Sunday, September 17, 2017
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Two executives from Google have started a new company which is selling a vending machine called "Bogeda" (the name used for small Hispanic family-owned food stores). When the product was announced to the public in September, 2017, there was an uproar because bodegas (and small food stores in general) are something of an institution in this country, and people were incensed that a Silicon Valley start-up would try to put them out of business. However, my interest is in how the vending machine would work, and whether it could be successful.
The Bodega vending machine is a 5-foot-wide glass case with doors that open so that people can take things. It is designed to be put in the common areas of buildings, such as apartment buildings, dorm rooms, offices, etc. Cameras are trained on the machine at all times, and also on anyone who approaches it. From their web site, it seems that the machine works like this: You must have a cell phone, with the Bodega app installed on the phone. You log into Bodega's site on your cell phone, give it the number of the Bodega machine you want to access, and the company unlocks the machine's doors. You then take what you want. The cameras determine which items you have taken, and, since you are the one who instructed the company to open the machine, your account with Bodega is charged. In other words, you must have a cell phone with internet capabilities to use the vending machine. This is a more cumbersome procedure than, say, swiping your credit card on the machine to make it open.
Privacy concerns have been raised about the multiple cameras installed in the machine (five or more cameras), but that should not be a concern since all Bodegas must be installed in private spaces, and the landlord would have given permission to the surveillance.
When I first found out about the machine, I thought that people who use the machine would have to have their pictures taken so that the machine would recognize them, but now I don't think that's necessary.
The company believes that a 5-foot wide glass case with several shelves can hold everything that people in a limited area would want, but that is very doubtful. The machine is limited to about 100 items. Let's say that one of those hundred items is toilet paper, an item that no one wants to run out of. Let's say that the machine is sitting in the lobby of an apartment building with five apartments in it. It is likely that each of those five families uses a different brand of toilet paper. The marketers of the machine would like it if everyone in the building bought ALL their toilet paper from the machine; but since everyone uses a different brand, they are only likely to buy toilet paper from the machine when they run out of it and don't want to go to the market.
This same problem exists with every product. People like different kinds of snacks, for example. If I like Bugles and the machine has Doritos, I have to be satisfied with Doritos. Also, is there room enough in the machine to carry those Doritos in a big bag, or just a little bag? People find vending machines frustrating because they hold a limited number of items -- usually, 20 to 40. But 100 items is not that much more than 40, and yet this Bogeda vending machine is expected to sell a great deal more than just snacks.
Restocking the machine is also an issue. The company that makes it doesn't restock it. Rather, their automatic inventory system determines what items have been taken from it, and those items are shipped to the building manager, who then restocks it. If the building manager is the landlord, that creates more work for the landlord. This brings in the question of whether the landlord gets to take a cut of the sales. If so, that will make the prices even higher.
A small vending machine does not have the economies of scale that a food store has, so it is likely that all the items in the machine will be expensive. Furthermore, there are expensive shipping charges to factor in.
The fact that the vending machine can't hold fresh items is a huge problem. For most of my life I have frequented food stores about five times a week. I go so often because I want fresh, perishable items to eat, not the non-perishable items that this vending machine would sell. If I need non-perishable items, I get them when I'm buying my perishable items. I have to buy perishable items so frequently precisely because they are perishable. I estimate that 70% of what I buy in food stores is fresh (milk, yogurt, eggs, bread, vegetables, fruits, frozen items, deli items, etc.). Even when I lived in New York City and frequented corner food stores a lot, I usually went there to buy fresh items (ice cream, milk, cheese, etc.). The truth is, Americans are eating out of shelf-stable packages much less than they used to.
What I purchased yesterday is a perfect example of the kinds of things I buy:
sliced ham
sliced American cheese
bread
kefir
refrigerated pudding cups
diet soda
napkins
Five of those seven items are fresh. Even if I lived in an apartment building with a Bodega vending machine in it, I would have needed to go out to get most of that stuff. Also, is that vending machine likely to carry the two non-perishable items that I got? Both of them are bulky, so probably not. If a Bodega vending machine were to carry 2-liter bottles of soda, the selection would be very small, so I might not be able to get the flavors I want. Yet I buy a 2-liter bottle of diet ginger ale five days a week. I wouldn't be willing to buy 12 oz. cans of ginger ale because they would be too expensive. Even if the machine carried 2-liter bottles of diet ginger ale, will the price be 99 cents (the price I pay for the store-brand soda), or will it be $1.99 for a name-brand soda? As for napkins, I don't think anyone buys them often enough for them to be put into a vending machine.
So these are the apparent drawbacks of this machine:
-- the need to own a cell phone
-- the work involved in restocking the machine
-- the high price of the items sold in it
-- the limited selection of items
-- the lack of perishable items
To that we can probably add "technical problems", since the built-in cameras and computer might be prone to malfunctions.
I lived in New York City for 30 years, and I shopped at a lot of small food stores. In the articles that I've been reading about this vending machine, people seem to have some misconceptions. One misconception is that such stores are open 24 hours a day. That was never my experience. Most of them would close at 11:00 p.m. or midnight. Also, some people seem to think that these stores doubled as restaurants where you could buy a breakfast sandwich. Again, I never frequented a small food store which made breakfast sandwiches (unless it was a deli, which is a different animal). Also, many people think that bodegas serve as neighborhood meeting places. Even when I lived in Hispanic neighborhoods, I never found that to be the case. Almost all the stores I frequented did not want a crowd either in the store or outside the store. In New York City, such stores had one definite drawback: Almost all of them sold beer and cigarettes to minors. Because of that, I am a firm believer that liquor and cigarettes should be sold only in liquor stores.
