Vending for iPods

November 15, 2006

Unless they control their own distribution through owned and operated stores, consumer products companies are essentially at the mercy of retailers to support their brands and the purchase experience they aim to deliver to consumers. A growing trend in the US, building upon established success in Japan, brings a new wrinkle to the store-within-a-store approach. High-end vending machines offering consumer electronics retailing for upwards of $300 are cropping up in department stores, malls, airports and hotels, with Sony, Motorola and Apple leading the charge.

Macyís has become an Apple retailer, selling all flavors of iPods and accessories via sleek, space-age vending machines. Just swipe your credit card and instead of a Snickers, youíll be reaching in for new hot pink Nano. Motorolaís INSTANTMOTO machines sell the latest in cell gadgetry, yet I expect this process is complicated somewhat by that pesky issue of the service provider. Sony is reportedly planning to add USB ports to machines already in place in several cities, so in addition to buying PSP games, headphones or handheld devices, consumers can download Sony MP3 files right there.

Cool ideas all. But these machines better work. Itís one thing to lose a few quarters if your bag of M&Ms fails to drop. Another story entirely if you swipe your Amex for a RZR only to somehow come up empty-handed. And if youíve ever tried to get help from a shopkeeper after losing some change in a vending machine, you can imagine the nightmare trying to get someone at Macyís to help you complete your purchase (or get credit back) if the process goes off track. From a brand managerís perspective ñ whether you are the vendor or the retailer - anything less than 100% satisfaction in the purchase is probably unacceptable.

Yet, if we take superb quality control on the whole vending experience as a given, this trend offers some interesting benefits for the right kinds of brands.

First off, with more and more purchasing happening online, people are increasingly comfortable buying even expensive items without ever interfacing with a human. Many probably prefer a salesperson-free experience. It is, indeed, a short leap to extend that behavior to a vending machine. For products that ìsell themselvesî and require no touch (unlike, say, clothing), why not buy from a machine?

iPod and Mobile Phone Vending Machine

Second, it opens up new and non-traditional distribution channels. Logical points of distribution, places where your target customer is but where traditional models may not permit your brand to go, can be the holy grail of retail. Plus, in alternative distribution channels, you create an off-the-shelf solution that gives you a retail presence uncluttered by your competitors. (That is, of course, until the model evolves to the equivalent of Coke/Pepsi/Snapple machines standing side-by-side.)

Third, vending enables a brand like Macyís to leverage an association with iPod without really having to train staff or having to think about shrinkage/theft issues. Extend that thinking to hotels and airlines aiming to differentiate themselves by connecting with strong brands, and the appeal is obvious.

Finally, vendors have another option in creating a direct connection with consumers which they can conceivably continue to build upon for years to come. One last tip: They just better make sure the entire experience is inviting, intuitive and, above all, that it works.

Jonathan Paisner

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