Snickers or an iPod?

The last time I was in New York, my hip younger sister took me to a really cool vending machine.

No, seriously. It's a humongous vending machine, with a whole storefront built around it, and a whole kitchen behind it. A bunch of people work at this vending machine, supplying it with fresh, hot snacks.

And I am not talking about chips and pretzels. I am talking grilled cheese, chicken wings, pizza and piping hot donuts.

The place is called Bamn. It's a recent version of a much older concept, called the Automat, which last dotted New York's late-night scene in the 1940s. Big banks of vending machines were serviced by cooks in the back, and the places had real crockery, metal utensils and seating for people seeking a fast, cheap bite.

Today, the atmosphere is different and so are the customers. Those crazy kids come in at all hours of the night, pop two bucks in the change machine, and grab their corn dogs and peanut butter sandwiches. Then they continue on their walks of shame. Bamn has no seating, no waiters and no time wasted. It's the epitome of modern, urban convenience.

Now granted, this place is a gimmick. It's not much different from any burger dive - same greasy food, same rock bottom prices. The only difference is the machines.

But for commodities like fast food, I would argue that the machines provide a refreshing twist on the original. Has a Burger King employee ever truly brightened your day? Chances are you leave most fast-food counters feeling bored at best, angry at worst. And burgers are a commodity. At this point, you can compete on taste or you can compete on price. Most compete on price.

Now, let me be very clear. I think Bamn works for two reasons. The product is a commodity and the service is unnecessary. Vending machines deliver the product, effectively and efficiently, and no love is lost when no humans are present. But folks, vending machines are popping up in all kinds of crazy categories! And I think it's getting out of control.

Let's start with the bottom right. When the product is a commodity (low prices, little differentiation, readily available) and the service isn't adding any great value, then I say, vend away. Exhibit A: Bamn. Great job, guys. Way to catch a trend.

Next. Top right. Sometimes, the product is undifferentiated but the service can add great value. Example: hair care. You can blow dry your own hair with any generic dryer, but real women pay $20 and up to have someone do it for them. That service adds a mighty margin to an otherwise basic offering. So I don't think vending machines are necessarily going to boost this market, unless they can provide something that current services do not.

Enter Beautiful Vending. Its hair-straightener vending machines are popping up in women's restrooms all over the UK. One pound buys two minutes of time with a hot iron. This is smart because it creates a new usage occasion. Vending machines provide what beauticians cannot - ubiquity. Place one in every bar, and suddenly the entire hair care market expands.

Bottom left. Sometimes, the product is unique but the service is nonexistent. (Exhibit B: the chump at your local Blockbuster). The DVD market is crowded, and as Americans increasingly choose home over theater, lots of firms are dying to deliver movies to your set-top box or mailbox. Again, I think most shoppers' needs are being met, and the only way vending machines will grow the market is if they provide real improvement over existing models.

Enter companies like DVD Now. Its DVD vending machines are making waves at the grocery store, the drug store, and wherever shoppers make routine, weekly visits. One benefit rises to the top: the machines only carry new releases. No wasted space for box-office flops. So let's say you're not a huge movie person, and you don't subscribe to Netflix. Then you probably just want the hottest summer blockbuster. This machine helps "low-commitment shoppers" cut to the chase. It provides an easy solution for a new type of customer, thereby expanding the market for DVD rentals.

This brings me to the top left. Sometimes, though very rarely, the product is so unique that it creates and dominates a revolutionary new market. Sometimes, the product puts a company on the map and singlehandedly facilitates its turnaround. Sometimes the service surrounding the product is adding so much value, it can be described as the world's most amazing retail experience.

This is perhaps the only time where I would say that a vending machine is not going to help. In fact, it's going to hurt.

Ouch. Yes, those are real iPods. And real Bang & Olufsen, Sony and JBL accessories. They aren't cheap items. But their markdowns are being advertised loud and clear.

Great low prices? Is this a grocery store? Are we in Wal*Mart? Has anyone ever bought an iPod because it was cheap? Apple, talk to me. Are you trying to commoditize your product? Trying to undercut your outstanding service? Make it unnecessary for shoppers to visit the Apple Store? What can a vending machine possibly bring to your incredibly successful table?

Apparently it can bring a touchscreen interface. And that's about it. I don't see how this vending machine helps the iPod market. Its location doesn't expand product usage - this one was spotted in Macy's, where I can't imagine shoppers are in the mindset for electronics. It doesn't attract a new type of customer, unless you count the kind of customer who's hungry for a Snickers bar. (They're walking around Macy's, feeling hungry, they see a vending machine, and boom. They're looking at iPods. Unfortunately, now they are confused AND hungry).

No, this concept seems to only be providing more iPods in more places. And that is not such a good thing, because it will cause them to lose value. It's the law of supply and demand. Quite frankly, this vending machine has got to be the worst idea I've ever seen at retail. And folks, that's saying a lot.


