Has the time finally arrived in the US for the automated c-store?
The Oasis24seven can offer between 200 and 800 SKUs. Image courtesy of Oasis24seven.
The Internet of Things is unleashing new capabilities for automated retailing to meet the needs of consumers and businesses alike – more economically and efficiently than traditional brick and mortar retailers.
Capabilities such as remote machine monitoring, interactive touchscreens, near-field communications, robotics, identity verification, video surveillance etc. are becoming more affordable. Traditional retail, meanwhile, becomes more capital intensive, largely on account of rising labor costs.
One retail concept that stands to benefit from these changes is the automated convenience store. Fully-automated stores offering food and convenience items have existed for decades, but in the U.S., they have never gained traction. The concept has been more successful in Europe, which has denser populations and higher labor costs.
Amazon recently introduced Amazon Go, which allows shoppers to enjoy the convenience of shopping without the need to stop and check out. Shoppers scan themselves into the store using an app, shop as normal, remove items from a store shelf, place items in a shopping bag and leave the store. The items are in turn billed to an authorized Amazon.com account accompanied by a detailed email receipt.
Amazon Go can be viewed as a variation of a concept that has existed in the U.S. since at least the 1930s. Other automated retail concepts also exist, and some observers think recent developments – such as more versatile inventory supply chains, the growth of "food deserts," and the rising cost of labor – have created a new demand for automated retail formats.
Automated stores come in different formats. They can be free-standing terminals where consumers purchase products from shelves, similar to a vending machine. They can also be stores that the consumer enters and buys products, such as Amazon Go.
In the 1930s, Clarence Saunders, founder of the Memphis, Tennessee-based Piggly Wiggly supermarket chain, introduced the "Keedoozle." Customers viewed products behind glass-enclosed display cabinets, then inserted a key into a corresponding keyhole near the display cabinet to identify the product they wanted, according to Wikipedia. Stock personnel then put the selected items onto conveyor belts that took the products to the cashier for checkout. The system, which was not fully automatic, proved mechanically unreliable.
Other systems have emerged over the years. One that has managed to survive from the 1990s is the SmartMart, also in Memphis. The SmartMart is a drive-up store where people order on a touchscreen and pay using cash or card. The customer views images of more than 2,000 products. A picking device removes product from inside the machine and places it on a conveyor belt to a slide-out door. The system has been upgraded over the years, according to owner Mike Rivalto.
As the new millennium approached, some massive glassfront merchandisers from Europe made their ways to U.S. shores. The marketers of these systems recognized an opportunity as U.S. retailers began facing similar challenges to their European counterparts – higher costs, lower profit margins and less available real estate.
One unit that showed promise was the Shop 2000, a 150-square-foot glassfront machine that dispensed up to 200 SKUs of varying shapes, sizes and temperature needs. Time Magazine named it one of the best inventions of 2002, noting the novelty of watching a robotic arm in action and the machine’s ability to address the convenience industry’s labor shortage.
McDonald’s tests the concept
In 2002, McDonald’s adapted the Shop 2000 and developed what it called a Tik Tok Easy Shop. It also launched the Tik Tok DVD shop, which it soon renamed Redbox. The company in 2003 chose to discontinue the Tik Tok Easy Shop, while Redbox evolved into a separate company.
In addition to McDonald’s, the Shop 2000 was tested in at least one U.S. convenience store, but was removed after six months due to operational and mechanical issues.
In 2006, Shop24, a Belgium-based glassfront merchandiser similar to the Shop 2000, was installed at the State University of New York at Morrisville. The unit dispensed snacks, cleaning supplies, medicine and full meals in a fraction of the time it takes to shop at a traditional convenience store.
The SUNY machine in Morrisville continues to this day. Shop 24 secured several other placements in universities and other sites to varying degrees of success. The SUNY Morrisville machine, serviced by university staff, is considered to be the most successful automated c-store in the U.S. to date.
"There have been limitations in how it’s been marketed and how it’s been deployed" said Mark Bruno, a vending industry veteran who was active in marketing Shop 24 and is now working with a similar system from France called Oasis24seven. "There seems to be great demand when it’s explained. The rollouts have been a little bit inconsistent," he said for automated c-stores in general.
What has worked to date
The reason the SUNY Morrisville deployment was successful is that the university took an active role operating and servicing the machine, Bruno said. "They used it to augment their dining services as well as provide off-hour access to meals and products," he said. "The additional win for them is they were able to close a bookstore that they had, a convenience store, where they were losing $80,000 a year."
"The entire cost of this store can be subsidized through advertising," Bruno said.
In less successful Shop 24 deployments, the location hosting the machine did not have the support of a larger organization such as SUNY. "They put a route driver out there. Then you’ve got to handle all the product yourself and you’ve got to handle all the distribution yourself," Bruno said.
"There’s not enough skin in the game by the real estate owner," he said. "Unless it has enough skin in the game for all the participants, it gets marginalized."
Ecommerce brings change
With the recent growth of ecommerce, inventory supply chains have become more versatile, thanks to Amazon, Jet.com (now owned by Wal-Mart), Peapod and other ecommerce shippers, Bruno said. Hence, there are more support resources for alternative retail formats such as automated c-stores.
"It (the inventory supply chain) is more available and more versatile, while capable of serving a wide set of demographic demands," he said.
Food deserts create a new need
Bruno thinks the automated c-store concept will have its greatest impact in addressing the need to provide nutritional food access in areas that don’t have enough supermarkets, known as "food deserts."
"Something has to replace those (grocery) stores that are closing," he said. The government is spending $90-plus billion a year trying to provide access to people, both urban and rural, living in areas that no longer have the brick and mortar supermarkets. "We can accept SNAP (Supplemental Nutrition Assistance Program) cards which would open up that whole market," Bruno said for the Oasis24seven machine.
He also sees opportunity for the concept in military locations and for disaster relief efforts in addition to traditional retail opportunities.
Oasis24seven plans to deploy four to five units in the U.S. this year.
Oasis24seven can offer between 200 and 800 SKUs. The inventory management software allows the unit to reorder automatically. It is a belt-driven as opposed to gear-driven system, and shelving can be adjusted in matter of minutes. It also has the automated capability of pulling expired product out of the sale position.
"You might have a kiosk that serves as an ATM that allows you to pay bills and things like that," he said.
While other self-service concepts are in the works, such as Amazon Go and micro markets, a massive glassfront merchandiser such as Oasis24seven can stand alone in an unprotected outdoor environment, Bruno said.
"You wouldn’t put the micro market outside," Bruno said. "And you wouldn’t put it in a highly transient area. And even though you’ve got security surrounding the micro market, there are limitations in what you can do with that security."
The Oasis24seven also offers a far greater product variety than a micro market, as well as the ability to purchase different package and container sizes.
The business metrics are also different for an automated c-store than for a micro market, Bruno added. "You’ve got to be looking at higher sales per capita with the Oasis to justify a higher investment," he said.
Businesses and organizations that have satellite retail outlets are prime users for the automated c-store, Bruno said. SUNY Morrisville’s Shop 24 demonstrated the opportunity to improve profitability in such an environment. Military camps, marinas, interstate stops, dormitories and gated communities are good examples.
Mike Rivalto, who owns the SmartMart in Memphis, thinks technology is catching up to the concept he introduced decades ago. By using cloud technology, he has removed $300,000 from the system and reduced the amount of wiring by 80 percent.
Meanwhile, ecommerce is creating the need for new pick-up options that SmartMart can provide, Rivalto said.