Re-Imagine The Machine

May 11, 2015

The vending machine is not what it was ten years ago. Changing consumer retail experiences have challenged vending equipment manufacturers to create a total consumer experience at the machine that includes more flexibility, customization, digital advertising and multiple payment methods.

Operators are increasingly seeing the need for “connected” machines that enable them to manage new aspects of their business — promotions, advertising and merchandising — remotely. All with an emphasis on their return on investment. Now, more than ever, the machine is transitioning from a static black box and becoming a retail destination.

Integrated approach

New and retrofitted machines can help grow same store sales and grab locations from competitors. In order to show that differentiation, vending manufacturers have been creating machines with total integration. “Integrated to us is about ensuring an intuitive and simple experience from both a consumer and operator perspective,” said Tom Glomski, vice president of sales & marketing at Crane Merchandising Systems. “In regard to our newest Media equipment, which encompasses snack, cold beverage and hot beverage machines, this means driving new consumers to vending and increasing the value of the average vend ticket through the use of new features like touchscreens, lighting, and professional graphics; integrated payment that includes cashless; shopping cart; and digital product advertising,” he said.

Digital advertising is an additional and important revenue generator for operators. It allows advertisers to gain impressions and is one thing that should be considered when purchasing or retrofitting machines. “The operator’s location can get eight minutes every hour on diji-touch® (15 second increments) to advertise their product or their venue, and we’ve found that to be a success for operators,” said Frank Guzzone, business developing manager, strategy & innovation at Mondelez International. He noted that at least in one instance, the main reason diji-touch ® was able to win a California location was because the venue could advertise their events on the machine.

“However, the operator doesn’t have the time or skillset to be selling advertising, to create engaging promotions, to create content, no matter how big or how small, they need a helping hand when it comes to advertising on the machine,” Guzzone said, which is where diji-touch® is able to help as it offers a platform for vendors to create their own digital advertising.

Technology that drives growth

Within the last five years, the addition of various forms of cashless acceptance has increased dramatically, and that includes at the vending machine. It’s no longer just a trend, but a necessity. Pepi Companies in Dothan, AL, has installed cashless devices on 100 percent of machines since 2012. “In order to create a great consumer experience, new equipment needs to provide bright lights, access through multiple payment systems, screens that inform and promote and mobile connections that connect personally,” said Vic Pemberton, Pepi Companies CEO.

Although cashless technology has been around the vending machine for years, the adoption rate within the last 12 to 24 months has accelerated at an unprecedented rate. “Operators want to accommodate how their customers interact with the machines, pay for their merchandise and view the vending industry as a whole. Screens, credit card readers and cashless devices play a big role in getting this accomplished,” said Stephanie Begley, director of marketing at Vendors Exchange International, Inc.Cashless not only gives operators the ability to sell higher ticket items and in return, drive a higher margin, but it also alleviates some price sensitivity the consumer might have.

So what’s driving this cashless trend? Consumers. “Retail drives consumer preferences to pay at the vending machine,” said Jim Chico, vice president of global sales & marketing at U-Select-It. “Trends are wrapped up in technology, in digital. The machines today are more versatile than they were ten years ago and not only is cashless growing, but so is the demand for loyalty promotions at the machine.”

Consumers will also drive mobile payment acceptance at the machine. “It’s imperative that you offer the mobile option to your customers,” said Maeve McKenna Duska, vice president of marketing at USA Technologies. “This growth curve that is mobile will continue to increase over the next few years. Anyone who has made the investment into cashless will benefit.”

Angela Olson, marketing manager at Seaga Manufacturing, Inc. notes that her operators are showing more interest in new types of payment such as Apple Pay and Google Wallet, “As long as they provide a benefit to them, either in greater sales or easier operation,” she said.

Although cashless and mobile are growing payment options in the industry, Chuck Reed, senior director of sales & marketing operations at Crane Payment Innovations, cautions operators not to abandon cash. “A recent Boston Federal Reserve study confirmed that across all consumer age demographics, 65 percent of consumers still use cash as the preferred method for purchases under $10 in value,” Reed said. “Vending shouldn’t limit payment to cash or cashless, but instead cash AND cashless.”

The connected machine

Cashless acceptance requires a machine to be connected, something that is picking up speed in transforming the machine. “Once connected, a vending machine is much more than an isolated ‘retail outlet,’” said Reed. “It is now part of an ecosystem that can deliver cashless acceptance, digital advertising, price or bundled promotions, and new revenue streams for operators selling targeted advertising at their machines. That same connection can enhance operational performance by providing machine alarms, remote monitoring via DEX of sales performance and enabling dynamic route scheduling that increases operating efficiency by as much as 25 percent.”

Connectivity also allows operators to take advantage of additional revenue through digital advertising. “The presence of a screen is only the first requirement for digital advertising. The machine must also be connected to enable seamless content management over the air and to deliver required “proof of play” data to the advertisers. Being able to update them easily has been the biggest breakthrough in the last year, and it’s going to be important in terms of going forward with everything from a digital perspective,” said Brendan Kehoe, vice president and general manager at Crane Streamware.

“We see the vending marketplace having a significant increase in connected devices in the future because understanding and utilizing real time information about the machines increases efficiency and profitability,” Begley continued.

All of this — the integrated, connected machine, cashless options, advertising, etc. — does no good to the operator, however, unless he or she is able to attract consumers and see a return on investment.

Sound investment

Affordability is the key when purchasing new equipment or retrofitting used equipment. Many operators ask ‘Will I see a return on investment? If so, how quickly?’ Not only are operators concerned with investments, they are also concerned with investing in a technology that might just become a “fad” and dissipate with time. “Technology for technology’s sake isn’t going to cut it. It has to make them a return on investment,” said Glomski. “So what we focused on was really that same store sales growth because that is the fundamental issue our entire industry faces. We have to drive new consumers to vending.”

Tom Murn, CEO at The Answer Group in New York, NY, believes that it takes a little money to get a lot back. For Murn, investing in technology, especially consumer media interaction at the machine, has helped him see a quick return on investment. “All equipment manufacturers are doing great things, in their own way,” he said. “There are many options, all at a price point for any size operation. It’s important for operators to remember that selling the higher ticket items and spending more up front will get you more in return.”

One solution that has worked for Pepi has been retrofitting old machines. “We are taking the basic vending machine and turning it into a retail store, and I’m seeing a return on investment quickly,” said Pemberton. “The prices for retrofitting equipment haven’t risen significantly and the cost to create a retail type experience is worth the additional investment.” Pemberton notes that Pepi will not stop purchasing new machines; it just comes down to the right location. “New machines have a place, and we’ll continue to buy them where it makes sense and where we can get a return,” he said.

Future-proofing machines

There is no such thing as “future-proofing” a machine. It is possible, however, to monitor consumer trends and see changes in their retail shopping experience. Machines of today, and those that will meet the needs of the future, allow for digital advertising and multiple types of payments. They draw the consumer in with bright lights, customization and the ability to vend non-traditional items. They also engage the consumer in a total interactive experience that looks far different from the vending experience of ten years ago.

“Semi-attended or unattended engagement at self-checkout lanes, airline check-in kiosks, train ticket kiosks, etc. are now so common place they are preferred by customers,” said Reed. “Providing that same interactive experience at a vending machine with touchscreens and connectivity is fast becoming the new normal.”

To read what interviewees have to say about the future of vending, click here.