Expat Gower Smith reckons he’s seen the future of retailing … and it looks a bit like a vending machine on steroids. Smith is the founder and CEO of San Francisco-based ZoomSystems, and what he describes as “a new concept in automated retailing” is something called the ZoomShop.
To be fair, the ZoomShop is light years away from traditional vending machines. It’s a high-tech beast with interactive software that can demonstrate products at the touch of a screen, remotely monitor inventory, send replacement orders to distribution centres, accept credit cards, and even capture and analyse aspects of shopper behaviour.
ZoomShops stand ready to serve 24/7 in high foot-traffic areas like shopping malls, airports, train stations, resorts, hotels and military bases. According to Smith, they are little retail gold mines.
“They give the highest return per square foot in the retail industry,” he says, quoting broad figures that show ZoomShops bring in roughly 20 times the revenue of traditional outlets in airports and malls. He says airport ZoomShops return between US$1200 and US$12,000 per square metre per year, depending on the type of merchandise, compared to the average retail return of around US$300 per square metre. Zoomshop sales in malls are between US$900 and US$3000 per square metre versus about US$105 for the average retailer.
The machines, made in Mexico by a Japanese manufacturer, are leased to clients, with ZoomSystems receiving a monthly rental plus a share of revenue. The company has more than 800 ZoomShops in major cities and airports across the US, and Smith predicts that will reach 1000 by year’s end.
Even in today’s recession-ravaged retail sector, he says business is booming: “We are in double-digit growth this year over last.” In contrast, he says, most retailers are in negative territory in terms of annual growth measured by comparable same-store sales.
Smith partners with household names like Sony, BestBuy, Rosetta Stone, Macy’s and Proactiv Solution. A swiped credit card gives shoppers access to a wide range of popular products including digital cameras, GPS systems, iPods, software and cosmetics.
Smith believes ZoomShops provide people with the convenience of online shopping combined with instant gratification. “Consumers prefer this type of purchasing experience. It’s fast, easy, convenient and reliable. They research products online and know what they want.”
He sees ZoomShops as the retail equivalent of ATMs and self check-in at airports. Neither has completely replaced bank or airline staff, but they offer an optional service that many people come to feel comfortable with, and then prefer using.
The concept makes sense to Julie Baker, professor of marketing at the Neeley School of Business, Texas Christian University. “From a marketing standpoint, it’s another channel of distribution for manufacturers: they have stores, the internet and now these sorts of vending machines. The most important thing is to get product in front of the customer at as many venues as possible.
“With limited space required and no employees, it’s a lot cheaper than a little storefront. So, it’s cost effective for manufacturers and convenient for customers. It’s a win/win for both parties.”
Smith grew up on a farm near Dannevirke, Hawkes Bay, attended Napier Boys’ High School and Wellington Polytechnic, then headed across the Tasman to study microprocessors at the Melbourne Institute of Technology. A serial entrepreneur, he started his first two businesses in Melbourne, retailing and wholesaling computers, technology and software. Four more ventures followed in Australia and Asia before Smith, by then fully committed to automated retailing, moved to the US in early 2007.
“The original vision when we moved here was to gain access to the capital markets and the consumers,” he says, referring to California’s population of about 37 million and a US market over eight times that size.
Initially with development partner Hewlett-Packard and later with the help of almost US$100 million from a handful of institutional investors, Smith has built ZoomSystems into a company with just over 100 employees. He won’t disclose revenues or detail how ownership has been sliced up between himself and his equity partners.
He is keen to talk about plans for overseas expansion, starting with Japan. That country’s huge economy, convenience-oriented society and ready acceptance of self-serve technology — plus the high costs associated with traditional retail — have helped pave the way for seven ZoomShops so far with the promise of more to come.