Vending and the Mobile Internet

Vending and the Mobile Internet
by David Kilburn

No description of the idiosyncrasies of marketing to the Japanese is complete without an account of their love of vending machines. According to the Japan Vending Machine Manufacturers Association, there are more than 5.6 million vending machines in a country of about 126 million people. The sales of products dispensed this way in Japan last year was over 7.1 trillion yen, about twenty times the value of all e-commerce transactions.

You can buy almost anything from them - condoms, sanitary towels, batteries, tobacco, soft drinks, canned tea, train tickets, instant noodles, sandwiches, fresh flowers, engagement rings, and hot spring water for the bathtub.

And until June last year, you could buy beer or hard liquor around the clock from some 170,000 vending machines outside off-licenses. After years of ignoring the problems such machines caused, the government eventually decided it was time to cut underage drinking. A survey in 1996 found more than half of 17-18 year old schoolboys drank alcohol at least once or twice a month and often obtained it from a vending machine. An attempt to discourage this by posting stickers asking people aged under 20 not to use the machines proved ineffective, so draconian measures were introduced last summer.

This of course was bad news both for off-licenses as well as vending machine makers. But now the success of NTT DoCoMo’s i-mode mobile Internet services is providing a life-line for round the clock drinkers and their suppliers.

Matsushita Refrigeration Co. has developed a new vending machine to sell alcoholic beverages (and cigarettes) only to adults after checking their ages from cellular phone registration data. The new machine decides whether to permit a sale after checking whether prospective buyers are adults from their cell phone registrations after these users initially transmit signals, which are relayed to NTT DoCoMo’s servers via the vending machine.

Though interesting, these moves could be dwarfed by a mobile Internet initiative from Coca-Cola Japan, NTT DoCoMo and Itochu, a large trading company. This summer, the three plan to start networking Coke’s 1 million soft drink vending machines in Japan with DoCoMo’s i-mode phones, which now have over 22 million subscribers. Called the "i-Vending Project," the initiative will link special i-Vending machines with DoCoMo’s popular i-mode service to enable the cashless purchase of beverages, and to deliver ads and other information on a display, or printer, installed in the new machines. The first tests are scheduled to take place this summer in Tokyo,

DoCoMo subscribers who sign up for the new initiative through a dedicated i-mode site can use their mobile phone to buy Coke and other soft drinks at the i-Vending machines.

Coca Cola will encourage Japanese consumers to use the new machines with a loyalty program which awards points for purchases that can be exchanged for soft drinks or branded merchandise.

Itochu is developing the technology for collecting data for market and system development. Coke is developing the logistics and information systems, while DoCoMo is providing its mobile network, marketing expertise and the technology to create the dedicated Web site.

"Clearly there is an opportunity for Coke to win an increased share of wallet," says Dr. John Ricketts, director of m.Ogilvy, a mobile Internet consultancy in Tokyo owned by the Ogilvy & Mather advertising agency. "But the potential importance of the project is much more. There is an opportunity to extend the relationship between Coke and its buyers, both through loyalty programs and also by making the vending machine interactive. Among the young people who are key Coke consumers, the mobile phone has become an essential part of life-styles and now even the lack of cash will be no barrier to buying a Coke! Being associated with i-mode is now one way a company can say it is in touch, youthful, and relevant to people’s lives good brand-enhancing stuff for Coke," Ricketts added.

Other approaches are also coming to market. Sanyo, for example, has developed i-PS, a system that offers cashless purchases of drinks to cell-phone subscribers. With the system, the owners of Web-enabled cell phones can buy a drink by accessing the relevant producer’s Web site and inputting their identification number, followed by the vending-machine number and product number shown on the machine.

While i-PS settles a purchase by adding the price of the drink to the purchaser’s phone bill, Sanden is working toward introducing a trial service that uses the online settlement service of Digital Check Inc. In this system, the process of buying a drink is similar to that of i-PS, but charges are deducted directly from consumers’ bank accounts, as in debit-card settlements.

