---
title: "Is the Unmanned Retail Trend Over? A Look at Japan Might Change Your Mind"
description: "In 2017, 3 billion yuan was invested in unmanned retail, but by 2018 many startups faced high theft and operating costs. Examining Japan's vending machine history, this article argues that demand for unmanned retail is mature, but success lies with brand owners and niche self-service machines, not retail operators."
author: "治维"
publisher: "New Distribution"
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published: "2019-08-03"
language: "en"
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# Is the Unmanned Retail Trend Over? A Look at Japan Might Change Your Mind

> In 2017, 3 billion yuan was invested in unmanned retail, but by 2018 many startups faced high theft and operating costs. Examining Japan's vending machine history, this article argues that demand for unmanned retail is mature, but success lies with brand owners and niche self-service machines, not retail operators.

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**Will Japan's vending machine past become the future of China's unmanned cabinets?**
In 2017, 3 billion yuan of capital flowed into the unmanned retail market. A series of unmanned cabinets and unmanned convenience stores emerged, aggressively expanding their presence through relentless, cost-blind promotion. Open-shelf unmanned racks, as the undisputed star, seemed to herald the next bike-sharing-style trend.
But in 2018, the unmanned retail sector underwent a shakeout. Many open-shelf unmanned cabinet startups faced high theft rates and high operating costs, making their business models unprofitable. Companies downsized or shut down, capital cooled, and the industry entered a period of consolidation.
**Has the unmanned retail trend already ended?**
**Vending machines, as the origin of unmanned retail, are now ubiquitous in Japan. Statistics show that Japan has over 5 million vending machines, one for every 23 people on average, while China has only about 200,000. In "The Evolution of Japanese Consumer Society: A Glimpse into China's Next 20 Years," the author notes that Japan and China share strong similarities in the underlying elements of retail business models, such as population density and urbanization levels.
So, we hope to illustrate the following points by studying the history of vending machines in Japan:
> **On the demand side, the macro environments at the rise of unmanned retail in China and Japan are very similar: slowing economic growth, high urbanization rates, and just emerging from an era of high consumption desire. This indicates that the demand for unmanned cabinets is already relatively mature.**
> **On the supply side, most of the domestic unmanned cabinet startups that died during the boom entered with an operator model. In Japan, FMCG brands are the biggest winners in vending machines. It is difficult for new companies to enter through a retail model, but there are still opportunities for self-service machines in vertical niches.**
### **Japan's Vending Machines: Born Alongside Convenience Stores at the Dawn of an Aging Society**
The 1970s to 1990s were the golden age of vending machine development in Japan. In the preceding 1950s and 1960s, Japan was experiencing post-war economic recovery, with GDP growth rates of around 10% for over a decade. The Japanese government invested heavily in infrastructure such as coal and steel, and industrial companies like Panasonic and Toyota rose rapidly.
Growing urban employment opportunities attracted large numbers of people from rural areas to cities. Japan's urbanization rate jumped from 56.1% in 1955 to 75.9% in 1975. In retail, large department stores and supermarkets became the mainstream. People emerging from wartime scarcity had high consumption desires, and large department stores met the need for one-stop, bulk shopping. Among the rising middle class, the "three sacred treasures"—black-and-white TVs, refrigerators, and washing machines—became household essentials.
A 1950s Panasonic washing machine advertisement.
Starting in the 1970s, due to changes in the dollar exchange rate system and two oil crises, Japan's economic growth slowed, with GDP growth falling to around 4%. At the same time, urbanization stabilized at around 75%. On the consumption side, people's spending began to shift from quantity to quality. Many middle-class families already owned the three major appliances, and consumption focus shifted to high-frequency, essential food and daily necessities. Meanwhile, Japan's birth rate began to decline, leading to an aging society with higher demands for convenience.
In this macro environment, convenience stores and vending machines emerged. They focused on high-frequency, essential food, beverages, and daily necessities. Although these categories have low margins, high urban population density provided sufficient traffic and repeat purchases to support profitability. Additionally, these formats met the convenience needs of the elderly and single-person households.
The similarity in positioning led to their simultaneous rise.
