The invention: A device that separates real coins from counterfeits, the slug rejector made it possible for coin-operated vending machines to become an important marketing tool for many products
The people behind the invention:
Thomas Adams, the founder of Adams Gum Company Frederick C. Lynde, an Englishman awarded the first American
patent on a vending machine Nathaniel Leverone (1884-1969), a founder of the Automatic
Canteen Company of America Louis E. Leverone (1880-1957), a founder, with his brother, of the
Automatic Canteen Company of America
The Growth of Vending Machines
One of the most imposing phenomena to occur in the United States economy following World War II was the growth of vending machines. Following the 1930′s invention and perfection of the slug rejector, vending machines became commonplace as a means of marketing gum and candy. By the 1960′s, almost every building had soft drink and coffee machines. Street corners featured machines that dispensed newspapers, and post offices even used vending machines to sell stamps. Occasionally someone fishing in the backwoods could find a vending machine next to a favorite fishing hole that would dispense a can of fishing worms upon deposit of the correct amount of money. The primary advantage offered by vending machines is their convenience. Unlike people, machines can provide goods and services around the clock, with no charge for the “labor” of standing duty.
The decade of the 1950′s brought not only an increase in the number of vending machines but also an increase in the types of goods that were marketed through them. Before World War II, the major products had been cigarettes, candy, gum, and soft drinks. The 1950′s brought far more products into the vending machine market.
The first recognized vending machine in history was invented in the third century b.c.e. by the mathematician Hero. This first machine was a coin-activated device that dispensed sacrificial water in an Egyptian temple. It was not until the year 1615 that another vending machine was recorded. In that year, snuff and tobacco vending boxes began appearing in English pubs and taverns. These tobacco boxes were less sophisticated machines than was Hero’s, since they left much to the honesty of the customer. Insertion of a coin opened the box; once it was open, the customer could take out as much tobacco as desired. One of the first United States patents on a machine was issued in 1886 to Frederick C. Lynde. That machine was used to vend postcards.
If any one person can be considered the father of vending machines in the United States, it would probably be Thomas Adams, the founder of Adams Gum Company. Adams began the first successful vending operation in America in 1888 when he placed gum machines on train platforms in New York City.
Other early vending machines included scales (which vended a service rather than a product), photograph machines, strength testers, beer machines, and hot water vendors (to supply poor people who had no other source of hot water). These were followed, around 1900, by complete automatic restaurants in Germany, cigar vending machines in Chicago, perfume machines in Paris, and an automatic divorce machine in Utah.
Also around 1900 came the introduction of coin-operated gambling machines. These “slot machines” are differentiated from normal vending machines. The vending machine industry does not consider gambling machines to be a part of the vending industry since they do not vend merchandise. The primary importance of the gambling machines was that they induced the industry to do research into slug rejection. Early machines allowed coins to be retrieved by the use of strings tied to them and accepted counterfeit lead coins, called slugs. It was not until the 1930′s that the slug rejector was perfected. Invention of the slug rejection device gave rise to the tremendous growth in the vending machine industry in the 1930′s by giving vendors more confidence that they would be paid for their products or services.
Soft drink machines got their start just prior to the beginning of the twentieth century. By 1906, improved models of these machines could dispense up to ten different flavors of soda pop. The drinks were dispensed into a drinking glass or tin cup that was placed near the machine (there was usually only one glass or cup to a machine, since paper cups had not been invented). Public health officials became concerned that everyone was drinking from the same cup. At that point, someone came up with the idea of setting a bucket of water next to the machine so that each customer could rinse off the cup before drinking from it. The year 1909 witnessed one of the monumental inventions in the history of vending machines, the pay toilet.
The 1930′s witnessed improved vending machines. Slug rejectors were the most important introduction. In addition, change-making machines were instituted, and a few machines would even say “thank you” after a coin was deposited. These improved machines led many marketers to experiment with automatic vending. Coin-operated washing machines were one of the new applications of the 1930′s. During the Depression, many appliance dealers attached coin metering devices to washing machines, allowing the user to accumulate money to make the monthly payments by using the appliance. This was a form of forced saving. It was not long before some enterprising appliance dealer got the idea of placing washing machines in apartment house basements. This idea was soon followed by stores full of coin-operated laundry machines, giving rise to a new kind of automatic vending business.
Following World War II, there was a surge of innovation in the vending machine industry. Much of that surge resulted from the discovery of vending machines by industrial management. Prior to the war, the managements of most factories had been tolerant of vending machines. Following the war, managers discovered that the machines could be an inexpensive means of keeping workers happy. They became aware that worker productivity could be increased by access to candy bars or soft drinks. As a result, the demand for machines exceeded the supply offered by the industry during the late 1940′s.
Vending machines have had a surprising effect on the total retail sales of the U.S. economy. In 1946, sales through vending machines totaled $600 million. By 1960, that figure had increased to $2.5 billion; by 1970, it exceeded $6 billion. The decade of the 1950′s began with individual machines that would dispense cigarettes, candy, gum, coffee, and soft drinks. By the end of that decade, it was much more common to see vending machines in groups. The combination of machines in a group could, in many cases, meet the requirements to assemble a complete meal.