If successful, these different approaches will help one of the newer problems facing Japan’s Vending industry crime and vandalism. Ten years of deepening recession have seen a rise in petty crime, such as breaking into machines to steal the cash, or using low value foreign coins or tokens in place of Japanese yen to make purchases. A new high tech vending machine can cost as much as a small car, so the damage caused by vandals can prove costly.

Takashi Kurosaki, secretary general of Japan Vending Machine Manufacturers Association, says, "We are used to the instant, always-on connection of I-mode, and to vending machines that dispense the products you ordered instantly, so the speed of the transaction will be an important factor in the project’s success."

The mobile interface between vending machines and humans will probably need some fine-tuning after this year’s experiments. But one interface is already proving a hit. Sanyo Electric Co. has developed i-MS, a system that automatically sends out e-mail alerts when a vending machine is broken. The system can tell not only what is wrong, but also what replacement parts are needed. And should vandals attack one of the newer machines, it will automatically send out a distress call over the mobile Internet.

These new generations of vending machines will be tested among millions of vending-savvy Japanese customers this summer. If they can get the approval of the world’s toughest customers, vending machines could soon become the next hot thing for the Internet Economy.

Published in New Media Age in May 2001

and later . . . . . . .

Press Release

Tokyo, August 8, 2001 -- Coca-Cola (Japan) Co., Ltd., NTT DoCoMo, Inc. and Itochu Corp. today announced the trial launch of a unique consumer service employing cutting-edge computer software that transforms a soft drink vending machine into an information station and services terminal offering fun, excitement and entertainment.

The new service, named "Cmode", links a specially developed Coca-Cola vending machine equipped with a printer, sensor and speaker, and connected to i-mode, the Internet-enabling system launched by NTT DoCoMo. Cmode members can accumulate user points that can be exchanged for soft drinks or for one of a variety of Cmode services that are available through i-mode.

To help gauge consumer response and to identify additional service options that might be introduced later, the three companies will conduct several months of trials beginning September 3. During the 17-week trial period that ends December 31, a total of 25 Cmode-friendly vending machines will be installed at strategic locations around Tokyo.

Cmode is a compound word combining the initial "C", which stands for Coca-Cola, culture and communication, and 'i-mode'. The decision to introduce the Cmode service follows the agreement reached in March by Coca-Cola, NTT DoCoMo, and Itochu to explore the possibilities presented by marrying DoCoMo's cell phone enabled Internet service with Coca-Cola vending machines. Itochu is providing marketing and financial support relating to technology and service content.

The vending machines to be linked to the new service are called "Cmode information terminal vending machines" or Cmo. In addition to being conventional vending machines, Cmo units have an embedded computer that exponentially increases their functionality and allows consumers to reap the rewards of a unique membership-based service.

Initially, trial testing of the machines will be possible at "The World of Coca-Cola TOKYO", "Shibuya 109" and the "Shibuya Miyamasuzaka DoCoMo Shop". Later, more Cmo vending machines will be available throughout Metropolitan Tokyo, particularly around Shibuya where Japan's cell-phone toting, i-mode savvy youth gather in large numbers.

[Background]

Outline of the Cmode trial testing

Trial period

September 3, 2001 - December 31, 2001

Areas where testing is to be implemented

"World of Coca-Cola TOKYO" (Mediage 6F, Odaiba, 1-7-1, Minato-ku, Tokyo)

"Shibuya 109" (Dogenzaka, 2-29-1, Shibuya-ku, Tokyo)

"DoCoMo Shop" (1F/2F Waco Miyamasuzaka Bldg., Shibuya,

2-19-19, Shibuya-ku, Tokyo)

From September 18 to December 31 in addition to the above three locations, the spread of the trial testing will gradually expand across Metropolitan Tokyo centered on Shibuya, and the total of Cmo vending machines installed will reach 25.

(A Cmo vending machine will be on display at the World of Coca-Cola TOKYO from around August 20.)

Cmode service outline

Types of service available

<1> Information service

Consumers can obtain maps, coupons, and Coca-Cola campaign and event information by checking the Cmo's built-in LCD display. A hardcopy printout or audio playback is also available. The machines can also be used to disseminate information and messages to the public such as disaster information from local governments, and community information.

