Integrating SST Innovation in a Vending Machine

Introduction

In accordance with Tseng & Lee (2014), everyone has experienced service innovation at some point, and service innovation is mainly driven by advancements in technologies geared towards widening service coverage and reducing the cost of services, which goes to say that whatever difference is experienced from the original form of service can be considered a new service. Service innovation comes in different forms. For example, service staffs in restaurants and airplanes can gain better insight on the preferences or needs of consumers and utilize the new understanding to provide services that better meet these needs. It was pointed out by Cox (2013) that, as an enterprise, service innovation does bring about enhanced values for products or services and help the consumers cope with their need diversity. As such, the main factor behind service innovation is changes in market needs and preferences. Simply put, service innovation is any change made in the original value of a service with the intent of enhancing the original value of such services in order to create a higher value and experience for the consumers (Namkung & Jang, 2013).

Service innovation

In recent years, service innovation has gained an increased level of global consideration from practitioners, researchers, policymakers, governments, and academicians. (Ettlie & Rosenthal, 2012; Rahman et al., 2015; Van Riel et al., 2013; Wang et al., 2015). The main factor behind this growing intent is environmental changes that have increased the overall complexity of service delivery (Van Riel, 2005). For instance, variations in economic conditions resulted in the opening of new markets as well as the closure of others. On the same note, there is a shift in the expectations of consumers, which makes it very difficult for companies to satisfy these consumers (Oliver et al., 1997). The outcome has been a significant increase in the volume of rivalry and competition in the world, and in order to address this, service companies are mandated to innovate their services in line with the changes in consumers’ needs (Van Riel, 2005).

Self-service technologies

One of the ways companies are addressing these changes is through self-service technology (SST). The advancement in Information and Communication Technology (ICT) has transformed the way firms interact with their consumers, creating an improved level of service standards (Barrett et al., 2015; Lovelock & Gummesson, 2004). As a result of this advancement, service firms introduced technology-enabled mechanisms (i.e., self-service technologies (SSTs)) for offering convenient services to their consumers with the intent of creating enhanced productivity and satisfaction (Gounaris et al., 2010; Hien, 2014; Tsou & Hsu, 2017). In the course of the past decade, SSTs have emerged as a business phenomenon in the service sector (Leung & Matanda, 2013; Verhoef et al., 2009). They have replaced the traditional direct contact between providers and buyers of services (Meuter et al., 2000). For the buyers, it allows them to generate and use the services without interacting with employees of the service firm (Eastlick et al., 2012; Ju Rebecca Yen & Gwinner, 2003; Martins et al., 2014).

In order to provide services to consumers, companies have traditionally employed a wide range of practices, such as delivery through employees of services that consumers co-produce themselves (Hilton et al., 2013; Turner & Shockley, 2014). However, the SSTs were launched by service firms for the purpose of enhancing proficiency, productivity, and effectiveness of the service delivery process (Curran & Meuter, 2005; Kelly et al., 2017; Kokkinou & Cranage, 2013; Walker et al., 2002; Zeithaml & Gilly, 1987). On the same note, it is aimed at allowing consumers access to services through convenient and modern channels (McGrath & Astell, 2017; Meuter et al., 2003; Reinders et al., 2008). Through this means, service companies were able to address both the interaction and needs of consumers (Bitner et al., 2002; Ganguli & Roy, 2011; Johnson et al., 2008). Presently, there are numerous kinds of SSTs available for consumers in Malaysia, and they include ATMs, mobile banking, online banking, online shopping, self-check-in machines at airports, vending machines, and so on.

In accordance with Meuter et al. (2000), SSTs can be defined as any technological interface that makes it possible for consumers to access services for free without direct interaction with the company. Recently, multi-channel marketing has been combined with SSTs to provide consumers with flawless service delivery (Grewal & Levy, 2009; Musso, 2010). For instance, passengers can pay for airline tickets and make seat reservations from the comfort of their homes through their computers or phones.

Objectives of this paper

In line with the above discussions, this paper presents a comprehensive analysis of SST innovation in vending machines. The idea is a vending mini-mart machine (VenMart). Simply put, it is a vending machine that offers more products (besides the traditional snacks and beverages offered by conventional vending machines in Malaysia). It is an interactive and highly advanced (based on artificial intelligence) vending machine that provides all basic home groceries for consumers to access 24/7.