You might be saying to yourself, "Everyone else is putting their products in vending machines, maybe I should too!" Well, I encourage you to consider within which quadrant your product currently lives. Is it already commoditized? Does it need a nudge in the other direction? What's your service experience like? Can a machine add value that a human cannot? Do vending machines make any sense at all?

For help answering these questions, I encourage you to refer to my handy vending machine planner's guide.

I hope that by now, this is self-explanatory.


Stephanie Weaver said...

As always, a great post, and giving thoughtful useful content for people to consider. Here's my take on the Proactiv vending machine...
Stephanie Weaver

sara said...

Thanks Stephanie!

Hmm, your link appears to be cut off.

Stephanie's post can be found here.

Nancy said...

"Its location doesn't expand product usage - this one was spotted in Macy's, where I can't imagine shoppers are in the mindset for electronics."

Sara, many people go to department stores looking for a gift when they have no idea what to buy. (I've been there many times searching!) Placing these vending machines in this location to me seems brilliant...Apple is hoping to make iPods ubiquitous, something you can just "pick up" as a gift...or as an impulse buy for yourself. How much customer service does a new iPod user require?

sara said...

Nancy, you make a great point. Department store shoppers, while perhaps not expecting electronics, are often searching for gifts. And we all know that iPods make great gifts (albeit expensive ones).

While I don't imagine someone buying their own first iPod from a vending machine, if they are already familiar with the product, perhaps they'll buy a second one here. Or one for a friend. No sales or service required.

Also, sure, if Apple wants to make iPods ubiquitous and snack-able, vending machines get the job done with minimal overhead.

These vending machines first surfaced in 2005, so I have to imagine they're doing something right (like, um, selling iPods). I just wonder, at what cost? I see a loss of perceived value, and some customers who start to compare mp3 players on price (and end up buying a cheaper competitor instead).

Now, putting anything in a vending machine is going to elicit comparisons to snack food. And it doesn't seem like a good enough user experience to really differentiate it from a Snickers bar. It also doesn't "feel like Apple," which may hurt the brand. It definitely left me feeling disappointed in a company I typically worship.

But, agreed. If Apple wants people to buy iPods more casually (and therefore more frequently) then this machine must be a good bet.

Udigis said...

Thanks for sharing this new concept vending machine.

Cheney said...

hmm...so if vending machines are self serve, that means, no customer service rep to pay, less store space, 24/7 shopping (in certain areas) therefore the price should be less than purchasing one from a retail store with fancy signs, reps walking around, sq. footage...etc. So why then am I not getting a discount when I use the self-checkout lanes at wal-mart, lowes, publix etc.? Isn't that service and the clerk's pay built into the price? So shouldn't self-check out shoppers get that "service" cost taken out of their product costs? I love the technology but I feel like I'm being taken advantage of by doing the work myself, now I'm an unpaid employee who's paying full price for the items with no employee discount! Boo to self-checkout lanes! corporate cheap-skates!

nobugs said...

Nice work, Sara!

I _would_ buy an ipod in a vending machine, as a repeat buyer. Only if it was cheaper than buying it online. But, then, isn't the internet kind of a delayed-reaction vending machine? (I face the machine, hit a few buttons pop in my credit card, WAIT a few days, and voila?

Okay, maybe not so "voila." But that's how I shop. The only thing keeping me from Macy's iPod-o-matic was my lack of knowledge it was there or (if I walked by it) my assumption it would be a bad deal.

sara said...

Nobugs, I love it. The internet is indeed like a giant, ubiquitous, detached and time-delayed vending machine. I type some buttons into my computer and in a few days, stuff shows up at my door.

Buying an iPod here would be very close to buying it online - the main distinction being speed. I think the ideal shopper at the iPod-o-matic is someone who's in a major rush for an expensive gift.

Your barriers are valid ones. Would you assume a bad deal because of the department store you were in? What if you saw this machine in a Walgreens or a Target?

Anonymous said...

Little late on posting....
Hi, I am about to buy an ipod from the Macys vending machine. In that case I will explain why these machines are brilliant. I have $800 in macys gift cards. I don't need clothes or anything else. I do want an Ipod. Now I can buy my ipod with Macys gift cards and tada. These machines are brilliant.

Amy said...

I think the ipod machines are a great idea. I may be wrong but I do not believe Macy's has an electronics department. The ipod machines are bringing a new department to the store without any added square footage or employees. The added touchs of lower prices and no waiting in line are both benefits of the machines as well. I saw one of the machines in macy's just yesterday, brand new ipod nanos on sale for only $99. Sold out of course, but a great deal! This is a good idea for the store, the customers (those who are familiar and don't have questions about the product, of course) and the gift card holders! (I never thought about that until reading the comment above, but another great reason to have the machines!) Some of us would rather not have to deal with another human being, and wish we could just purchase everything from a machine... :D

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Yosafat Agus said...

Thank you for this article. I've a 'robot' fans since 1978 (when I was 10 yr old), and this 'vending machine' was a wonderful robot for me!

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