Are Vending Machines Contextual Commerce’s Next Frontier?

Everyone has a vending machine experience go awry. The bill receptor that wouldn’t take the wrinkled dollar bill, the can of Coke that got stuck on the way down and prompted a shoving match with machine, or the bag of Cheez-Its so stale as to be rendered inedible.

Vending machines, CEO and Co-founder Brian Shimmerlik at Vengo Labs told Karen Webster, have gotten something of a bum rap in the past.

However, he noted, that is the history of vending machines. The future of unattended retail that has been taking shape over the last few years is very different. Vending machines aren’t just for soft drinks anymore, but for champagne, jewelry, electronics, cosmetics and a whole host of other products that would have seemed rather unthinkable even a few years ago.

Then again, Shimmerlik pointed out, a lot about retail has changed in the last few years, too. Those changes have opened up the field for a whole new way of thinking about vending machines, and their place in the retail ecosystem.

“As the landscape is changing, the reality is brick-and-mortar will always have a place, but it is less relevant to our day-to-day lives. That is making all of these other places more relevant — and, for us, vending is a way to create retail in places where it doesn’t currently exist, and [connect] it to the actual moment when people need a product,” he said.

The changeover won’t be with the vending machines of the past — large, clunky, unreliable and often hidden away under the nearest staircase or stashed in the deepest basement. From Vengo Labs’ point of view, vending needed a wholesale redesign and repurposing to get it ready for its next big job.

“The future is about retail real estate, and finding ways to both create and maximize it going forward,” Shimmerlik added.

The Vengo Machine

The first big change Vengo made to the vending machine was its size — since a six-plus foot tall machine is both space-consuming and something of an eyesore. The Vengo machine, on the other hand, is a little over two feet tall, a little less than three feet wide and exactly six inches deep. It comes equipped with a 21-inch screen that allows consumers to interact, and comes ready to take both card and near-field communication (NFC) contactless payments. It is also wall-mounted.

“We love shrinking down, and bringing the design and technology a whole new flavor. That smaller size opens up whole new markets, and gains us access to spaces that have never had a retail experience a part of it,” Shimmerlik said.

Due to their smaller sizes, they also have fewer choices packed in — only six-product stock-keeping units (SKUs) carried within, in fact. However, Shimmerlik did tell Webster that, despite that, there are a lot of those six SKUs in each machine, thanks to patented cartridge-packing systems created by the firm’s co-founder and former aerospace engineer Steven Bofill.

Yet, with only six items for sale, it is important to pick the right items — those that are most contextually relevant to the group of consumers likely to encounter the machine.

“The starting point when we launch a new location: we start by letting the data drive the merchandise decision,” Shimmerlik explained. “We pull from our system the most similar cohort that already exists to the new location, and then we watch what the data does, and what has sold.”

The screens on the machines allow consumers a space to make specific requests for offerings, which helps Vengo decide what things to add or take out. That product optimization is key, he noted, because the goal is to catch a customer at their moment of need, and offer them the most desirable selection for the context they are in at the time.

“I think there is a large portion of the population that might never stop at a Best Buy vending machine at an airport, but if you could place a vending machine in an environment that is more comfortable or more private, or just more contextually relevant, we can open up a portion of the population that will engage,” Shimmerlik said.

Starting In The Right Places

These days, colleges and health clubs are the two primary venues Vengo has targeted for its machines, though it is developing a larger presence in hotel chains as of late. From the perspective of the business, he noted, it is important to go deep rather than wide to unlock scale in specific verticals before moving on to the next.

As for those big sellers? Well, it depends on the context, of course. In health clubs, where Vengo sees its biggest success, Shimmerlik said earphones are always a perennial best-seller. On college campuses, beauty products and personal care items tend to draw a lot of spend.

Hotels, he noted, have been an interesting entry point.

Larger, upscale hotels can be complex because they have mini bars that offer many of the items Vengo might offer in its machines — and aren’t necessarily interested in lower-priced competition. Less upscale hotels often have lobby-based sundry shops that also aren’t looking for a vending machine to horn in on their action. However, at the mid-tier level, where there is no onsite competitor, Vengo machines tend to be a good and much less-expensive option.

“We want to be competitive, so we are well below mini bar-type pricing. We want to be a friend to the customer, and the best way to do that is not to take advantage of their captivity or need. At the same time, we are going to be priced above Amazon because of the costs of operating and maintaining distribution,” Shimmerlik told Webster.

What’s Next

Vengo’s proprietary physical machines are both the firm’s greatest strength and weakness, Shimmerlik noted. The machine is its differentiator, and the key to creating what it thinks is a unique retail experience.

Since Vengo is a physical machine, he said, it can’t just press a button and scale the business up. However, after six years in the market, and in the face of a rapidly changing retail environment, scale is top of mind — both where it is today and where it would like to be tomorrow.

“We are interested [in] offices, hospitals, airports,” Shimmerlik said. “Everyone has a couple of square feet of empty space, and we can show them that this is a really good way to use it.”

And monetize it.