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.

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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.