In Shaanxi's Taibai Mountain National Forest Park, far from the city yet incredibly close to technology, visitors can see Nongfu Spring vending machines along the roads from the visitor center to the scenic area. They sell a range of Nongfu Spring products, from mineral water to beverages, all at reasonable prices.

Meanwhile, in the ancient city of Xi'an, automated vending machines seem to be just getting started.

When vending machines first entered China, they didn't catch our attention

In 2000, China saw its first vending machine. When it first appeared, many people were at a loss. They didn't understand why they should buy from this strange machine what they could easily get in stores, and some even feared that inserting money wouldn't produce the product. At that time, people primarily shopped at malls and mom-and-pop stores, and convenience stores were still unfamiliar to us.

The world's first vending machine dispensed holy water

In the 1st century AD, the Greek engineer Hero created a device that automatically dispensed holy water, which is considered the earliest vending machine. In 1925, the United States developed a cigarette vending machine, followed by various modern machines for stamps and tickets. Modern vending machines vary in type, structure, and function depending on the products they dispense, including candy, beverages, and newspapers. Since then, vending machines have become popular globally. When it comes to the two countries with the highest vending machine usage, the United States and Japan inevitably come to mind.

In Japan, people are accustomed to shopping via vending machines

In Japan, 70% of canned beverages are sold through vending machines. Additionally, Coca-Cola, a global beverage giant, has deployed 500,000 beverage vending machines worldwide.

According to 1998 statistics, Japan had 5.5 million vending machines nationwide, with sales reaching 6.8969 trillion yen (6,896,948,870,000 yen), ranking first globally. Although Japan's total number of vending machines is lower than that of the United States, its per capita density is the highest in the world: one machine per 35 people in the U.S. versus one per 23 people in Japan. At some intersections in Japan, there are as many as 15 vending machines.

In China, there are actually many vending machines, but they are just not visible

Vending machines are ubiquitous in Japan, and despite the abundance of convenience stores, they still have their niche. In China, however, most vending machines are in places you don't see. Over 50% are in factories, about 28% in schools, and the rest on streets, in subways, and office buildings... Coca-Cola currently has only about 5,000 vending machines in China.

After more than a decade of development, China still has fewer than 100,000 vending machines. Of these, about 40,000 belong to Ubox, founded in 2010. In July 2015, Ubox received 530 million RMB in financing from The Carlyle Group, the largest investment in China's vending machine industry to date, signaling that vending machines are gaining recognition from global capital markets.

Today, vending machines can be found in airports, high-speed rail stations, shopping malls, tourist attractions, large residential communities, schools, factories, and many other places. And now, you no longer feel the unfamiliarity of the past; instead, you deftly pay with your phone. In just a few seconds, the product you want appears.

Can rising consumption levels lead to a vending machine boom?

If vending machines had been widely deployed in China ten years ago, no one would have paid attention because consumption levels were low, and people wouldn't have been willing to pay more than mall prices for a bottle of water or snacks. Today, the situation is different.

Vending machines not only provide a more convenient shopping experience but, more importantly, save our time. Moreover, our consumption concepts have changed.

When per capita GDP reaches $10,000, vending machine demand is expected to surge. Currently, 7 of China's 35 provinces and municipalities have reached this level. Ubox, which holds the largest market share, owns multiple smart vending machine patents, focuses on an O2O model, profits from interactive advertising, and has a franchise model that can be quickly replicated. Ubox has pioneered a unique retail + internet advertising model. Perhaps this signals a new beginning. Besides Ubox, some manufacturers are also developing new types of vending machines, including low-temperature frozen ones.

Multiple companies are entering the vending machine space—does this mean the wind is coming?

Recently, it was reported that Want Want Group established a vending machine operations center and launched Want Want smart vending machines, with plans to deploy over a thousand machines nationwide this year. This is not the first food company to join the vending machine industry.

As early as July 2016, Wahaha had already announced its full-scale entry into the vending machine sector. Zongsheng Intelligent Technology Co., Ltd., a vending machine business company jointly invested in by Mr. Zong Qinghou and his younger brother Zong Zehou, was officially registered. Last year, Wahaha deployed tens of thousands of vending machines to build its own nationwide smart retail terminal network.

By the end of 2016, Nongfu Spring's vending machine fleet had exceeded 10,000 units, not only across cities but also penetrating tourist attractions.

In addition to beverages, frozen food and ice cream vending machines are also on the horizon

In 2016, Sanquan, a frozen food company, began piloting boxed meal vending machines in some convenience stores. This year, frozen and ice cream vending machines will also move from behind the scenes to the forefront. By the summer of 2018, we might be able to buy our favorite ice cream from roadside vending machines.

Rising channel costs may make vending machines a good option

Currently, costs in traditional FMCG channels are continuously rising, and these channels are nearly saturated. With limited potential for market growth, the emergence of rapidly growing new channels, especially self-built and directly controllable vending channels, is attracting more companies to enter. Besides beverage giants, some ice cream, frozen food, and even low-temperature dairy companies have quietly begun to position themselves in the vending machine market.

Brand promotion + advertising: the unique advantages of vending machines

Vending machines occupy a small footprint, typically holding around 300 products, but companies don't rely on them for profit. Instead, they value the brand promotion and advertising effects. Through online payments, companies can track product movement in the backend, and since vending machine users are inevitably new-generation consumers, this provides a reliable source for data collection.

Can the vast market attract capital?

In Japan, the areas suitable for vending machine deployment are mainly the Tokyo-Yokohama commercial belt and the Kansai (Osaka-Kobe) commercial belt, which together cover 70-80% of Japan's population. In China, besides first- and second-tier cities, 5A tourist attractions and schools are also developable markets. Will unmanned vending machines soon attract capital? I think it depends on the market's acceptance of vending machines.

Inside the cabinet: differentiated products are needed

At Taibai Mountain National Forest Park, many visitors carrying large bottles of water are surprised to see Nongfu Spring vending machines, their first reaction being that they've been fooled. They didn't expect to be so close to technology in the deep mountains. Of course, prices here are slightly higher than outside, but still acceptable to consumers.

Of course, in the city, few would be willing to pay more for a bottle of water unless they're really thirsty and there's no convenience store nearby. More people use vending machines to buy beverages.

Thus, consumers hope to purchase higher-end or new products from vending machines, whether it's ice cream, beverages, snacks, or frozen foods. They are willing to spend more, but only if the products inside the cabinet interest them.

In 2018, vending machines will explode

In 2017, there were more and more news stories about vending machines, and various types have appeared in our cities. Perhaps by 2018, vending machines will suddenly explode, just like unmanned shelves did this year. But this requires a shift in corporate mindset and consumer acceptance of vending machines.

Compared to unmanned supermarkets, I think vending machines have stronger advantages, at least their business model isn't just about hype.

In China, whether it's technology, purchasing power, or consumer demand, all conditions are ripe. Perhaps in 2018, it will be a good business. We may not need unmanned shelves, but we definitely need a vending machine.

Large FMCG companies are getting involved precisely because they see the strong coverage and influence of vending machines on retail terminal channels. Since vending machines are mainly in first- and second-tier cities, this market is favored by major corporations. For companies, vending machines might be a powerful tool for channel sinking, directly reaching consumers and solving the last-mile problem. Similarly, vending machines could be a great opportunity for distributors to transform.

Source: Frozen Food Marketing (ID: lengshinews)

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