Commentary

How new technologies will redefine the automated retailing experience, part 1

Photo courtesy of iStock.

July 5, 2017

Michael Kasavana is the National Automatic Merchandising Association endowed professor emeritus, The School of Hospitality Business at Michigan State University

By Michael Kasavana

When faced with a challenging market, retailers, consumer product manufacturers and others seek solutions that are cost-effective, logical, and lead to profitability while advancing the image of the automated retail industry. Can technology be relied on to be the leading accelerant to make this happen? Will more efficient automation applications be well received? Is innovative technology cost effective?

The answer to these and related questions may lie in an emerging collection of diverse developments classified herein as “V-Engineering”.

The thrust of V-Engineering is the advancement of technologies designed to enhance the consumer experience while streamlining the planning, operations, management and controls necessary for a successful business. The following technology roadmap is designed to stimulate business growth, enable sales expansion and enhance operational profitability.

V-Engineering redefines automated retailing

Interest in creating enhanced user interactivity at the point of purchase coupled with the availability of new payment options, as well as interest in more product information at the point of sale, provide a powerful basis for redefining the automated retailing experience. The term “V-Engineering” represents a conglomeration of several advancements currently under active development by technology suppliers and industry practitioners.

The application of roadmap strategies such as digital media, cloud computing, remote management, location-based services, mobile payments, QR codes, user analytics and dynamic servicing are expected to create a tsunami-like impact on the automated retailing industry.

Automated retailing challenges

For some time now, industry practitioners have been cognizant of the fact that a significant aspect restricting profitability in automated retailing is its failure to parallel physical retail transactions. In a retail transaction, the consumer selects products first and pays for the chosen products second. In an automated retail interchange, this sequence is reversed as the consumer first establishes credit through coin, currency or electronic authorization, then makes an item selection.

While on the surface, this may not appear to be an important distinction, it is a roadblock that restricts technical development in many ways as the consumer is discouraged from purchasing multiple products, dissuaded from spending more than the initial amount deposited, and often is disappointed by the process.

In addition, this “pay first” approach invokes minimal interaction between the machine and the consumer, allows for little if any product or brand promotion, and often leads to an unstimulating buying experience.

Millions of consumers shop online every day. Ecommerce sites provide a shopping basket or shopping cart equivalent that enables the movement of selected products to the basket for eventual settlement from a choice of payment options available at checkout. By allowing customers to shop first and pay second, there are few constraints on selection as measured against a monetary prepayment, as is the case with a traditional automated retail machine. If the automated retail experience more closely paralleled retail experiences, would this provide a basis for improved sales and profitability?

As the placement of small, medium and large video screens appear on kiosks and vending machines, there is an opportunity to present a shopping cart graphic and depict product icons being placed into the cart as the consumer makes product selections for eventual payment.

For example, the consumer might select products and watch as iconic representations of each product are placed into a shopping cart (similar to the depiction when a computer file is copied from one location to another in MS Windows). Should the consumer change his/her mind and cancel the transaction or remove any item, these functions would process the change identically to actions used in an online shopping basket.

Once the consumer has finalized the desired set of items in the cart, payment options are presented (cash, card brand or other media) and the chosen items are purchased and dispensed. What effects will this reversal of the automated retailing sales process have on industry progress? Here are a few considerations:

More items sold – when the consumer is not constrained by a deposit or pre-authorization, there is a tendency to spend more than otherwise would be committed, resulting in more items being sold per machine.
Multiple product purchasing – since the consumer is not constrained by a prepayment in advance of item selection, there is an opportunity to make numerous purchase selections without having to initiate additional transactions.
Higher average sales – multiple product sales will result in higher average transaction amounts which will simplify machine audits and greatly reduce transaction costs for both cash handling and electronic processing fees.
Bundled promotions – the ability to engage the consumer in multiple product purchasing provides a foundation for promotional opportunities not otherwise available; for example, offering the consumer purchasing a cold beverage the option of receiving 15 cents off the price of a snack food item if purchased together.
More payment options – with payment following selection, the machine is able to offer more settlement choices without requiring pre-authorization or risk of exposure to misauthorization charges based on purchase selection (e.g., cash, credit/debit card, gift/prepaid card, mobile payment, PayPal, Google Checkout, etc.).
Replenishment cycling – higher sales may lead to more frequent replenishment but will enhance product freshness while improving productivity as more products will be handled each machine visit, thereby lowering the cost per product replenishment expense.
Data mining – having more and better information about products with complementary sale potential (i.e., identification of which products sell well together) ensures machine menus have optimal sales mix products derived from an analysis of multiple product purchases and/or bundled purchase promotions.

Altering the retail sequence in automated retailing to closely parallel traditional retail shopping will contribute to additional advancements by providing a pathway for changing the consumer's buying experience.

Part 2 in this series on V-Engineering will consider the impact of digital media.