Necessity Is the Mother of Innovation in UK’s Vending Machine Sector

The well-known proverb — necessity is the mother of invention, or in this case, “innovation” — has been the North Star guiding businesses as they navigate the COVID-19 pandemic.

And for European retailer Selecta Group, whose business depended on vending machines located in places like offices, malls, and hotels — places where people didn’t go over the last 18 months — innovation is at the heart of its core business strategy.

“If you look at our business, we operate in offices, and nobody was going into offices. We operate in the air, and nobody was traveling through airports. We operate in rail [stations], and nobody was [there]. When people are inside their houses, the demand for our products goes pretty low,” said Paul Hearne, managing director of Selecta UK & Ireland.

At the height of the pandemic, Hearne said revenues for Selecta UK & Ireland, two subsidiaries of Europe’s leading provider of self-service coffee and convenience food in the workplace and in public spaces, were down by 45%. In such dire circumstances, waiting it out was not an option. Hearne said they had pivot from traditional vending machines in offices and on rail platforms “to things that are a little more imaginative, which is where our strength is as a business.”

And as if pandemic-related challenges were not enough, the firm’s business has been affected by the ongoing fuel crisis in the U.K. “If drivers used to do 20 visits in a day, now they can only do 15 because they’re spending time waiting on the forecourt to fill up with fuel,” Hearne told PYMNTS in an interview.

But overall, they’ve been “quite lucky” compared to other businesses, he remarked. Only four or five of their 650 vehicles have been off the road every day without fuel as the government works toward bringing the situation under control.

From Micro-Markets to Smart Stores

The catering space is one sector that holds promise for the regional retailer, giving Selecta an opportunity to use one of its innovations, the micro-market, to capture the market share lost by caterers whose services are no longer patronized in empty office buildings.

In July, the company launched the U.K.’s first-ever Foodies-on-the-go Micro Market at one of London’s busiest rail stations, East Croydon. The 24/7 unattended retail store, which offers “hundreds of meal choices,” consists of Selecta’s Pelican Rouge-branded coffee machines and another one of its innovations, the Smart Fridge.

It’s “basically a fridge with a contactless unit on the front,” Hearne explained. “You present your card to it and open the door … there are weighted shelves within the fridge so whatever you shop, it just charges your card, and then you walk away.”

The ease of access is one thing, but the wide variety of products – from sandwiches and wraps to “a high-quality steamed lunch or meal” – has made the innovation very successful with people commuting to work. Office-located smart fridges are also very popular, given their 24/7 convenience and the fact that workers don’t have to leave the office to buy food, said Hearne.

The retailer is also preparing to roll out its next generation of smart stores – a fully unattended store like that of the innovative Amazon Go. Using Just Walk Out technology, customers can present their card, walk into the store, shop for groceries and exit with no checkout lines, after which their virtual cards will be charged. Hearne said the first trials will take place next month across 10 locations in Europe.

Going forward, vending machines will have to be completely connected, and apps will probably be an important tool, he predicted. The use of contactless payments is also “an absolute must,” and combining them with the smart fridge has shown that consumers can “easily basket shop,” purchasing more than double the items they would have picked up in a vending machine, Hearne noted.

Moreover, the hardware will have to adapt to these new environments. As Hearne said, “the days of the old-school spiral vending machine (which he calls “the Museum of Food”), where you can’t touch anything, and products are all hidden behind glass, are probably numbered.”

The Transition to a Cashless Clientele

In August, Selecta announced a partnership with FinTech company Fiserv to offer cashless payments in vending machines and smart fridges across its 16 European markets starting in summer 2021.

Read more: Selecta Group, Fiserv to Offer Cashless Payments Across Europe

The company has since begun rolling out the new payment platform, installing about 7,000 Fiserv readers so far – “some of them replacement readers, others new” – with a total of about 20,000 installations expected in the U.K. and Ireland by the end of the year.

In terms of payments, clients pay predominantly with cards, even though they are gradually leaning further toward cashless than cash, currently about a 60%/40% divide. It’s heavily regionalized, though, with London and the southeast at around 80/20% card-cash usage, while cash payments tend to increase the further north you travel, Hearne explained.

The continued dependence on cash by some clients is why Selecta had to stop short of their goal to move beyond cashless and eliminate the use of cash from their machines entirely. Hearne remains optimistic, however, that it will one day become a reality: “I’m hopeful that at some point very soon, we can go completely cash-free,” he said. “That’s my dream, and I think that’s the way forward.”