Vending and reverse vending: the next big retail tech market?

Co-op Food put its reverse vending machine into practice for the first time at last weekend’s Download Festival, in what could end up being the first of many installations of the technology across the retailer’s UK network.

Amid the annual event’s headline music acts, which this year included Guns ‘n’ Roses, Avenged Sevenfold and Ozzy Osbourne, was a Co-op pop-up store featuring the new environmentally-friendly plastic bottle recycling facility.

The two reverse vending machines in operation allowed shoppers to return used plastic bottles in exchange for vouchers to spend on Co-op items. In an attempt to close the loop, the returned bottles are to be recycled and used again for Co-op-branded water.

Co-op’s use of the reverse vending technology is part of an initial wave of the equipment appearing within retail, and the grocer is considering more mainstream use of these systems after testing it at three more music festivals over the summer.

Iain Ferguson, environment manager at Co-op, says: “We’ve picked the festivals to use this tech because they provide a closed community – a great testing ground for the machines.

“You can run deposit return scheme (DRS) quite steadily. To do it properly for the rest of the UK we really would need an official DRS to be operating, although we are looking at putting machines in some stores as take-back machines.”

It is frozen food retailer Iceland, however, that claimed first-mover status on the high street, by starting a six-month trial of reverse vending in its London Fulham store at the end of May. It has since placed a machine each in its Mold and Musselburgh stores, in Wales and Scotland respectively, and one in the group’s larger format Food Warehouse location in Wolverhampton.

More machines could appear at various retail outlets if the government launches a nationwide DRS scheme, and the Department for Environment, Food & Rural Affairs (Defra) is at consultation stage in terms of mapping out what that might look like.

Neil Hayes, merchandising & format development director at Iceland, says: “We thought given all this potential discussion during the consultation with the government, the best thing for Iceland to do, in true fashion of any good retailer, is to just do it and learn.

“We’re getting on and doing it, and trying to replicate something that’s as close to a real deposit system as we can, so that we can understand what the customer behaviour is, what the response is, and how people use the machines.”

Iceland is absorbing the cost itself at this stage, giving consumers 10p off an Iceland shop for every Iceland-sold plastic bottle they return via the machines.

“It allows us to gather some rich learnings, so that we’re better informed when we’re talking about the implementation of a deposit scheme in Scotland and potentially across the UK in general,” Hayes adds.

DRS and demand for new retail technology

DRS recycling initiatives operate successfully in several countries, including Germany, Norway, Sweden and Denmark – and the UK and Scottish governments are exploring launching their own versions to clampdown on single-use drink container wastage.

Typically, consumers pay an additional sum up front when purchasing a drink, but that extra outlay is redeemed on return of the empty drink container. Defra says a possible variant of its proposed DRS is cash reward for returning containers without an upfront deposit.

Either way, there is significant potential for the technology market to capitalise on the interest in this type of solution to aid the eco drive within retail. Both Co-op’s Ferguson and Iceland’s Hayes say suppliers could experience huge demand in the months ahead.

Iceland is already testing the various kit available, and has installed equipment from either Diebold NixdorfTomra or RVM Systems in its participating stores.

IT teams will clearly have a key role to play in any reverse vending strategy implemented by retailers. Whether it’s in data capture or fraud protection set-up, there are multiple technological issues involved in this deployment.

Iceland has moved quickly in bringing its machines to market so it hasn’t yet integrated the technology centrally, but the retailer is working closely with the respective manufacturers to measure success and manage the initiative.

“The technology that sits within these machines is clearly advanced,” Hayes notes.

“They all have lots of different fraud prevention measures so that you can’t push a barcode on a stick repeatedly through a scanner to claim 10p, for example.”

He said the machines are currently powered through the manufacturers’ routers, connecting directly through their networks. They can dial in, analyse settings and check it’s working, so they know the machine is returning bottles or they can update customer messages on screens or receipts accordingly.

“This is not the type of technology where you have to send a technician down there with a tool bag – there’s an awful lot they can do using a remote connection," Hayes adds.

Vending and the growth of automated retail

The automation Hayes talks of is key to a rise in a different type of vending, too. In North America there is a growing demand for machines that enable self-service for items ranging from consumer electronics to pharmaceuticals, according to Raymond Lewis, general manager for Europe at tech business Zoom Systems.

Zoom Systems provides the hardware, software and management platform for retailers and brands to operate vast networks of machines that automatically distribute and replenish products. In some cases, just one individual at a retail business is required to oversee the whole machine network.

From Best Buy selling electricals via machines in hundreds of locations across North America, to CVS which does the same for pharmaceutical and convenience items, retailers are realising they can use machines to do the work of small stores in locations where their consumers want to shop.

Fashion retailer Uniqlo is selling coats and jackets through the machines, too, while Dixons Travel has tested the technology exclusively at airports to sell consumer electronics.

“Uniqlo has proven to be a successful partnership for Zoom," explains Lewis.

“The key is it has selected the right product mix for automated retail and it has provided excellent returns. Uniqlo is continually evolving its location strategy – initially machines were located in airports but the company continues to expand its location strategy.”

Talking more widely, he says businesses using the vending machine network have a chance to expand their physical footprint for low cost. Zoom’s machines can generate brands up to tens of thousands of dollars a month, he argues.

“That’s the point of rolling out an automated retail channel as part of an omnichannel sales strategy,” he notes.

“It’s a very low-cost way to roll out and penetrate deeper into consumer market territory. Once you have the platform set up you can roll out dozens or hundreds of locations month after month and keep expanding your brand presence deep in your target consumer territory.”

Coffee brand Nespresso and beauty products company Proactiv also work with Zoom for this very reason.

Meanwhile, Rockflower is an example of a company selling flowers through its own automated machines 24 hours a day. 

Talking about its new ‘Prince’ machine at last year’s Millennial 2020 event in London, the business explained how the tech only requires a 240 volt plug to operate, can be customised in corporate colours, and has the potential to be fitted with flat screens that play brand relevant video content.

Its cloud-based platform management system allows the retailer instant access for managing stock, updating content, reviewing hour-by-hour sales, and has straightforward links to Sage.

Whether it is traditional vending or reverse vending, it appears there’s a growing appetite for automated machines in retail.

Co-op’s reverse vending machines will appear at Latitude Festival in July, and Reading and Leeds festivals the following month, and Iceland hasn’t ruled out introducing the machines to additional stores. The government launching a DRS would pave the way for other retailers to get involved in an official capacity.

Options Management [sister company of Recycling Options] supplied the machines for Download, but we are talking to others as well for the future,” Co-op Food’s Ferguson says.

“There will be big opportunities for suppliers as we go along.”