Looking beyond established convenience services to meet post-pandemic customer needs, a NAMA panel considers «smart stores» and catering.
Image courtesy of Minus Forty.
For more than a decade, micro markets have made their mark in convenience services. These markets that allow customers to select products from open shelves and pay at a self-serve kiosk have improved product variety and the overall customer experience.
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| Rhonda Dunn, Linda Saldana, David Chang and Alan Munson discuss the merits of «smart stores» and catering. |
Since then, numerous technologies have emerged across the retail landscape. And as the economy recovers from the coronavirus pandemic, now is a good time to ask the question, «What comes after micro markets?»
A panel of operators during the first day of the National Automatic Merchandising Association convention Wednesday tackled this question head-on before a standing-room-only audience at Chicago’s McCormick Place.
The panelists agreed that as workers return to traditional worksites in smaller numbers than in the pre-pandemic era, vending machine banks, manual cafeterias and even micro markets could give way to a concept known as «smart stores,» which combine the security of a vending machine with the product diversity of a micro market.
Moderator Alan Munson, chief commercial officer of Parlevel Systems, a convenience services software and micro market kiosk provider, reviewed the progress micro markets have made at the expense of micro markets.
From 2014 to 2018, U.S. vending machines declined from 4.5 million to 4 million, while from 2013 to 2020, micro markets rose from 5,000 to more than 23,000, Munson said, citing industry statistics.
A market opportunity
While micro markets bring the advantages of more product diversity, they require higher investment than any other convenience services business line, such as vending machines, office coffee service and pantry service.
In addition, micro markets, which are typically in «captive» as opposed to public locations, have less customer traffic than vending machines.
Based on these facts, Munson said the opportunity exists for a format that serves high customer traffic, requires less investment than micro markets but offers high customer value.
For the purposes of this discussion, Munson defined smart stores as merchandisers that require the customer to unlock the machine by swiping a payment card or scanning a QR code before selecting their product, after which the system automatically bills them.
This concept is also frequently referred to as a «smart fridge.»
(Editor’s note: More extensive «smart store» concepts have been introduced in recent years that involve smart shelf sensors, biometric identification and security cameras.)
Munson further noted that smart stores (like micro markets) can work within existing vending infrastructures while giving operators access to locations such as malls, transit stations, schools and hospitals.
Operators see merit
All three operator panelists agreed the «smart store» concept has merit.
Panelist Rhonda Dunn, managing member of Machine Cuisine Vending LLC in Kingman, Arizona, simplified smart stores as micro markets with a smaller physical footprint.
«Technology has taken this industry to a whole new level,» she said, adding that real estate clients are especially receptive to smart stores since they offer high customer value and require little oversight on the customer’s part.
Panelist Linda Saldana, co-founder and vice president of customer relationships at Seventh Wave Refreshments in Atlanta, agreed that smart stores, like micro markets, offer more freedom over what products can be offered than vending machines.
Panelist David Chang, chief of staff at Mahaska Pepsi in Dallas Texas, said smart stores, like micro markets, can offer more healthy products than vending.
Munson further added that vending still suffers from a less than stellar customer perception.
Tap existing tools
The marketing tools that operators have found helpful with micro markets, such as email blasts, can also be used to promote smart stores, Munson said. Some micro market operators offer purchase credits in exchange for customer feedback.
«(Getting) as close as you can get to the customer makes the most sense,» he said.
Customer theft: the ongoing challenge
Smart stores also address one of the biggest issues micro market operators face: customer theft, Munson said. Theft has become especially important for many operators post pandemic since employers are reluctant to address the problem knowing that labor is harder to find.
An operator in the audience said one micro market account has 8% loss to employee theft, which the location management is reluctant to address.
While smart stores offer more protection against theft than micro markets, it should be noted that customers can still steal from them.
What about catering?
As smart stores, like micro markets, give operators the opportunity to offer more fresh food, Munson said operators should also consider offering catering.
The most valuable accounts expect hot, made-to-order food, he said, and this food has higher profit margins than vending and micro market products.
«You’re not a vending operator,» Munson said. «You are an unattended retail operator…Operators today have got to think about more than just ‘the break’ itself,» Munson said. Many businesses today want to provide foodservice.
Saldana agreed, noting that she has teamed with various caterers to provide their services to her customers.
«I just refuse to say, ‘okay, that’s not me,'» she said.
Where some operators may view caterers as competitors to her micro market business, Saldana said they enhance it.
Micro markets expected to expand
The panelists viewed smart stores and catering as complements to their existing services and expect micro markets to continue to expand.
Saldana, who launched her company shortly before the pandemic began, said customers were generally welcoming of micro markets. The company also operates coffee and pantry service, but no vending.
One of the most important benefits of micro markets, Saldana said, is the ability to engage with customers. She said she encourages customers to download a QR code to give feedback on what products they want to see.
Dunn, for her part, noted that her company’s 12 micro markets outperform its 600 vending machines.
«It’s been a great improvement from the old school legacy vending,» agreed Chang, who noted that accounts with blue collar workers, who were initially less accepting of micro markets, have become more accepting of them. Chang said he was able to win acceptance by showing the accounts that the micro market software was able to provide customer usage data.
«We’re a mini concessions store at a consumer facility,» Chang said.
«Smart stores and dining solutions are the way of the future,» Munson said.