Vending Evolution

Of all the provisions put into play by President Obama's signing of the health care reform bill in March 2010, at least one receives no attention from the popular media: Section 4205 of the Patient Protection and Affordable Care Act requires vending business operators with more than 20 machines to disclose calorie content for certain food items. That labeling provision has forced staid old vending companies to undertake the reinvention of their machines — and as a result, presented retailers and marketers with new possibilities to digitally engage consumers."If you told me five years ago we'd be involved in vending machines, I wouldn't have believed it," says Chris O'Malley, director of retail marketing for Intel's Intelligence Systems Group, a Chandler, Ariz.-based unit that develops embedded processors for missile guidance systems and medical imaging equipment. "The nutritional disclosure laws hit vending really hard. [With traditional vending machines,] you can't see the nutritional content until the product is in your hands. Now you need to put a screen on the vending machine, and you need a processor to drive that."Several new-generation machines made appearances in the marketplace in the past year driven by Intel's Audience Impression Metric (AIM) technology, which uses facial recognition to identify a person's age and gender and respond with a suitable ad, offer or sample. Scores of other technology providers and vending machine manufacturers have joined the rush to market with solutions for retailers and product marketers looking to bridge the gap between digital and bricks-and-mortar shopping.Section 4205 came along as retail enters a disruptive period that occurs but twice a century, according to a recent issue of the Harvard Business Review. In a December 2011 special report entitled "Reinventing Retail," the journal placed the rise of digital retailing on par with the emergence of the shopping mall and the big-box discount store, while counseling merchants to re-engineer their business plans to appeal to shoppers reliant on both digital technology and physical stores.Those shoppers are here now, and in huge numbers. An IBM survey (released in January) of 28,000 people worldwide found that 71% employ digital devices when shopping. Nearly a quarter of all those polled said they used three different technologies to research products before buying."By 2015, 40% of all shopping will be initiated on a mobile connection. That's our prediction," says John Ross, chief executive officer of Shopper Sciences, an Atlanta-based research arm of Interpublic Group. "It's the Amazonification of shopping. If I can go there and see product reviews and see other prices, why can't I get that when I go to a grocery store?"Shoppers seemingly will in the not-to-distant future.To get a picture of vending's new digitized role in retail, Shopper Marketing spoke with executives at three multinational corporations venturing into the arena of retail automation – one with a social media campaign, one attempting more efficient sampling, and one looking to energize its entire retail network.Unilever's SmileThe word "vend" derives from the Latin vendere, which translates "to sell." But vending isn't just about selling anymore, not in this digital-media-mad world, and not at Unilever's London-based ice cream company, Wall's."We can switch the machine from free to pay mode, but we are not using it to sell product," says Wall's senior global brand manager Daniele Palmieri about the company's Share Happy machines, 50 of which have been stationed in various European countries. "We want to understand the buzz the machines will generate. We want to learn what new tools we can develop.""Share Happy" is the theme of an umbrella marketing campaign Wall's uses to sell Magnum, Cornetto and Solero brand ice cream novelties. It is born of a study finding that eating ice cream makes people smile. A video screen on the front panel of the Share Happy machines, designed by interactive marketing agency SapientNitro, Boston, invites people approaching the machine to smile. The screen captures their pictures, rates their smiles, dispenses free ice cream treats, and invites them to post the shots on their Facebook profile pages."We wanted to provide people an exciting experience, so we came up with this idea of using these machines to have people engage with the brand in a fun and happy way," says Palmieri. "You have to have a digital strategy, and until three years ago, that was just websites. There was a general belief that consumers would go there, but you need to use other tools today to establish daily communication."The Wall's happiness campaign may soon be spreading to the United States. It introduced its Magnum super-premium ice cream bars here in April 2011.Kraft's TasteWhat if a vending machine could recognize a customer's age and gender and make a sales-appropriate response? With the high cost of labor weighing down their bottom lines, most retail chains would be interested. Now what if that same machine could demonstrate products and – unlike the kindly ladies in the aisles of Sam's Club – politely refuse to hand over a sample to any but targeted consumers?Kraft Foods was interested. It teamed with Intel on the iSample machine – since rechristened the Diji-Taste by Kraft – that sampled Jell-O Temptations ready-to-eat desserts in tests at the Shedd Aquarium in Chicago and South Street Seaport in New York. Kraft currently has a TV ad campaign in heavy rotation positioning Temptations as "Just for adults," and Diji-Taste uses Intel's AIM technology to identify grown-up targets approaching the machine before dispensing a free sample. "Sampling expenditures are huge, and you're never able to control the brand message," says Intel's O'Malley. "With this platform, Kraft controls the message: Adults only; this is for you."Kraft marketers were impressed with Diji-Taste's test results and are preparing to deploy the technology in support of other brands in its stable – in locations ranging from supermarkets and shopping malls to airports and college campuses. "It enables our brands to interact with consumers in a new way by creating an emotional connection," says Ed Kaczmarek, Kraft's director of innovations and consumer experiences. "It's a cost-effective and exciting way to personalize content and connect with consumers to generate buzz and increase brand impressions."Kraft