**From the 1970s to the 1980s, the number of vending machines and convenience stores in Japan grew rapidly. In recent years, domestic convenience stores and unmanned cabinets have also gained attention almost simultaneously, attracting many companies and capital.** Around 1973, convenience store chains like 7-Eleven, Lawson, and FamilyMart were established in Japan. Notably, by then, the vending machine industry had already completed early deployment—there were nearly 500,000 vending machines nationwide.
Data source: 7-Eleven annual report, China Merchants Securities.
**Beverage Companies Are the Biggest Behind-the-Scenes Drivers**
**Today, nearly half of Japan's vending machines are beverage machines—and the beverage machine market is completely monopolized by beverage brands, with 97.3% of beverage machines operated directly by beverage companies like Coca-Cola. If Japan is the originator of vending machines, beverage companies are undoubtedly the biggest behind-the-scenes drivers.**
As early as World War II, Coca-Cola developed a relatively mature vending machine, the Vendalator 33, and used it to provide free Coke to the U.S. military. In the post-war 1960s, the advent of aluminum can technology made it easier to keep Coke cold in vending machines and less fragile than traditional glass bottles during transport. At the same time, Coca-Cola and vending machine manufacturer Vendo developed mature coin payment technology. **The maturity of aluminum cans and payment technology was crucial to the spread of beverage vending machines.**
Coca-Cola vending machine: Vendalator 33.
For beverage companies like Coca-Cola, developing vending machines is essentially a channel expansion strategy. **The core value of a channel lies in delivering the right product (What) to the right person (Who) at the right time (When) and the right place (Where).**
Beverage consumption is characterized by mass appeal, immediacy, and impulsiveness. This is especially true for Coca-Cola as an international leisure beverage brand: anyone, at any time, in any place, might have the impulse to drink a Coke. This prompted Coca-Cola to seek a channel that is available 24/7 and accessible everywhere. Clearly, traditional channels cannot achieve this: in terms of time, restaurants only operate during meal times, and grocery stores close at night; in terms of space, narrow streets cannot accommodate a grocery store, and schools have no extra space for a shop. For an ambitious company like Coca-Cola, **vending machines are an excellent way to fill the temporal and spatial gaps of existing channels, allowing consumers to buy Coke anytime, anywhere.**
In 1962, Coca-Cola began introducing vending machines jointly manufactured by Mitsubishi Heavy Industries and the American company Vendo into Japan, installing 880 machines that year. Many beverage companies followed suit, deploying their own beverage vending machines. For beverage companies, vending machines not only expanded channels but also increased profits by eliminating intermediaries.
Large beverage companies often have a rich product portfolio. For example, Coca-Cola owns brands such as Coca-Cola, Sprite, Fanta, Minute Maid, and Ice Dew. These brands can form a complete all-scenario beverage lineup on vending machines. Additionally, their mature supply chains and logistics systems can be used for restocking. Revenue from traditional channels also allows beverage companies to continuously invest in vending machine R&D and deployment.
In contrast, many domestic unmanned cabinet startups entered with a retail model, putting them at a disadvantage in supply chain, operations, and capital strength compared to large brand owners. For example, a bottle of water with a retail price of 1.5 yuan has a manufacturing cost of about 0.49 yuan (water cost 0.1 yuan + packaging cost 0.17 yuan + operational and marketing cost 0.22 yuan). A startup purchasing from distributors at 1 yuan per bottle earns 0.5 yuan profit per bottle. In comparison, a beverage company selling directly through vending machines, without any intermediaries, earns 1 yuan per bottle—twice as much. The early disadvantage of the retail model in product costs is evident.
Japan's first Coca-Cola vending machine.
By 1973, Japan had about 500,000 vending machines. After 1973, with widespread public acceptance and the rise of convenience stores, beverage companies began mass deployment of vending machines—ushering in the golden age of Japan's vending machine industry. As beverage companies rapidly seized locations, vending machine channels expanded to more categories and services. Among single-category vending machines, cigarettes performed best after beverages. Similarly, Japan's cigarette vending machines are monopolized by upstream tobacco manufacturers. Japan Tobacco, controlled by the government, and cigarette giant Marlboro both began deploying vending machine channels early.