The idea: VenMart

In Malaysia, vending machines can be categorized in two ways: based on mode of payment and kind of service. By mode of payment, there are those that accept cash (coins and/or paper money) and those that are POS-based. By mode of service, there are two types: those that dispense drinks and those that dispense food or a snack. Irrespective of the time, most of the vending machines in Malaysia are provided by brands that use the machines to sell their products exclusively. Thus, there are a number of limitations with the vending machines in Malaysia, including:

• They are provided by companies that use them for selling their products, which doesn’t offer consumers the much-needed variety in choice. For instance, it is impossible to see an F&N product in a Coca-Cola vending machine, and
• Most of the vending machines are not smart, as they can only accept cash payments, limiting consumers’ purchasing power.
• There is a lack of visibility. When the machines are out of stock, the personnel do not know, and they will need to visit the machine for such confirmation. Additionally, the machines can be shut down for long hours and possibly days during repairs.
• Conventional vending machines also lack interaction. Consumers are accustomed to high levels of machine interaction through their computers, phones, and other advanced technologies, but this is not the case with conventional machines, as it is more or less a one-way process. The consumer keys in their product of choice, pays, and goes.

These issues are what VenMart aims to solve. VenMart (a name derived from "Vending Mini-Mart") is a machine that is not brand-specific. It is more like a vending mini-mart where consumers can buy their regular products with ease. It will feature a POS payment system so that the limitations of cash vending machines can be eliminated. Additionally, it will have an artificial intelligence system (based on internet technology) to communicate with the system managers when a product reaches 90% sales and recommend reordering such a product. The conceptualization is as illustrated in the figure below.

Figure 1: Conceptualized design of VenMart

Mode of payment: This machine will accept POS and QR codes for modes of payment. Consumers can slot in their ATM in order to access the POS payment option or generate a QR code online, then display the code on their smartphone and have all paid products dispensed for them to collect. For instance, a consumer might not be with his or her ATM, and to eliminate the inconvenience of going back home, all that is required is for the consumer to click on the VenMart website, order all products as desired, make payment through mobile or internet banking, and be issued a QR code. The consumer will then have to display the QR code for the machine to read, and once done, the machine will dispense all the paid items.

Products and services: the vending machine will feature varieties of beverages and foods/snacks from different brands for the consumer to choose from. Additionally, it will be able to dispense basic groceries such as body care products (soaps, lotions, perfumes, deodorants, tooth pastes, tooth brushes, etc.), home grocery products (such as noodles, eggs, corn, tomatoes, pasta, rice, etc.), health care products (slimming tea, etc.), and other basic home groceries. Basically, it will be a vending mini-mart, as the name suggests.

Others: This is a smart machine, and as such, it will have other features besides dispensing products for the consumers. It will have a clock and weather information; a map will help users locate their destinations; and it will also be able to print bus, taxi, and movie tickets. Thus, the system will work in conjunction with transportation and cinema houses in Malaysia, displaying the nearest cinemas and their movie schedule and selling tickets to interest consumers. The order screen will be an LCD touch-screen, and after each purchase, a message will be displayed as follows: "Thank you for your purchase; please come again!" a message synonymous with local store attendants.

Conventional mini-mart: Finally, there will be a conventional mini-mart located close to each of the VenMarts, and the VenMart systems will be connected to a local database installed in the conventional mini-mart. The system will provide the service personnel with information about the percentage of goods available in the vending machine. The service personnel are expected to refill once any product reaches 10% availability to ensure that products never run out of stock. Additionally, any technical issue with the machine will be communicated to the service personnel in the local stores, who will then have to contact the technician for servicing.

Origin of the idea

In a modern business setting, the pervasive influence that information and communication technologies have on consumers’ convenience cannot be overestimated. This is because things that used to be fast are now considered slow (Berry, 2016). Service convenience, which is the perception of reduced time and effort required to obtain a service by a consumer (Berry et al., 2002), has become pivotal for creating a competitive edge. The demand for service convenience is further fuelled by the changes in the sociodemographic and sociocultural features of consumers (Berry, 1979; Seiders et al., 2007).