is testing a number of other vending-based platforms in support of various brands. Among them:The Cadbury Diji-Taste Experience, which features a gesture-controlled game that people can play while waiting for their samples to dispense.A Diji-Touch vending machine with a touchscreen interface that delivers product nutrition information and advertising messages. Kraft is currently testing 20 or so of these in the Boston area.A meal-planning solution incorporating mobile technology that allows Kraft to engage consumers directly in store settings with recipes, samples and other offers."We strongly believe," says Kaczmarek, "that Diji-Taste can drive awareness, increase basket size and lead to incremental shopping trips. And we can customize it to a specific retailer to drive greater relevancy for their customers."Adidas' WallAdidas has a retail problem. Although it makes athletic shoes in thousands of styles and colors, it can only stock 300 at one of its 2,300 company-owned retail stores. That adds up to scads of sales lost to other retailers and shoe brands.Adidas' solution: The Virtual Footwear Wall, a 12-foot-wide installation conceived with Intel's help that gives shoppers access to the shoemaker's full inventory – plus the ability to complete a purchase – while they are in an Adidas store and prepared to buy."This all started when we did some research with people coming into stores and asked them, 'Did you intend to buy?'" says Chris Aubrey, Adidas' Germany-based director of commercial experience. "Fifty percent said they had money in pocket and came in to buy something. If they didn't buy, it was for one of two reasons: They couldn't find something in their size, or they couldn't find something they liked."The Wall aims to keep such shoppers in the store with four 46-inch, high-definition touchscreens that let them enter general specifications of the shoe they are seeking and winnow their options by size, price and color. Three-dimensional modeling of the shoes give people the ability to view them from all angles. When they find the style they want, a store associate ascertains their fit with shoes on hand in store. If the proper pair is not in stock, the shopper can still finalize the transaction and either pick the shoes up at a different Adidas store or have them delivered at no extra cost.Adidas recently completed a test of the Wall at a store in Oxford, England, where it propounded the merits of its new $300 F50 MiCoach – a professional-level soccer shoe with a wireless communication feature that allows players to review every move they made on the field. During the test, the Oxford store sold five times as many F50s as the average Adidas outlet.The Wall has since been shipped to the United States for a test run at the Adidas store on Lower Broadway in New York, but company marketers are poised to deploy the technology chain-wide. Adidas has instituted three-dimensional video renderings of all shoes entering the production line as part of the design process. "This year will still be about testing, but next year will be the rollout. All locations will be the ultimate goal," says Aubrey, who adds that Adidas is considering a plan to fund installation of Walls in the stores of licensed retail partners, who would handle maintenance costs.Aubrey believes emotion is the intangible best addressed by such retail technology. "There's a massive amount of people who go out to shop because they want to buy something. But when a store associate tells them to go home and order what they want, they're not in the same frame of mind when they get to their computers. We are still very emotional about the purchases we make, and retailers need to keep shoppers in that emotional state of mind in the store and complete the transaction there."What Next?The new wave of retail automation is "a marketer's dream," says Brent Garson, CEO of vending machine manufacturer and operator Vendors Exchange International, Cleveland. He will be the first to tell you that the vending business hasn't changed much in 40 years. Now he wants to be one of the first to tell consumer marketers that he can transform their businesses."Using anonymous analytics, we can tell who's in front of the machine, but we can also do a couple of other things," says Garson. "Say I'm a 50-year-old white male and I approach a vending machine. Perhaps Kraft wants to sell me trail mix, so a Kraft video comes up to sell me trail mix. Now there's the consumer intelligence aspect. Did I watch the ad? Did they lose me in three seconds? Seven seconds? Did I buy the product? If not, what did I buy instead? Vending companies are no longer limited to the product in the machine. This puts us in the consumer intelligence business. It puts us in the marketing business."Considering that more than 90% of the 8 million vending machines in the United States are controlled by a handful of operators with the resources to invest in technology, and that large carbonated soft drink companies such as Coca-Cola and PepsiCo operate their own huge vending networks, it is clear that vending's digital era is close at hand.This month, Vendors Exchange rolls out the VE Connect Module, a digital touchscreen door with user interface capability that vending operators can attach to machines currently in-market at a cost of $3,000 to $4,000 each. "We can customize the user interface to meet specific needs," Garson says. "Have a lot of Hispanic customers? We can have the screen display Spanish-language offers and ads."Shopper Science's Ross believes that collecting and acting on shopper intelligence will end up being the most important benefit of digital vending. The former chief marketing officer of Home Depot sees a huge upside for the interactive technology in big-box stores that often lack sufficient associate coverage. "I can put a digital interface display anywhere. Say it's a power tools department in Home Depot or Lowe's. A Hispanic pro walks in, the machine recognizes him and delivers a Spanish-language product message of lifetime ruggedness on the job."If a mom with a couple of kids in the cart walks by, the message changes instantly to talk about how lightweight and easy the tools are to use for home repairs."It's just possible that, if the machines help them complete their shopping sooner, consumers will welcome them as eagerly as marketers are doing now.

Vending Evolution

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