopping online for products that took up to 10 days to arrive, Mr. Swift figured that that comfort level would also apply to expensive vending machine purchases. He was right. "There is a sense of confidence that it's secure enough to make a $300 to $400 purchase from a vending machine," he says.
More than half of the people who buy from the machines that Swift's company operates are males who earn more than $100,000 a year and go through an airport more often than a mall, he adds.
There are 7 million vending machines in the United States and more than 100 million Americans use them every day, says Jackie Clark, a spokeswoman for NAMA. One-third of the machines are located in manufacturing settings, while colleges and schools account for 15 percent of the total number.
Half of all machines sell soda, and the number of machines that dispense high-end or nonconventional products remains low, but it's growing, Kasavana says. Since 2005, Zoom has installed more than 300 machines carrying high-end products in locations as varied as airports, department stores, and college campuses, Mullins adds.
For those worried about swiping and not getting what they asked for, a lot of machines have built-in technology called "surevend," says Ms. Clark. This is a laser beam that sweeps the tray to make sure your product is there. If it's not, your card will not be charged.
And if swiping weren't easy enough, several companies are experimenting with cards equipped with a chip, which you only need to tap or wave at a card reader to make a payment. With such a increase in convenience, Kasavana says, cash transactions will continue to decline.