Vending machines go beyond soda and smokes

Vending machines in neon-splashed Tokyo have electronic eyes that evaluate customers’ skin and wrinkles to determine whether they are old enough to buy tobacco. In bathrooms at upscale Canadian bars, vending machines with flat irons enable women to defrizz their locks. In Abu Dhabi, the lobby of a luxury hotel has a vending machine that dispenses gold bars and coins at more than $1,000 an ounce.

A new breed of vending machine is proliferating – and while the United States is coming late to the party, Dr Pepper and Mike and Ike are already feeling sidelined.

Flashy and futuristic, souped-up machines are popping up everywhere, be it the Mondrian hotel in Miami or a Macy’s in Minneapolis. They have touch screens instead of buttons, facades that glow and pulse, and technology designed to stop vending machine rage – sensors that ensure that a customer’s credit card is not charged unless the chosen item has dropped. These machines are not for quarters; purchases are measured in dollar amounts that typically start at two figures and go up.

Changing consumer preferences about shopping and the high cost of operating brick-and-mortar stores are inspiring premium brands to rethink how they hawk their wares. As Gower Smith, whose company, ZoomSystems, has created about 1,000 automated kiosks called ZoomShops, put it, “A ZoomShop costs less than an employee.”

And with examples overseas showing there is money to be made, the automated retail store (the term vending machine is so Industrial Revolution) is venturing into fashion, beauty products, electronics and more.

A couple of months ago, The Body Shop cosmetics franchise began offering skincare products with ingredients like hemp and vitamin E in deluxe machines at airports and, soon, shopping centres. In the fall and winter, a company called U(AST)tique will begin selling high-end beauty products in machines that light up when customers approach – a better reception than shoppers get from most retail employees.

In the past few years, Best Buy, Sephora, Apple and Proactiv have put their products in vending machines. Quiksilver offers board shorts and bikinis in machines at Standard hotels. Such machines also offer nascent brands that have no store outlet another way to bring their products to market. Customers can make returns by calling a phone number on the receipt.

The machines – which bridge the gap between old-fashioned stores and online shopping – are not only being installed in airports and malls. They are materializing in supermarkets, military bases, college campuses, even chain stores.

The economics make it easy to see why. Mall stores produce about $330 a square foot a year, while a 28-square-foot ZoomShop can generate $3,000 to $10,000 a square foot a year, Smith said. Or consider airports, where stores make about $1,000 a square foot and ZoomShops generate $10,000 to $40,000 a square foot, he said. ZoomSystems, based in San Francisco, charges the brands in its machines a fee that includes the cost of rent at an airport or mall. Landlords typically take a percentage of the sales, too.

“This is the second coming,” said Christopher D. Salyers, the author of a new book, “Vending Machines: Coined Consumerism” (Mark Batty Publisher), that chronicles the rise of the machines, from the boom in the 1800s Tutti-Frutti gum era to today. “We’re starting to see, more and more, weirder items and weirder machines.”

At the same time, the classic vending machine business – sales of soda and snacks – is hurting. Research by IBISWorld said the industry is in decline because of trends toward more healthful eating, increased cigarette regulation, declining industrial work forces and more competition from fast-food restaurants and convenience stores open late or 24 hours.

Revenues for vending operators are expected to be $11.3 billion this year, according to IBISWorld, up from $11.1 billion in 2009. Yet the industry is expected to grow only 1 percent a year through 2015, down from a 2 percent growth rate over the five years ending 2010.

The newfangled machines, which cost $3,000 to tens of thousands of dollars, are now a small part of the industry, generating less than a $1 billion in revenues said Chris Rezendes of VDC Research.

And expanding the vending frontier has not been without setbacks. One of the first automated convenience stores in the United States began operating in 2002 and was controversial. Known as Shop 2000, it offered sundries – eggs, diapers, condoms – in the Adams Morgan neighbourhood of Washington. But as it turned out, one man’s convenience was another’s dehumanizing eyesore and the machine was ultimately shut down.

Other parts of the world are less conflicted. In Europe and Asia consumers buy underwear, umbrellas, toys, pizza and organic strawberries from machines. Japan has one vending machine for about every 23 people, Salyers said. The country’s density, low crime rate and fascination with technology have made it a vending paradise.

“They just line the streets,” Salyers said. “You can’t find a trash can there. But you can find a vending machine.”