<2> Content service for i-mode-compatible phones (members only)

Users can select i-mode-compatible content such as wallpaper or ring tone melodies from the Cmo, and then download these onto their i-mode phones.

<3> Point service (members only)

Points are earned by making purchases of soft drinks from Cmo vending machines or by using Cmode services. These points can be exchanged for soft drinks or a variety of Cmode services.

Verification

To access members only Cmode services, users must first register on the i-menu site "Coca-Cola Moments" provided by Coca-Cola (Japan) Company. The "Coca-Cola Moments" site will open in August.

Consumers wishing to enjoy members-only services simply pass their cell phone over the Cmo's sensor. This reads the product verification code plus the mobile phone user's verification code (like a digital bar code) issued by Club Cmode on the i-menu site "Coca-Cola Moments". Both codes are in the form of a 2-dimensional bar code. When buying concert tickets via i-mode for example, a Cmode member simply scans his or her cell phone across the Cmo sensor and the machine then prints a hard copy of the tickets.

Method of payment

<1> Advanced payment service (members only)

By inserting cash into the Cmo vending machine, members can deposit funds into a special account on the Cmode server for use with subsequent cashless purchases.

<2> Point service (members only)

Users can pay for Cmode services through points accumulated in their special member accounts.

<3> Cash

Users may pay for Cmode services by inserting cash into the Cmo vending machine.

Trial service contents

- Gourmet Pia meal ticket (Pia Digital Communications Corp.)

- Pia street map (Pia Digital Communications Corp.)

- TSUTAYA rental ranking & coupon (TSUTAYA Online Corp)

- Shibuya Character Shindan (Index Corp.)

- Arcade games (Sega Corp.)

Consumer inquiries

Free dial 0120-156509

Email info@Cmode.jp

Inquiries regarding Cmode Project

Name The "Cmode Project" business office

Persons in charge Shunsuke Noda, Yasu Takahashi, Yutaka Ebina

Address c/o Netventure Business Department Office

Aerospace, Electronics & Multimedia Company

Itochu Corporation

2-5-1 Kita-Aoyama Minato-ku, Tokyo 107-8077

TEL 03-3497-3435

FAX 03-3497-4181

Email Cmode@aemc.itochu.co.jp

Cmode vending machines (Cmo)

Structure

Cmo vending machines are highly computerized and feature a small LCD display, speaker and printer. Buttons on an attached keypad are used to control each of the functions. Cmo machines are also fitted with a sensor that reads the 2-dimensional bar codes that users receive when registering as members. This process verifies a user's identity.

Cmode, connected to a server through DoCoMo's packet communications service "DoPa", is a multimedia information terminal that provides a variety of information services while simultaneously keeping track of customer information.

Cmo functions

Simply by pressing the 'C' button on the keypad, users can switch the function of a Cmo machine from that of a regular soft drink vending machine to Cmode, enabling consumers to take advantage of the various Cmode services. In addition to being able to purchase coupons, tickets and maps that are issued through a printer, users can facilitate a wide variety of information via the attached speakers and the display panel. Furthermore, in conjunction with i-mode, users can enjoy abundant consumer services such as cashless shopping.

[Outline of participating companies]

Coca-Cola (Japan) Company, Limited

Address4-6-3, Shibuya, Shibuya-ku, Tokyo, Japan

Founded June 1957

Capital ¥3,600 million (as of December 2000)

No. of employees 500 (as of May 2000)

President Mary E. Minnick

NTT DoCoMo, Inc.

Address 2-11-1, Nagatacho, Chiyoda-ku, Tokyo, Japan

Founded August 1991

Capital ¥949,679 million (as of February 2001)

No. of employees 5,334 (as of March 2001)

PresidentKeiji Tachikawa

Itochu Corporation

Address2-5-1, Kita-Aoyama, Minato-ku, Tokyo, Japan

FoundedDecember 1949

Capital ¥174,722 million (as of April 2000)

No. of employees 5,254 (as of April 2000)

President and CEO Uichiro Niwa