SINGAPORE (Jan 29): Alvin Lim, CEO of SGPomades, recently began selling his Ubersuave texturing wax and Mister Pompadour peppermint shampoo using vending machines. His company, an online retailer of hairstyling products, has a number of vending machines installed at locations such as Chinatown Point and White Sands. So far, the results have been favourable.

“Vending sales are picking up and bringing in rather stable profits,” Lim says. “Many of our customers praised us for our vending concept, as it made it more convenient for them. Although I initially thought that some of our online sales would trickle over to the vending machines, we experienced a slight increase online instead. So, including revenue from this vending machine venture, our business has achieved organic growth.”

SGPomades’ vending machines come from SmartRetail, an operator of “smart vending machines”. They boast integrated cashless payment systems, which accept all major credit cards as well as EZ-Link and NETS payments. The machines also have touchscreens that display information about the products. And there is an integrated back-end system to show retailers which items need to be restocked.

“SmartRetail’s machines were exactly what I wanted: a machine with a large touch display screen that functions [the way] an online store works, with displays of product descriptions and review videos in individual product pages,” says Lim. “It is very important to have these functions, as each of our machines has at least 30 variants of hairstyling waxes. Without them, a customer would be at a loss [as to] which to choose.

“Cashless payment is another important factor that attracted us. It’s easier for our customers and accounting system. I also liked that most of the product facts and prices can be changed remotely through the internet, which allows us to align our promotions with our online channels easily.”

Lim is among several customers warming to SmartRetail’s machines. The company has deployed over 100 machines in Singapore, and its customers include Singapore Telecommunications and the Dairy Farm International Holdings-owned Guardian and 7-Eleven. SmartRetail says these machines bridge a gap between e-commerce and retail stores, and it plans to expand its business regionally to Malaysia, the Philippines and Indonesia in the coming year.

As mall operators complain of dwindling shopper traffic and weaker purchase volumes, could the likes of SmartRetail change retailing as we know it? What other innovations are retailers turning to as they figure out a better way to supplement their e-commerce operations?

The modern mall

For years, local brand owners and retailers bemoaned the tough local retail scene. Mall operators seeking higher rents favoured big, well-known brands such as Fast Retailing Co’s Uniqlo, Inditex’s Zara and H&M that could take up large floor plates and draw plenty of traffic. Niche brands were pushed to set up shop in neighbourhoods such as Haji Lane or online.

These days, it does not look like the smaller retailers are missing out on much. As more people shop over the internet, mall operators are rushing to embrace the online world. CapitaLand recently announced a tie-up with e-commerce marketplace Lazada to launch an online mall, integrating offline and online channels.

Lazada will launch click-and-collect lounges in CapitaLand-operated malls. Customers will be able to test their electronics or try their -purchases in fitting rooms. The two companies aim to open 13 lounges by March.

Malls are also playing host to the logistics players that support e-commerce retailers. At the service desk at Millenia Walk, customers can pick up parcels delivered by Ninja Van. The local logistics start-up has set up Ninja Boxes and Ninja Points at several malls. Customers can even deliver their parcels directly to these collection points, as long as their e-commerce retailer uses Ninja Van’s services.

“Shopping centres were natural choices because they are usually in convenient locations with high footfall,” says Lee Wai Hoe, business unit head at Ninja Van, adding that negotiations with mall owners so far have been straightforward. “As we are in the Fourth Industrial Revolution now, where technology has affected the way we live and shop, such digital services can complement what bricks-and-mortar malls offer by increasing footfall to the locations.”

Seeing how easy it is for customers to pick up products they have purchased online may even induce some physical retailers to build a more significant online presence, Lee adds.

Shop in a box

For most retailers today, the internet is the first port of call. An online presence is relatively cheap, easy to scale and offers significant reach. But an offline presence continues to be necessary, says Lim of SGPomades. A customer who has run out of shampoo, for instance, is going to want a replacement fairly immediately. If SGPomades cannot fill that demand, he says, some other physical retailer will.

Click-and-collect lounges such as those offered by Lazada and CapitaLand are a way to fulfil that demand. But having a physical retail presence has other intangible benefits too. “An offline presence also helps instil brand image and trust value in our e-commerce platform,” says Lim.

Unfortunately, despite falling shopper traffic, mall rents continue to be beyond the reach of many retailers. There are also other costs to be considered — the cost of fitting out a store as well as staff salaries. “Before we launched our vending machines, we evaluated internally our options for an offline presence. Opening storefronts is capital-intensive and comes with too many factors to consider such as manpower,” says Lim.

“We decided it was best for us to start with vending machines, as they have a relatively low requirement in capital [and] we have the ability to expand quickly. In terms of brand image consistency and product management, vending machines can deliver well with proper management.” The SmartRetail machines are rented rather than purchased.

Kevin Williams, general manager of SmartRetail, anticipates more e-commerce retailers turning to vending machines as physical points of presence. “They realise they need a physical space for their customers and to improve their brand, because [when you are] online, you kind of get lost in the mix. As great as e-commerce is, there are a lot of players in the e-commerce field. What [retailers] are looking for is an offline presence that supplements their online presence. That’s where we come in,” he says.

“To launch, bricks-and-mortar stores take a lot of cash upfront. And malls are picky about who they accept. Some malls go to the extent of having [potential tenants] submit their [store] design to the mall.” Undesirable layouts or tenants can be turned away entirely.

Will mall operators adapt?

But mall owners can turn vending machines away too. SGPomades entered the market with five machines in 4Q2017. Securing good locations was a challenge, though. In fact, Williams says mall operators have been slow to catch on to the benefits of vending machines.

“Malls are very concerned about bringing in machines that are competitors to [existing tenants],” Williams says. This resistance has struck him as odd because competing tenants are often located close to each other. “You can see [pharmacies such as] Guardian, Unity and Watson next to each other.”

He suggests that perhaps mall operators see vending machines as disrupting their own business models. “Because some of these guys pay quite good rents [and have] a good brand name, and they want to keep that relationship,” he says.

However, acceptance of these machines is gradually improving. “[For] our first rental vending machine, we worked with [healthy snacks distributor] BoxGreen, and that first machine was installed at OUE Link,” says Williams. This is a retail space occupying a walkway connected to OUE’s flagship commercial property OUE Bayfront. “Our relationship with OUE has grown and there are some locations in OUE malls that have space and we partner with them [to place vending machines there].”

Since its success with OUE, Williams says other mall operators have become more open to the idea of allotting space to vending machines. The company is even talking to the management of CHIJMES, a historic building complex that has become a hub for restaurants.

SmartRetail is also working with Giant to put vending machines in Giant supermarkets. These machines, branded VendMart, dispense a variety of products from other SmartRetail clients. “With Giant’s VendMart, we have eight vending machines already. Because we have a lot of clients, it was a natural fit and we work with Giant to offer these locations,” says Williams.

SGPomades is among the clients whose products are available at Giant’s VendMart. Lim wants to continue expanding his vending machine network. “We want to have at least one machine in each of the major heartlands of Singapore and then we will move to the central area,” he says. “Vending machines can become an important revenue channel for SGPomades.”

This article appeared in Issue 815 (Jan 29) of The Edge Singapore.

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