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Relationship Retailing & The Giant Vending Machine in the Cloud

Would you buy a suit from a vending machine? How about a pair of shoes? No? A soft drink?

“Yes” to the soft drink! Well, that’s good. Vending machines are useful for this. A single one of them usually contains a range of soft drink brands housed inside the same mechanical box. Assuming you have some loose change, its convenience is unmatched.

These devices have been around since the first century A.D., when Greek mathematician and engineer Hero of Alexandria created a device that dispensed holy water. In recent decades, they exist everywhere, offering a range of consumable, packaged products. The largest vending machine in the world actually straddles the entire planet. It is a company called Amazon.com.

Most people do not think of Amazon as a vending machine, and many retailers only see it as a global behemoth and a major threat to their livelihood. In fact, Amazon is an entity that conveniently dispenses and delivers products – without human intervention. It has strengths, but it also has limitations. As vast and efficient as Amazon is, it can be a brand-dissolving mechanism.

First, there is the customer’s perspective. Amazon does not provide sales associates who understand and love the brand and its products. It merely responds to a request. Certain consumables sell well through this model, specifically items with a previously established value statement, such as books and videos, tunes by a favorite artist, or even bags of grass seed.

However, many purchases depend on the interaction between a consumer and a knowledgeable sales professional to balance choices and preferences, and to get the right "fit." The more personal the item – like a computer mouse or a pair of shoes – the wider the gap between the customer and the vending machine, and the narrower the opportunity for an emotionally satisfying transaction.

Second, there is the retailer’s perspective. Merchandise offered for sale inside a giant online vending machine may see its hard-won brand fade substantially under the overpowering presence of Amazon’s influence. Items are arranged courtesy of price and search history algorithms. Competing products of varying quality appear en masse, rendering them anonymous in the process. A brand that exists inside a vending machine has commoditized itself. It has removed what made it unique. The only thing left standing is Amazon’s big orange and black smile.

It is a mistake to think technology is something that reduces the high-touch experience. In truth, technology can increase it, placing other sellers at the polar opposite of Amazon's approach. Retail, after all, is theater. It is a physical and emotional event organized for the satisfaction of each customer. The best real-world stores, like Nike, Apple, Adidas, or Jimmy Choo, already deliver a finely-executed service that contributes to the overall enjoyment of the purchase. Now, other retailers can also deploy tools that augment human contact, and assist brands in providing some of their value through the experience of acquiring the product.

A mobile loyalty app connects a shopper to a store associate in a way that allows the salesperson to give a warm, personalized welcome while simultaneously collecting the customer’s preferences and previous purchase or browsing history data. This starts – or continues – an emotionally satisfying relationship. The "App-Powered Store Associate” (APSA) becomes the centerpiece of a technologically augmented shopping experience. The consumer’s estimation of the store value grows, and the wealth of knowledge is permanently protected within its walls.

Without question, Amazon and similar companies will remain successful in the type of relationship retailing where human contact is unnecessary or unimportant. But, in situations where shoppers require or prefer personal interaction, the big vending machine concept will be far less efficient.

This dichotomy is proven by the continued existence of physical stores, where most commerce continues to happen. The experience still matters, as do the people. Pure play is dead, and existing solely online is not in the cards – even for Amazon – which is currently launching brick-and-mortar locations from which to offer goods. 

The Internet-based vending machine model has an additional cost/benefit challenge in the area of returns, and their associated costs. Current statistics show digital consumers return 20-30% of their apparel purchases. These downgrade overall revenues to 75 cents on the dollar. When retailers offer "buy online/pick up in store," the return rate drops, and they can expect to see 90 cents on the dollar. When this is further refined to "buy online/return in store," the revenue potential jumps to $1.20 because of the added impulse or routine purchases. 

Ultimately, there is a battle between service and convenience for customers’ wallets and their ongoing allegiance. A single convenient purchase may suffice for the moment, but the value of repeat commerce is even higher. Brands help shoppers define and demonstrate their self-identity. The way in which vendors treat customers will have a direct impact on future success. This is not a place where automated digital commerce through a vending machine model can excel. People, personal interaction, and care are key requirements.

Check out our previously recorded webinar on How to Beat Amazon at the Fulfillment Game and learn how to provide convenience and a high-touch consumer experience. 

View Recording

Phil Granof, CMO

Phil is an award winning marketing executive with over 20 years of experience in marketing strategy and brand development. Prior to NewStore, Phil was Executive Vice President and Chief Marketing Officer of Black Duck Software, a global enterprise software company where he successfully repositioned the entire brand, built a modern marketing organization, and simultaneously redefined an industry. As Chief Marketing Officer of NewStore, Phil combines his analytical data-driven approach to marketing with creative vision to oversee Demand Generation, Product Marketing and Management, Brand Development and Corporate Communications.

Topics: Fulfillment

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