Most Macy's department stores pulled the plug on selling consumer electronics five years ago. But a recent deal with Zoom Systems Inc. is allowing Macy's to reconnect to the fast-growing market.
Zoom, a San Francisco-based deployer of automated retail machines made by an undisclosed Japanese manufacturer, was expected to complete the rollout of 150 payment card-accepting kiosks that sell iPod MP3 players in mid-November. The kiosks, deployed in 140 Macy's stores, also sell iPod carrying cases, travel speakers, headphones and other electronic equipment, says Macy's spokesperson Jim Sluzewski.
The 1,600-pound machines are seven feet tall and require 30 square feet of floor space. The 40 to 50 products the kiosk vends for $10 to $300 are displayed behind shatter-proof glass, providing a low-risk way for Macy's to return to the consumer electronics market.
And other retailers are watching, says Tamara Mendelsohn, a Forrester Research analyst who specializes in understanding how shoppers interface with retail technology. She says some retailers may find the kiosks to be an easy and inexpensive way to enter new markets.
VeriFone Inc. installed the machines' payment terminals, which accept debit, credit and charge cards offered by American Express, Discover, JCB, Macy's, Visa and MasterCard. Chase Paymentech Solutions LLC processes the transactions.
Kiosk users swipe their cards and press buttons to select products. If they want more information about, say, an iPod, before buying, they press another button and a robotic arm provides a brochure to the customer through a door in the machine.
Once the customer makes his selection and pays, a robotic arm picks up the product and its warranty, and the kiosk prints a receipt. All three are delivered to the buyer through the door, says J. Rick Cusick, Zoom executive vice president of merchandising and marketing. The buyer can take the receipt to the nearest service counter if he also wants a Macy's shopping bag.
Macy's is placing the vending machines in high-traffic areas. The machines are on casters, so if a selected location does not work, they can be moved to another, Sluzewski says. Zoom's agreement with Macy's represents the largest single deployment of the company's kiosks. It also represents a major vote of confidence for the concept, notes Francie Mendelsohn, founder and president of Summit Research Associates, a kiosk consulting company.
Besides Macy's, Zoom has deployed two kiosks at Hartsfield-Jackson Atlanta International Airport, where Macy's executives first noticed the machines. That led to a pilot last year at Macy's Union Square store in San Francisco.
The contract between Macy's and Zoom comes several years after other companies first began experimenting with card-accepting vending machines, selling inexpensive products such as $2.50 cans of soda.
This quantum leap in what Zoom's executives say consumers will spend at a kiosk compared with what initially was envisioned is not lost on Summit's Francie Mendelsohn, who is not related to Forrester's Tamara Mendelsohn. "[Zoom executives] stepped way out of the [the vending machine price selling] comfort zone," Francie Mendelsohn says.
Consumers have grown comfortable interacting with self-service machines because of ATMs and airport kiosks. But only 14% of consumers have used a kiosk in a retail store because there are not that many deployed, says Tamara Mendelsohn. "[Consumers] are more comfortable dealing with a person, so this will be a test to see how well it works," she says. "If it goes well, other retailers will follow."
The Consumer Electronics Association contends Macy's is using the kiosks to become a player again in a consumer-electronics market whose sales are expected to reach $140 billion this year, up 9% from 2005 sales of $128 billion.
Most Macy's stores stopped selling consumer electronics because wholesalers refused to provide them large-enough discounts. This made it difficult to compete with Wal-Mart Stores Inc., Circuit City and other big-box retailers, Sluzewski says.
Consumer-electronics departments also suffer from high theft rates, Zoom's Cusick says.
"You can't trivialize the security aspect. They're items that people want, and people take them," adds Francie Mendelsohn. "But the only way a person could break into one of these machines is with a sledge hammer, and a person walking into a department store with a sledge hammer will draw a lot of attention."
(c) 2006 Cards&Payments and SourceMedia, Inc. All Rights Reserved.
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