I'll be curious to see what happens to this product. I predict that it will ultimately fail. If it has any success, it won't be any more successful than typical vending machines have. Indeed, vending machines -- which are stocked by the companies that provide the machines -- have a better business model, in my opinion. In any event, I don't think that this machine is likely to replace any actual bodegas.
The Bodega vending machine is a 5-foot-wide glass case with doors that open so that people can take things. It is designed to be put in the common areas of buildings, such as apartment buildings, dorm rooms, offices, etc. Cameras are trained on the machine at all times, and also on anyone who approaches it. From their web site, it seems that the machine works like this: You must have a cell phone, with the Bodega app installed on the phone. You log into Bodega's site on your cell phone, give it the number of the Bodega machine you want to access, and the company unlocks the machine's doors. You then take what you want. The cameras determine which items you have taken, and, since you are the one who instructed the company to open the machine, your account with Bodega is charged. In other words, you must have a cell phone with internet capabilities to use the vending machine. This is a more cumbersome procedure than, say, swiping your credit card on the machine to make it open.
Privacy concerns have been raised about the multiple cameras installed in the machine (five or more cameras), but that should not be a concern since all Bodegas must be installed in private spaces, and the landlord would have given permission to the surveillance.
When I first found out about the machine, I thought that people who use the machine would have to have their pictures taken so that the machine would recognize them, but now I don't think that's necessary.
The company believes that a 5-foot wide glass case with several shelves can hold everything that people in a limited area would want, but that is very doubtful. The machine is limited to about 100 items. Let's say that one of those hundred items is toilet paper, an item that no one wants to run out of. Let's say that the machine is sitting in the lobby of an apartment building with five apartments in it. It is likely that each of those five families uses a different brand of toilet paper. The marketers of the machine would like it if everyone in the building bought ALL their toilet paper from the machine; but since everyone uses a different brand, they are only likely to buy toilet paper from the machine when they run out of it and don't want to go to the market.
This same problem exists with every product. People like different kinds of snacks, for example. If I like Bugles and the machine has Doritos, I have to be satisfied with Doritos. Also, is there room enough in the machine to carry those Doritos in a big bag, or just a little bag? People find vending machines frustrating because they hold a limited number of items -- usually, 20 to 40. But 100 items is not that much more than 40, and yet this Bogeda vending machine is expected to sell a great deal more than just snacks.
Restocking the machine is also an issue. The company that makes it doesn't restock it. Rather, their automatic inventory system determines what items have been taken from it, and those items are shipped to the building manager, who then restocks it. If the building manager is the landlord, that creates more work for the landlord. This brings in the question of whether the landlord gets to take a cut of the sales. If so, that will make the prices even higher.
A small vending machine does not have the economies of scale that a food store has, so it is likely that all the items in the machine will be expensive. Furthermore, there are expensive shipping charges to factor in.
The fact that the vending machine can't hold fresh items is a huge problem. For most of my life I have frequented food stores about five times a week. I go so often because I want fresh, perishable items to eat, not the non-perishable items that this vending machine would sell. If I need non-perishable items, I get them when I'm buying my perishable items. I have to buy perishable items so frequently precisely because they are perishable. I estimate that 70% of what I buy in food stores is fresh (milk, yogurt, eggs, bread, vegetables, fruits, frozen items, deli items, etc.). Even when I lived in New York City and frequented corner food stores a lot, I usually went there to buy fresh items (ice cream, milk, cheese, etc.). The truth is, Americans are eating out of shelf-stable packages much less than they used to.
What I purchased yesterday is a perfect example of the kinds of things I buy:
sliced ham
sliced American cheese
bread
kefir
refrigerated pudding cups
diet soda
napkins
Five of those seven items are fresh. Even if I lived in an apartment building with a Bodega vending machine in it, I would have needed to go out to get most of that stuff. Also, is that vending machine likely to carry the two non-perishable items that I got? Both of them are bulky, so probably not. If a Bodega vending machine were to carry 2-liter bottles of soda, the selection would be very small, so I might not be able to get the flavors I want. Yet I buy a 2-liter bottle of diet ginger ale five days a week. I wouldn't be willing to buy 12 oz. cans of ginger ale because they would be too expensive. Even if the machine carried 2-liter bottles of diet ginger ale, will the price be 99 cents (the price I pay for the store-brand soda), or will it be $1.99 for a name-brand soda? As for napkins, I don't think anyone buys them often enough for them to be put into a vending machine.
So these are the apparent drawbacks of this machine:
-- the need to own a cell phone
-- the work involved in restocking the machine
-- the high price of the items sold in it
-- the limited selection of items
-- the lack of perishable items
To that we can probably add "technical problems", since the built-in cameras and computer might be prone to malfunctions.
I lived in New York City for 30 years, and I shopped at a lot of small food stores. In the articles that I've been reading about this vending machine, people seem to have some misconceptions. One misconception is that such stores are open 24 hours a day. That was never my experience. Most of them would close at 11:00 p.m. or midnight. Also, some people seem to think that these stores doubled as restaurants where you could buy a breakfast sandwich. Again, I never frequented a small food store which made breakfast sandwiches (unless it was a deli, which is a different animal). Also, many people think that bodegas serve as neighborhood meeting places. Even when I lived in Hispanic neighborhoods, I never found that to be the case. Almost all the stores I frequented did not want a crowd either in the store or outside the store. In New York City, such stores had one definite drawback: Almost all of them sold beer and cigarettes to minors. Because of that, I am a firm believer that liquor and cigarettes should be sold only in liquor stores.
I'll be curious to see what happens to this product. I predict that it will ultimately fail. If it has any success, it won't be any more successful than typical vending machines have. Indeed, vending machines -- which are stocked by the companies that provide the machines -- have a better business model, in my opinion. In any event, I don't think that this machine is likely to replace any actual bodegas.
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