In terms of category characteristics, cigarettes and beverages are very similar, both having "mass consumption, high frequency, immediacy, and impulsiveness." Categories with these traits are naturally suited for vending machine sales. Vending machines, based on traffic logic, can fill the temporal and spatial gaps of traditional channels like convenience stores, achieving full coverage of consumers. In contrast, categories like snacks, newspapers, dry batteries, and toys, which are relatively low-frequency and have narrower consumption scenarios, perform far worse in vending machines than beverages. For these categories, convenience stores, with fuller inventory and convenient locations, are often better choices for consumers.
Japan cigarette vending machine.
Self-service machines are also very common in Japan, with about 1.25 million units, accounting for 25% of all vending machines. These provide services such as change exchange, printing, ticket sales, and laundry. Self-service machines are widespread in Japanese convenience stores, becoming an important part of creating "life service centers."
For example, many 7-Eleven stores in Japan have their own self-service printers, ticket machines, and ATMs. The self-service printers were jointly developed by 7-Eleven and Japanese printer giant Xerox, allowing users to upload files via a mobile app and print in-store. The self-service ticket machines were developed in partnership with Japanese ticketing company Ticket Pia. 7-Eleven's banking arm, Seven Bank, has also deployed ATMs in most stores to provide deposit and withdrawal services.
Beyond convenience stores, some self-service machines, such as foreign currency exchange and photo booths, are independently operated by third-party operators. In recent years, Japanese company ActPro has installed about 400 Smart Exchange self-service currency exchange machines in Japan, accepting 12 foreign currencies. With the year-on-year increase in foreign tourists to Japan, these machines meet tourists' currency exchange needs and are deployed in malls, shrines, temples, tourist attractions, airports, and other areas frequented by tourists. Traditional currency exchange shops can hardly match the flexibility in location placement of automatic exchange machines. The core of such self-service machines lies in identifying specific consumer needs in specific scenarios and leveraging their flexibility to reach consumers more precisely and efficiently than traditional brick-and-mortar stores.
Currency exchange machine.
In summary, the development of vending machines in Japan was initially driven by beverage giants as a key channel strategy. The maturity of vending machine technology and Japan's economic and social evolution led to the rapid rise of vending machines alongside convenience stores in the 1970s.
On one hand, beverage companies, the drivers of vending machines, quickly seized locations and tapped into traffic; on the other hand, technological and business model maturity allowed many players from other categories to enter, but beverages and cigarettes remain the most successful categories in vending machines. The advent of self-service machines has enabled convenience stores to better become "life service centers." Startups like ActPro have also entered from niche services, meeting specific needs in particular scenarios.
**Conclusion**
**From Japan's experience, the "last 10 meters of consumer demand" met by vending machines can compensate for the spatial layout shortcomings of convenience stores in categories like beverages and cigarettes, which are "high-frequency and highly immediate," achieving a certain scale. However, vending machines selling other categories, due to limited consumption scenarios, find it difficult to differentiate significantly from convenience stores.**
Since 2015, domestic beverage giants such as Nongfu Spring, Master Kong, and Wahaha have also increased their vending machine deployment. As of 2018, Nongfu Spring had 10,000 vending machines in China. Beverage brands are clearly determined to succeed in vending machines.
In 2017, during the unmanned cabinet boom, a group of startups entered the market with an operator model, aiming to meet office workers' "last 10 meters of snack and beverage needs" and become "mini convenience stores" closer to users. But it has been proven that this model requires rich operational experience and supply chain capabilities to achieve profitability.
The self-service machine field seems to offer more opportunities. Self-service printers, photo booths, and currency exchange machines, which are common in Japan, are far from widespread in China. But the core question is whether these niche areas have a sufficiently large market and imagination space. Are they better suited as supplements to convenience stores' life services rather than nurturing entirely new enterprises?
Perhaps more worth pondering is: are there any entirely new scenarios, similar to bike-sharing, that could be fulfilled through self-service machines?
In 2017, 7-Eleven officially entered the vending machine field in Japan, leveraging its supply chain advantages to offer fresh food through vending machines. The battle between convenience stores and vending machines has begun. In China, their story is just starting, but opportunities for startups in unmanned cabinets are indeed running out.


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