For service providers (such as retail stores), the demand for service convenience is crucial because it influences the services consumers are willing to patronize as well as how they perceive the services they obtain. It does contribute to the consumer experience by enhancing their sense of satisfaction and, as such, leads to repurchase intention (Ostrom et al., 2015). In past research, it has been demonstrated (Andaleeb and Basu, 1994) or assumed (Berry, 2016) that service convenience does have a positive influence on how consumers perceive the service experience as well as driving consumer satisfaction. There are potential long-term benefits associated with customer satisfaction, which include increased loyalty and profitability for the business (Cooil et al., 2007; Homburg et al., 2005). While past research has demonstrated the positive effects that service convenience can have on both consumers and companies, important issues in this context have gone unaddressed (Sabine et al., 2017).

This is evidenced in the analysis of the conventional vending machine above. First, it is important to point out that as a service machine, a vending machine offers a high level of service convenience. This is because they can be installed in condominiums, on streets, or in areas close to residential and commercial buildings, providing consumers 24/7 access to their desired product ranges. However, irrespective of this potential, vending machines are underused in Malaysia. In most cases, consumers will have to walk towards nearby stores to access their desired products. Even in cases where they have vending machines available, they operate an exclusive list vending (for the products of the brands offering the machines), limiting overall access to product variety for the consumers.

Figure 2: Conceptualized Design of VenMart

As such, the team, following numerous sections of brainstorming, idea generation, and elimination, reached the conclusion that a vending store located near people’s homes would offer these much-needed conveniences. Whether it is in the middle of the night or that they don’t feel like walking long distances or driving to stores to access these groceries, they can just walk down their building and make desired purchases. Even if they are coming from shopping malls but forgot one or two things, there is no need to go back because they can have them dispensed from the VenMart. Therefore, the whole idea of VenMart comes from the need to provide consumers with the convenience they desire. It is a vending mini-mart where consumers can shop without the stress of going to mini-marts at a distance or waiting for the day to break (as it is available 24/7).

Expected impact of the new service

The impact of this service innovation can be seen in the perceptions of consumers and companies. From the consumer’s perception, the impact is reflected in the dimensions of service convenience: decision, access, search, transaction, and after-sales convenience (Berry et al., 2002; Seiders et al., 2005, 2007; Colwell et al., 2008; Jiang et al., 2013; Moeller et al., 2009).

Decision convenience

This implies the consumer’s perception that minimal effort and time are required for deciding on the service provider to patronize, which is mainly influenced by quality and availability of information (Seiders et al., 2007). In this case, the consumers will not have to input much effort or time as the products and their features are displayed on the LCD screen, which they can scroll through and click on any desired product to make a purchase.

Access convenience

By "access convenience," what is implied is the perception of consumers that minimal time and efforts are required to reach the location of the service provider, which is normally determined by the physical location, operating hours, and available parking space (Jones et al., 2000; Seiders et al., 2000). This is the main function of the VenMart, which will be located close to residential and commercial areas and operate 24/7. Thus, consumers can access it at their convenience from any location close to the store.

Search convenience

This is the consumers’ perception that minimal time and efforts are involved for identifying and selecting their product of choice (Dabholkar et al., 1996). VenMart offers this with its LCD display screen. Consumers do not need to move from one shelf end to the other, as is the case with traditional mini-marts. Instead, they can just stand at one point and search through all the available products in the marketplace, then click to make the desired purchase. The feel is instantaneous and requires minimal time and effort for searching through as each product is listed in its different categories. For example, to search for different biscuit brands available, just click on the biscuit category, and the available products with their respective prices will be displayed.

Transaction convenience

This is considered the extent to which consumers perceive that minimal time and effort are required for completing a transaction, which also includes the speed and ease with which the consumer can locate the checkout area and maneuver through it (Dabholkar et al., 1996). This is obtainable through Venmo. Once the consumers are done selecting their desired products, the machine will automatically calculate the aggregate price and display two options for the consumers: pay now or pay later. With the "pay now" option, the consumer will insert a card (a debit or credit card) and pay through a POS system. With the "pay later" option, a payment code will be sent to the consumer’s phone or email, which the consumer will use to pay via the company’s website and obtain a QR code for cashing out the paid products.

After-sales convenience

It involves the consumer’s perception of the minimal time or effort required in any activity following purchase, like levying complaints, returning faulty merchandise, and obtaining a guarantee (Seiders et al., 2000). The conceptualizers of this idea also understand the possibility of such an outcome. As such, the idea is based on the view that no faulty product will be loaded into the machine, and the machine is connected to a local database (through the internet) where the personnel can monitor every feature of the machine via a computer and address issues that arise. However, in the case of a faulty product, there is a permanent fixed number on the display screen that such a consumer can call for instant support. In any case, it is important to reiterate that the possibility of having a faulty product is highly unlikely.

