Rise of the Machines

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\"RRWhat if you could find a new retail outlet—yet another piece of the omnichannel puzzle to enhance the in-store experience? Well, how about a vending machine?

Admittedly, it’s not the first avenue of growth that comes to mind in our high-tech, high-touch world, and not exactly the kind of impersonal customer service image that most retailers want to project. But it’s the wave of the future.

Condoms and Holy Water

The first documented vending machine showed up around 215 BC at a temple in Alexandria, Egypt. You inserted a coin in a slot at the top of the machine. Levers opened a valve and out spritzed holy water. It was designed to prevent people from taking more then they paid for and, for all you historians, an early solution to portion control and shrink. It’s been pretty much downhill from there with vending machines mostly denigrated as low-rent purveyors of cigarettes, stale chewing gum on subway platforms, and restroom condoms.

On a more personal note, I admit to having fond memories of the Coca-Cola machine at the local candy store dispensing ice-cold bottles for ten cents that cooled the body and the soul on those sweltering summer days. Or, my father tossing me a quarter during his weekly poker game in back of the hardware store to get him a pack of Luckies from “the machine.”

However, we are seeing a new generation of “smart” vending machines that could be an effective sales tool for retailers in urban and suburban locations, plus a novel way of giving stores a way to pick up incremental revenues.

$20 Billion and Growing

The vending industry, or “automatic retailing” as insiders prefer to call it, is only about $20 billion annually. But it is growing, and with some unusual twists in technology and merchandising, it could make vending machines more attractive to consumers and less of a stigma for retailers.

For one thing, the days of fishing around for change or an uncrumpled dollar bill is rapidly coming to an end. Research firm Frost & Sullivan estimates that there could be two million smart vending machines that scan credit, debit cards, key fobs or smartphones in operation by 2018. Interestingly, research indicates that machines accepting plastic can get a 25% bump in sales.

However, the big news is what’s being sold. We’ve all come across the ZoomSystems machines that sell Apple and Best Buy products at airports. Their sales are reportedly growing 15% annually. But that’s only the tip of a very large iceberg. We are seeing the beginnings of the automated store. There has been some initial success in Europe and even Russia, where vending machine venues look something like kiosks on steroids.


A Dutch company has created a vending machine that bakes a pizza from scratch in 2.5 minutes. If you’re in the mood for seafood, a machine in Nanking China dispenses live crabs. In Paris, where bread is something of a religion, a machine dispenses freshly baked baguettes. And as a sign of the times, a medical marijuana dispensary in Arizona has a vending machine that enables buyers to simply swipe an ID card for their purchase.

There’s a drink machine in Japan that uses facial-recognition software to identify the age and gender of the buyer and combines that with data on outside temperatures to suggest what he or she should buy.

On the non-food side, Alibaba, the much-touted Chinese online seller has vending machines for tee shirts, skirts and blouses. At the South Station bus and train terminal in Boston, travelers can pick up some clean underwear, T-shirts, socks and scarves. In Taiwan, a vending library dispenses books, CDs and magazines. And a Gold-to-Go vending machine is located in Abu Dhabi.

Several hotels in New York have tried the Semi-Automatic; a rethinking of the hotel gift shop stocked with a combination of travel and luxury items including watches, Ray-Ban sunglasses and jewelry. I wouldn’t expect to find a vending machine in the lobby of the Waldorf or the George Cinq, or Saks and Neiman Marcus anytime soon.

Nike tried it as a promotional gimmick in New York City when it shared plans to place a Nike+ Fuelbox at undisclosed locations as a vending machine version of a pop-up store. However, the machine, containing items like Nike socks, tee shirts and hats didn’t take cash, credit or debit cards—only daily Nike Fuel Points that were transferred to the machine via the USB connection from a FuelBand, Nike’s portable fitness tracker. The machine has since disappeared and whether it will return in New York or other cities is unknown.

Barriers to Service

Retail objections are obvious. Detractors say they would only limit personal interaction between customers and employees. Then, there’s the argument that at a minimum of $10,000 each, machines would be bottom line cost, not a contributor, and it would be far cheaper to just continue putting merchandise on shelves or in display cases.

But let’s expand our thinking. We already have 24-hour banks and video kiosks. Are 24-hour shopping centers, especially in urban environments, really so hard to fathom? How valuable would it be for retailers that can’t afford to stay open after peak hours to capture the growing ranks of after-hours shoppers? And to have those machines networked to facilitate deliveries and repairs?

Convenience and technology are the mantras of the 21st century retailer. We are living in a 24-hour world where the convergence of the two is inevitable.



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