The next generation of vending machines
Technology, cashless payment options appeal to millennials
Imagine having the ability to pick up a beverage and examine it without ever touching it. Thanks to next-generation vending machines, this idea of virtual selection
At the National Automatic Merchandising Association (NAMA) OneShow 2013, which took place April 24-26 in Las Vegas, Purchase, N.Y.-based PepsiCo showcased its Pepsi Interactive Vending machine prototype, powered by Microsoft Kinect, which currently is being tested in several malls throughout the United States. The machine responds to movement and essentially turns the vending consumer into an avatar whereby he or she can purchase a product, gift a product, or play a game to win a product all without touching the machine, the company explains. Product nutritional information and videos also are available for on-demand viewing, and users can charge their mobile devices at the machine via specially designed AC power outlets or USB ports while enjoying a beverage, it adds.is becoming a reality.
Additionally, Fresh Healthy Vending will launch new technology that turns the entire front of a vending machine into an LCD screen, says Ryan O’Keefe, vice president of franchise operations for the San Diego-based company.
“Consumers can touch the screen, choose products, rotate the product image, check nutritional content, and, most importantly, our new machines will offer education on healthy recipes, nutrition tips, and facts on obesity and diabetes,” he explains.
Jennifer D. Elizondo, marketing communications analyst for Sanden Vendo America Inc., Dallas, adds that touchscreens became more popular after nutrition labeling requirements for the industry were announced.
“Several years ago, touchscreens were viewed as an expensive feature only suitable for certain locations,” she says. “After the nutrition labeling requirements were announced, touchscreen tech-nologies became more applicable to the entire vending industry. The screens give operators the freedom to switch out products and update that information via the Internet, saving on menu board print costs, labor hours, etc.” Touchscreens also enable vending operators to display the calorie counts for the products inside the vending machine.
Taking vending technology a step further, Chuck Reed, marketing director with Malvern, Pa.-based MEI, notes that Intel Corp., Santa Clara, Calif., has introduced technology that can generally identify the gender and demographic of a consumer by utilizing a camera at the front of a vending machine.
“[This] means that they can tailor the advertisement that pops up in that machine to be radically different from one consumer to another,” he explains. “That has far-reaching implications in terms of revenue streams for the vending operator [and] advertisement capabilities for the brand goods company.” This technology also can allow consumer packaged goods manufacturers to better determine and learn about the consumer who is purchasing their products, he adds.
New technologies introduced at the NAMA OneShow this year also included vending machine loyalty programs, MEI’s Reed says. For instance, Atlanta-based The Coca-Cola Co. has offered its My Coke Rewards program for a number of years, and a vending machine loyalty program would be another way for consumers to claim those rewards, he explains.
“In addition, other companies are talking about less product-specific programs and more machine-specific loyalty programs,” Reed says. “So, for example, if I use a credit card or my mobile phone to make a payment, the machine can recognize that this is maybe the 10th time I’ve been at this machine and can prompt me to get a free drink or snack based on the fact that it notices that I’ve been there the last 10 times, buying different products, but I’ve been there 10 times, so the vending operator can consider a rewards program for my loyalty.”
These various new vending technologies help to evolve the channel from static, mechanical devices toward more interactive devices, he says. This evolution is an attempt to entice Generation Y, or millennials, who are used to using self-checkout lanes at retail as well as other interactive and automated devices, he adds.
NAMA research also has found that millennials are helping to further innovation in the vending channel.
“While everyone is a vending machine customer, our research found that Generation Y, who has grown up with technology that allows them to define their own experiences, is driving much of the innovation in the industry,” says Roni Moore, vice president of marketing and communications for NAMA.
Sanden Vendo America’s Elizondo agrees, adding that younger generations are not intimidated by technology. “They enjoy being able to interact with the machine itself and their peers via the social media features available on some of the latest machines.”
Cash or credit?
Convenience also plays an important role when it comes to the vending channel, experts say. Millennials, in particular, like the convenience of vending machines and appreciate the ability to be able to pay with a credit or debit card, says Rinaldo Spinella, executive vice president and general manager of unattended payments for Apriva, Atlanta.
“We’ll see cashless vending adoption continue to grow, and it is in some respect a direct reflection of the business opportunities in the Generation X and Generation Y crowd,” he says.