Enhanced sales and consumer loyalty

Besides the convenience that the machine will provide for consumers, it will also lead to enhanced sales and consumer loyalty for the company. With such a level of convenience, consumers will be likely to reuse, and as such, the company will be making more sales (Seiders et al., 2005, 2007, Jiang et al., 2013).

Justification for the expected outcomes       

Since the machine will be mounted close to the consumers and maintain 24/7 operations, there will be a pull for the services. This is because, even when other mini-marts are closed (at night), the consumers can still purchase from a VenMart, and even when they are open (during the day), the VenMart will be the closest store for the consumers. On the same note, aggressive marketing can be employed to push the idea and concept to the consumers, which will further enhance adoption and overall penetration. Thus, the idea is justified because it combines the functions of a traditional mini-mart and vending machine into one. Eventually, it would end up as the new vending approach, as its added product variety will definitely draw more consumers compared to the exclusive list of conventional vending machines.

Paradigm shift: from conventional to smart vending machines

Earlier on, the issues associated with the conventional vending machine (now considered dumb vending machines) were discussed as limited payment options, brand exclusivity, poor visibility, and a lack of interaction (Rich, 2017). As a result of that, there is a paradigm shift toward smart vending machines (Intel, n.d.).

There are four main features of a smart vending machine: an interactive display, sensors, payment technologies, and connectivity. Smart vending machines come with large display screens used for attracting the attention of customers, and with digital displays, the message being delivered to the consumers can be updated at any given point in time. The effect is that the advertisers can experiment with varied ad campaigns, and the machine can feature different messages in line with factors such as time of day and situations happening around the machine. Additionally, display machines help to build consumer engagement by providing them with additional product information, gaming, news feeds, social networking, and a host of other options. On the same note, product customization, such as printing the name of consumers on a product, is enabled through interactive display. See Appendix 1 for a sample of a smart vending machine.

Similarly, consumers are now pushing for more convenient service options, and offering them has enhanced their level of satisfaction. In past studies, it has been shown that consumers' perceived level of minimal monetary involvement in terms of effort and time (convenience) required for a given service does yield a positive influence on their level of satisfaction (Andaleeb and Basu, 1994; Kaura et al., 2014). Therefore, a machine that will significantly reduce the time and effort required for shopping in conventional mini-marts (as is the case with VenMart) will be highly welcomed by consumers. This shift is the main justification and motivation for this innovation.

Industrialization

Basically, VenMart is a combination of the functions of a smart vending machine and a basic mini-mart (without the human interaction). Thus, while it corresponds to existing functions, it is an innovation because these concepts have not been developed (at least to the knowledge of the team). However, it is a function that is possible because smart vending machines are readily available, and the only addition required is extra space for storing huge volumes of groceries along with the additional functions listed in the features of the machine above. Thus, industrialization (in terms of manufacturing, installation, and operation) of this new machine is highly feasible, as the concepts have already been industrialized and are in use today.

In terms of employment, the industrialization of VenMart will provide employment in different areas. First, it will require the service of a dedicated technician that will handle any issue arising from the machine almost instantaneously. Secondly, it will require the service of "refill personnel" stationed at a local warehouse or store that will be refilling the orders once they reach minimum acceptable levels. Additionally, staff are required throughout the whole manufacturing and installation process. Thus, the industrialization of this machine will provide a number of employment opportunities for different staff members.

Environmental impacts

For every innovation, it is important to access the potential impact that utilization of such an innovation can have on the environment, as protecting the ecosystem is no longer an exclusive responsibility because everybody now has a role to play to that effect. In the case of the VenMart, the environmental impact is more positive than negative. Compared to the conventional mini-marts, this machine will use less electricity, less paper, no plastic for packaging (just like the conventional vending machine, the products won’t be packaged for consumers), and less waste. Therefore, the machine will reduce the negative impacts of mini-marts on the environment, leading to enhanced sustainability of the ecosystem in general. Thus, it can be stated that VenMart is eco-friendly.