Convenience is the key to the popularity of vending machines. Their ability to sell around the clock has probably been the major impetus to vending machine sales as opposed to more conventional marketing. Lower labor costs have also played a role in their popularity, and their location in areas of dense pedestrian traffic prompts impulse purchases.
Despite the advances made by the vending machine industry during the 1950′s, there was still one major limitation to growth, to be solved during the early 1960′s. That problem was that vending machines were effectively limited to low-priced items, since the machines would accept nothing but coins. The inconvenience of inserting many coins kept machine operators from trying to market expensive items; as they expected consumer reluctance. The early 1960′s witnessed the invention of vending machines that would accept and make change for $1, $5, and $10 bills. This invention paved the way for expansion into lines of grocery items and tickets.
The first use of vending machines to issue tickets was at an Illinois race track, where pari-mutuel tickets were dispensed upon deposit of $2. Penn Central Railroad was one of the first transportation companies to sell tickets by means of vending machines. These machines, used in high-traffic areas on the East Coast, permitted passengers to deal directly with a computer when buying reserved-seat train tickets. The machines would accept $1 bills and $5 bills as well as coins.
Limitations to Vending Machines
There are limitations to the use of vending machines. Primary among these are mechanical failure and vandalism of machines. Another limitation often mentioned is that not every product can be
sold by machine. There are several factors that make some goods more vendable than others. National advertising and wide consumer acceptance help. Product must have a high turnover in order to justify the cost of a machine and the cost of servicing it. A third factor in measuring the potential success of an item is where it will be consumed or used. The most successful products are used within a short distance of the machine; consumers must be made willing to pay the usually higher prices of machine-bought products by the convenience of machine location.
The automatic vending of merchandise plays the largest role in the vending machine industry, but the vending of services also plays a role. The largest percentage of service vending comes from coin laundries. Other types of services are vended by weighing machines, parcel lockers, and pay toilets. By depositing a coin, a person can even get shoes shined. Some motel beds offer a “massage.” Even the lowly parking meter is an example of a vending machine that dispenses services. Coin-operated photocopy machines account for a large portion of service vending.
A later advance in the vending machine industry is the use of credit. The cashless society began to make strides with vending machines as well as conventional vendors. As of the early 1990′s, credit cards could be used to operate only a few types of vending machines, primarily those that dispense transportation tickets. Vending machines operated by banks dispense money upon deposit of a credit card. Credit-card gasoline pumps reduced labor requirements at gasoline stations, pushing the concept of self-service a step further. As credit card transactions become more common in general and as the cost of making them falls, use of credit cards for vending machines will increase.
Thousands of items have been marketed through vending machines, and firms must continue to evaluate the use of automatic retailing as a marketing channel. Many products are not conducive to automatic vending, but before dismissing that option for a particular product, a marketer should consider the range of products sold through vending machines. The producers of Band-Aid flexible plastic bandages saw the possibilities in the vending field. The only product modification necessary was to put Band-Aids in a package the size of a candy bar, able to be sold from renovated candy machines.
The next problem was to determine areas where there would be a high turnover of Band-Aids. Bowling alleys were an obvious answer, since many bowlers suffered from abrasions on their fingers.
The United States is not alone in the development of vending machines; in fact, it is not as advanced as some nations of the world. In Japan, machines operated by credit cards have been used widely since the mid-1960′s, and the range of products offered has been larger than in the United States. Western Europe is probably the most advanced area of the world in terms of vending machine technology. Germany of the early 1990′s probably had the largest selection of vending machines of any European country. Many gasoline stations in Germany featured beer dispensing machines. In rural areas of the country, vending machines hung from utility poles. These rural machines provided candy and gum, among other products, to farmers who did not often travel into town.
Most vending machine business in Europe was done not in individual machines but in automated vending shops. The machines offered a creative solution to obstacles created by regulations and laws. Some countries had laws stating that conventional retail stores could not be open at night or on Sundays. To increase sales and satisfy consumer needs, stores built vending operations that could be usedby customers during off hours. The machines, or combinations of them, often stocked a tremendous variety of items. At one German location, consumers could choose among nearly a thousand grocery items.
The future will see a broadening of product lines offered in vending machines as marketers come to recognize the opportunities that exist in automatic retailing. In the United States, vending machines of the early 1990′s primarily dispensed products for immediate consumption. If labor costs increase, it will become economically feasible to sell more items from vending machines. Grocery items and tickets offered the most potential for expansion.
Vending machines offer convenience to the consumer. Virtually any company that produces for the retail market must consider vending machines as a marketing channel. Machines offer an alternative to conventional stores that cannot be ignored as the range of products offered through machines increases.
Vending machines appear to be a permanent fixture and have only scratched the surface of the market. Although machines have a long history, their popularization came from innovations of the 1930′s, particularly the slug rejector. Marketing managers came to recognize that vending machine sales are more than a sideline. Increasingly, firms established separate departments to handle sales through vending machines. Successful companies make the best use of all channels of distribution, and vending machines had become an important marketing channel.
See also Geiger counter; Sonar; Radio interferometer.