NAMA’s Moore also notes that cashless options are one of the most significant growth drivers in the vending industry. In fact, Apriva’s Spinella points out that two years ago cashless vending transactions accounted for 5 percent of all vending sales where both cash and cashless systems existed. Today, that number has increased to 30 percent, he says.
Cashless devices also offer the opportunity for higher sales transactions, Spinella says.
“Many more vending machines are now manufactured with the capability to support cashless vending, which reflects the growing trend that consumers are exhibiting to pay by card,” he explains. “One of the byproducts of the cashless evolution is the potential for bottlers to sell larger — and more profitable — beverages through vending machines. Since customers are not limited to the amount of cash in their pockets, it is very conceivable that they are willing to spend more money to buy a specialty beverage at the vending machine.”
As demand for cashless options continues to grow, the market also will see some changes, Spinella says. First, some cashless vending options will upgrade from 2G to 3G networks, he says. The second technology paradigm is occurring in card fraud and security, he adds.
“The major card brands are about to introduce a security technology called EMV [(Europay, MasterCard and Visa)], which requires card issuers to embed a coded chip into each credit card,” he explains. “These chips greatly reduce the potential for card fraud but require every merchant to install EMV-capable readers into every credit card terminal — including those in vending machines.”
EMV is a higher level of security that has been used for years in Europe as well as in the Asia Pacific region, MEI’s Reed says. “It really leaves only the U.S. as the last large market where it’s not being used, and that’s why it’s being introduced in the next two years,” he adds.
Vending operators also are considering telemetry to improve their machines’ sustainability and operations, says Angela Olson, marketing manager for Seaga, Freeport, Ill.
“A trend toward more sustainability has driven vending operators to seek tools to improve their footprint, such as telemetry offerings that assist with vehicle routing, LED lighting for more energy efficiency, and greener product packaging,” she says.
“The wide upswing in new equipment with on-board telemetry and cashless vending provides a benefit to the consumer via convenience as well as providing operator efficiency and brand loyalty by tracking sales with richer data, providing awareness in consumer trends and peak sales times that the operator can use to increase product availability and sales volume,” she continues.
Fresh Healthy Vending’s O’Keefe also notes that its vending machines offer operators remote monitoring technology that enables them to know when to visit a machine and what items to take with them in order to stock the machines. “Our reporting system produces over 30 different reports, helping our operators maximize profits and efficiency,” he says.
Sanden Vendo America’s Elizondo adds that remote monitoring enables operators to keep machines from running out of stock, which keeps the end-consumers happy and coming back on a regular basis.
Later this year, MEI plans to introduce a new telemeter that acts as a communications platform, Reed says. In addition to processing credit cards, it assists in remote monitoring to keep the machine up and running efficiently, he adds.
Despite years of declining sales in the vending channel, Rockville, Md.-based Packaged Facts forecasts 1.5 percent market growth in 2015. The prediction comes as a result of technological advances made in vending machines, including higher food and beverage quality, increased consumer interaction, increased cashless payment acceptance, and more aggressive competition with the foodservice channel, it says.
“Technological innovation holds the keys to future growth,” the market research firm states. “Social and interactive vending, touchscreens, and wireless supply-side networking are a big part of the equation, offering a tremendous upside for consumer engagement.”
A vending alternative
One of the most significant innovations in the industry is the boom in micro-markets, or unattended retail, says Roni Moore, vice president of marketing and communications for the National Automatic Merchandising Association (NAMA).
“The explosion in this arena means that consumers in ‘closed-loop’ environments, including hospitals, corporate settings and universities, will have the ability to purchase a much more broad selection of food and beverages, particularly those products that are part of the ‘better-for-you’ category,” she says.
Micro-markets leverage state-of-the-art checkout technology that essentially creates an unattended convenience store with hundreds of products available for purchase, explains Joseph Hessling, chief executive officer of 365 Retail Markets, Troy, Mich. He adds that micro-markets allow as much as a 50 percent increase in product variety compared with vending machines and attract consumers who did not utilize pre-existing vending options.
“Micro-markets offer expan-ded product variety, better shopping experiences and unlimited payment options all in a drastically improved shopping environment,” he says. “This entices end-users to buy more, including higher-profit items, than in the past, increasing the operator profits over vending in existing locations and often extending the contracts at the same time.”