Posts Tagged ‘vending machines’

The economics of scapegoating vending machines

Monday, May 9th, 2011

Two machines are always better than one

For his part in reviving a crippled Japan, Tokyo governor Shintaro Ishihara has made himself the point man in the demonization of vending machines. “Only in such a country do you see them lined up everywhere,” he groused recently, and suggested that anyone who wants a cold drink buy it in a store and put it in his own refrigerator.

There are various reasons why vending machines are ubiquitous in Japan. From the demand side, Japanese people just like gadgets and don’t always enjoy the face-to-face experience of dealing with store clerks. From the supply side, Japan is a relatively safe country, meaning you can install as many vending machines as the law allows without fear of vandalism. And the law allows a lot. However, if Ishihara and four other Kanto region prefectural governors have their way, vending machine operations will be curbed, at least during the summer peak electrical usage months. According to Sankei Shimbun, the five Kanto prefectures are pushing the central government to implement directives to limit electrical usage of vending machines based on existing ordinances, some of which have been in place since the “oil shocks” of the 1970s.

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Deflation at the vending machine

Monday, November 23rd, 2009

A Wex vending machine in a parking lot near Kabuki-za

A Wex vending machine in a parking lot near Kabuki-za

The “one-coin theory” is a hallowed principle of retailing in Japan, the idea being that if your product can be purchased with one coin, people are more willing to buy it. This principle was formulated through Japan’s extensive vending machine business, in particular vending machines that sold beverages. Until the mid-90s, 100-yen was the upper limit for all canned beverages sold in vending machines since it was considered a kind of psychological barrier. Most vending machines are owned by beverage makers, and no one wanted to be the guy who increased their prices first, even though material costs had been rising for years. If one was going to do it, they all should, and eventually they did. After a short period of sluggish sales, profitability eventually returned and there have been regular rises in prices ever since. The standard VM price is ¥120 for canned drinks and ¥130-¥150 for drinks in larger PET bottles.

But in the past few years, there’s been a marked reversal. Independent vending machine operators have bucked the big manufacturers like Kirin, Suntory, Asahi, Pokka and Dydo by selling their products below the retail prices these manufacturers dictate. The trend has seen prices not only drop back to the one-coin level, but even further. Wex, a VM operator out of Osaka, sells Suntory, Pokka and Kirin products for ¥100, as well as its own private brand of canned coffee called Two Down for only ¥80, all in their own vending machines, and the big manufacturers are seriously ticked off.

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