Innovation management

This product is fulfilling consumers’ demand for convenience. Thus, a market pull strategy will be employed. First, the product will be targeted at congested areas with little or no mini-mart, leading to high utilization. As time goes on, a technology push strategy will be employed in which the product will be marketed to consumers, leading to greater adoption and penetration. In general, the idea is to get people to try it and see the extra value it offers, then recommend the product to consumers, and eventually VenMart will end up replacing the conventional vending machines or at least acquiring a huge volume of its market share. It is the future of vending: bringing mini-marts closer to consumers’ doorsteps and, as such, offering them a higher level of convenience.

Clusters

For this innovation to be successfully implemented, three major clusters will need to come together, as follows:

Manufacturers

They are the ones that will manufacture the machine in line with the specifications stated earlier. Basically, any smart vending machine manufacturer can do this. In Malaysia, there are numerous vending machine manufacturers and distributors, so finding one won’t be difficult.

Warehouse or local store

This is the place where the products used for refilling the vending machine will be stored. The best option will be a local store that offers the services of a conventional mini-mart, where VenMart is used to generate more sales for the local store. However, an individual can decide to adopt this as a sole business enterprise, making use of a warehouse (that doesn’t sell to consumers directly) to store products solely sold through VenMart.

Suppliers

They represent the product suppliers. For each category, suppliers will be welcomed in line with the storage space available in the vending mart. Thus, for VenMart to truly function, these three business clusters will need to come together and function (not necessarily as a unit).

competitiveness of this innovation

Compared to conventional mini-marts, this vending unit will be operational 24/7. Compared to conventional vending machines, this vending unit will feature a huge variety of products, an interactive screen, advanced payment options, and a high level of visibility. Additionally, the only thing required is space for installation (which would naturally be more affordable than the cost of renting a space for a mini-mart). Therefore, this machine already has a competitive edge over conventional vending machines and mini-marts. Added to this, the cost of operation is much lower because two staff members can service numerous machines at the same time, one taking care of the technical features while the other refills orders as necessary. Also, lower utility bills and resource usage mean that the vending machine has lower operating costs. Finally, as it is located closer to the consumers than the mini-marts, it is a more viable option for the consumers, leading to an enhanced and sustainable competitive edge.

The future of VenMart

For VenMart, the future is sustainable with potential adoption in the medical field. When it comes to evaluating relationships with companies, consumers compare their expectations with the actual outcomes. The outcome as well as expectations are a reflection of the input-output ratio of the relationship a consumer creates with a brand. In line with the exchange theory (Thibaut and Kelley, 1959) and equity theory (Adams, 1965), consumers are satisfied with a relationship and consider such a relationship as fair if they feel that what they get from the relationship is proportional to what they put into it. Thus, this theory does put into perspective the importance of a consumer’s input instead of focusing solely on a company’s output (performance). As such, creating a satisfying customer relationship means that the service providers will need to work in line with two dimensions: reducing customer input and enhancing output, which include monetary and non-monetary costs. In the event that these mandatory costs are minimized, it is expected that this will positively influence consumers’ purchases of the services (Berry, 2016; Berry et al., 2002; Pan and Zinkhan, 2006) and lead to repurchase intentions. A high level of repurchases does help the company create a sustainable competitive advantage.

Based on this discussion, the future of VenMart is sustainable. It can be seen that the future of VenMart is sustainable. This is because: a) consumers will continue to need groceries and, as such, seek the service of grocery sellers; b) they will continue to buy more from sellers who are closer to them; c) as VenMart becomes more widely adopted, conventional vending machines will phase out; and d) this phasing out of conventional vending machines will lead to a subsequent increase in VenMart sales.

Conclusion summary

In conclusion, VenMart is a vending machine that combines the functions of a conventional vending machine and a mini-mart in a smart way. It is a mini-mart that is closer to the consumers and requires no human interaction. It provides desired conveniences through its 24/7 operations. The features of VenMart are:

• Smart payment options with POS and QR codes
• higher level of visibility (the personnel can see order volume and any issue with the machine from the warehouse or local store).
• higher level of customer interaction.
• product variety as different kinds of groceries are available.
• high level of convenience.
• Ticket sales for cinemas and buses
• Overall improved service experience

In terms of sustainability, the future looks bright and sustainable for the machine because it is expected to replace the conventional vending machines that offer exclusive product lists and are non-smart and non-interactive. Thus, it is concluded that, when carefully implemented in line with the discussions contained in this report, VenMart is a profitable business venture for the investors.

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Appendices

Appendix 1: smart vending machine