April 13, 2004Vending MachinesVending Machines Are Being Stocked With More Than Snacks Convenience, No Store By Margaret Webb Pressler Imagine waking up in a hotel in the middle of the night with a splitting headache and discovering you don't have any Tylenol. Or rushing through the airport on your way to an important business meeting and realizing you forgot your laptop's power cord. Or jumping into the rental car at that vacation resort and remembering the suntan lotion is at home on the bathroom shelf. New high-tech vending machines may be the answer. Target, Staples, Kodak, Banana Boat and Avis are among the brand names being emblazoned on a new generation of vending machines anchored in high-traffic areas such as universities, airports, theme parks and hotels. All over south Florida, for example, machines are popping up that dispense Banana Boat sunscreen to travelers and outdoor enthusiasts where they need it the most. Thirty machines are set up in "points of sun" such as Miami International Airport, an Avis rental car center, Boomers water park in Dania Beach, Fla., and the Doral Golf Resort and Spa in Miami. Test runs are being considered by cosmetics manufacturers, drug companies and other consumer-product makers. Marketers are hoping the United States will finally get over its hang-up about vending machines, long the domain of snacks and sodas, and join countries that have embraced the machines as the easiest and most convenient form of retailing, even for more expensive items. The focus of the U.S. market on small items costing less than a dollar keeps estimates of annual vending sales in the $20 billion to $25 billion range. That's half the size of the vending market in Japan, where technically advanced -- and reliable -- machines allow consumers to buy products including blue jeans and expensive lunches. By contrast, many Americans associate vending with having to kick a machine to dislodge a candy bar. "That's probably the biggest hurdle we have to overcome, the historical negative impression that vending has had," said John Roughneen, vice president of strategic development for USA Technologies Inc. of Malvern, Pa., which has produced vending machines in joint ventures with film giant Eastman Kodak Co. and office-products retailer Staples Inc. "It's my feeling that it's natural to take well-known, brand-name items and dispense them closer to the point of use," Roughneen said. USA Technologies has developed credit card processing systems that work in the new generation of machines -- a critical technology for development of the business because people are more likely to buy higher-priced merchandise if they can just swipe their cards. Other developments that make higher-end vending machines possible include online monitoring of inventory and delivery guarantee systems -- aimed at eliminating the menace of stuck candy bars. Consumers have to believe that if the item doesn't come out for some reason, the consumer's credit card won't be charged. Vending experts say reliability is perhaps the single most important feature that the new machines have to offer potential buyers. Despite the hurdles, there are increasing signs vending machines are moving into new markets. "The brands themselves want to clearly differentiate themselves from their competition, and they want to create more consumer touch points," said Joseph Preston, president of Bethesda-based marketing company Vision Corp., which is working with Banana Boat. "The whole goal is to reach out to the consumer." Preston's company is also in negotiations with other major brands interested in similar machines to sell makeup in airports, over-the-counter medicines on college campuses and licensed toys in movie theaters, he said. Staples has been successful with a recent test of several machines selling traditional office supplies and technology products, such as universal cell-phone chargers, laptop cords and headphones, according to Roughneen of USA Technologies, Staples's partner in the venture. The machines are in place at universities and in airports, including Boston's Logan International Airport near Staples headquarters, as the company tries to figure out the best markets and product assortments. Some retailers are using vending machines to give their businesses 24-hour convenience. San Francisco-based Zoom Systems, a well-funded start-up pursuing the high-end vending machine market, has installed a machine outside the Virgin Records megastore in San Francisco, selling CDs and DVDs even when the store is closed. "It's the more innovative first movers who are experimenting and testing it right now," said company President Gower Smith. Zoom Systems also has installed about 50 hotel gift shop vending machines, in just about every major hotel chain, selling personal-care items, as well as cell phones, cameras, pantyhose and even neckties. Hotels like the machines because they save them the cost of running a gift shop and give guests 24-hour access to Tylenol, Smith said, but the profitability of the machines can vary widely depending on where they're placed. The company has also created the Avis Travel Store vending machine in several rental car locations on the West Coast and in Newark, N.J. There travelers can pick up maps, food, games for kids, prepaid cell phones or a laptop adapter. Zoom is trying to find a formula for a profitable multi-item machine, which McDonald's Corp. couldn't do with its Redbox automated convenience stores, which were shut down last year. There have been other failures too. Chain retailer Target Corp. recently removed its vending machine from the student union at Arizona State University in Tempe, before its year-long test was up. Target did not return phone calls seeking comment, so the fate of its other vending machines could not be determined. Kodak, too, is ending its recent vending program selling film and one-time-use cameras because the company is focusing on digital photography. Its several hundred machines did well, Roughneen said, especially at zoos, theme parks, aquariums and maternity wards in hospitals, so other companies may step into that void. Every disappointment makes it harder for vending companies to persuade other major brands to test the concept. But they still expect the business to take off. Consultant Bruce Yuen, of Global Vending Partners in Ridgefield, Conn., is brimming with ideas for items to vend if he can find the brands willing to try: foot-care products at state parks, golf balls at country clubs, towels at water parks, personal-care items in hotels and offices. "The only issue," he said, "is making it available." washingtonpost.com: Convenience, No Store Posted by Craig at April 13, 2004 04:55 PM |