Robotic Retail

This story appears in the July 2006 issue of Entrepreneur. Subscribe »

Dropping a couple of bucks into a vending machine for a soda and a candy bar isn't a big deal. But will consumers swipe their credit cards to dispense a $300 iPod?

Gower Smith thinks they will. The founder of Zoom Systems in San Francisco has developed automated robotic stores--or high-end vending machines--which are now in more than 100 U.S. locations, including airports, grocery stores and hotels. The machines dispense everything from cell phones to ink cartridges, raking in between $1,000 to $15,000 per square foot per year, with an average store measuring approximately 30 to 40 square feet.

Jacob Jacoby, professor of consumer behavior and retail management at New York University's Leonard N. Stern School of Business, says this concept just might take off. "The underlying notions are to give consumers more control, more flexibility and greater convenience," says Jacoby. "Anything that moves in those directions is likely to stick around."

Zoom has addressed many of the obvious objections: Interactive features answer questions about the products, receipts include a toll--free customer service number, and merchandise has a 30--day return policy. Some locations let buyers make returns on-site, such as at front desks in hotels. Because they require only a few feet of floor space, access to electricity and a communication line, robotic stores also provide a space-conscious way for traditional retailers to carry products they wouldn't ordinarily stock. "We can bring brands and products that [locations] might not ordinarily sell--MP3 players, satellite radios, inkjet cartridges--that customers might like to buy as a gift or for the convenience," says Smith, 49.

Smith estimates there are more than 100,000 potential U.S. locations for Zoom stores, which operate on a profit-sharing basis with location partners. The stores have varying structures with product partners, often requiring an investment of "a few thousand dollars a month," according to Smith.

Still, says Jacoby, don't expect retail to go entirely robotic anytime soon. "For products that you want to hold, touch and feel, it could be a problem."