My Review of Tokyo Vending Services That Focus on Real-Time Demand Fulfillment

Posted on October 25, 2009 by Ed

The biggest challenge and barrier to starting and operating a retail outlet is the cost of acquiring and maintaining unsold inventory, employees and commercial space. If we look at the core of American businesses inevitable decline, it boils down to these three factors. These factors are nothing more but hedged bets against perceived consumer demand. What happened basically is these companies are losing their bets due to lowered consumer demand or change in consumer behavior and now they holding the bag paying for excess inventory or commercial space.

The problem with the auto industry is they build these cars, thousands of these cars not knowing if they are going to sell or not. So as a result, there is a surplus of inventory on these unsold cars just sitting around on lots.

The problem the auto industry having right now are automobiles are more reliable than ever before. You should easily put 250K miles on most foreign cars if you keep up with the maintenance schedule and keep it for over 10 to 15 years. So what the auto industry tried to do is make a “newer model” fad buy changing the front grill or headlight design hoping consumers will “keep up with the Jones” and the latest automobile model. Another thing they do is push that leasing thing, which a lot of people fell for. Leasing was an artificial attempt to create demand for late model automobiles. You had these cats driving around in leased cars they didn’t own thinking someone supposed to be jealous because they got the latest model. At the end of the day, neither of these games could sustain consumer demand for the flawed automobile industry model of having to create so much unsold inventory upfront. This is why the auto industry goes bankrupt and will continue to do so until this flaw is fixed.

This same issue happens among record stores who all but a few went out of business, bookstores who have excess unsold inventory that weighs a lot meaning expensive shipping costs and now video rental that has unrented inventory and thousands of expensive commercial leasing agreements. So the whole traditional retail gambling bet is buying upfront inventory, maintaining expensive commercial space, hiring employees and their benefits and hoping consumer demand will be there to pay for all of that and make a profit. When they say a business is likely to fail in 5 years, it is due to the upfront cost that is not paid off with the revenue. If you eliminate that upfront cost, your chance of having a sustainable business will increase.

Because I’m aware of this, I do not try to suggest these types of traditional business models for you because I already know the flaws and the risks involved. Anyone trying to launch this kind of storefront retail model in 2009 and not aware of these flaws is clearly going to find out these flaws the hard way. Today, in this tough economy and with new technology, entrepreneurs should no longer invest so much upfront in inventory, commercial leasing and employees and should instead focus on demand fulfillment. This means find out what the customer demands and fulfill that demand, in near real time.

Hustlers been doing demand fulfillment all of the time with the t-shirt game. They wait for an event like a sports team going to the championship series, a conference/event or something significant before printing t-shirts and being on site selling directly to the customer. Think about the guy selling bottled water for a dollar during a walk-a-thon and this is the kind of demand fulfillment that entrepreneurs should look at to open a business at the lowest cost possible to get profits faster to stay in business.

So when you start a business in the 21st century, the real talk is not you got an SBA loan, your business plan is tight, VCs like your ideal, you got twitter followers and ish like these cornballs like to brag about. The real talk is if your business is truly capable of meeting customer demand in real-time and if you are able to do that, then you can be profitable on the first quarter if not the first day. The hot dog stand two blocks down from the train station that serves breakfast in the morning – they fulfilling a real-time demand from commuter who need to grab a meal and from my knowledge, I never saw a hot dog stand next to a train stop that went out of business due to poor sales.

Amazon.com is real time demand fulfillment and one of the best dotcom stocks out there because of that. Many people laughed at Amazon.com because they wanted to believe so bad that customers need to see things before they buy it. That’s the typical dumbass thinking of status quo cornballs who think they got things figured out. The truth is Amazon was able to makes themselves available when the customer has the real-time demand for something. If it is Monday and I don’t got time to shop for something during the workweek, I’m getting it off Amazon.com and have it shipped 2-3 days before Friday – haha! I don’t feel like going out of my way to run to Petco or Petsmart which is a stand-alone store in a strip mall somewhere, I run to Dr. Fosters and Smith online and have the marine aquarium stuff shipped to me before the weekend. Think real-time demand fulfillment and how to achieve this with the lowest cost. And the way to do that is either through e-commerce or being on-site at the proper context instead of waiting on passerby traffic.

Now that I spend so much time talking about fulfilling real-time demand, what I learned in Tokyo is how the Japanese focused more on meeting consumer demand fulfillment through self-service vending. As I stated in an earlier blog entries, the video rental kiosk Redbox has a line of customers. Many cats will walk by and say the typical ignorant statement “why are these people in line when they can go to Blockbusters” and that’s the typical non-hustler cornball that don’t get it. The reason why these people are standing in line for Redbox is because they are demanding this service in real-time and their demand for product/services has nothing to do with cute logos and brandings and stand alone storefronts. In Japan, the cats there get it by focusing on making sure customer demand is met first and foremost using technology.

Let’s recap some of the vending solutions I encountered while in Tokyo and see how they focus on demand fulfillment.

The Subway System

When I first landed in Tokyo and leaving the airport, you can get directly on the subway. This can be done in most major USA cities like Chicago or Washington DC. In order to get on the subway, you have to buy a prepaid card called Suica with a fixed amount that you will swipe at the entry/exit gate to have the fare deducted in real-time.

In the old days, you would have to stand in line to the subway station to pay the subway attendant a cash fare and ask for a transfer slip. So in other words, the customer who got to catch a train is standing in line while some old senile person at the counter is paying with a bag of pennies and the train goes by and most people start jumping the exit gates to get to the train. So the subway system starts putting up caged turnstiles to prevent jumping the gate, making it harder for easy exit of the train station, especially in case of an emergency. These dumbass people running the subway system focused on restriction/deterrent tactics to modify consumer behavior instead of maximize the customer ability to pay for and use the service in the most efficient manner possible.

Now think about the local business in the hood that put up bulletproof glass for with a revolving door to give you a pack of cigarettes. Or the jewelry store in the hood that want you to wait on the buzzer before being let into their business and ish. These are people who instead focus on maximizing the ability for customers to shop, focus on making it harder and more restrictive to do business. But what these sorry ass entrepreneurs did was make it tougher for them to be more profitable and grow their business.

Going back to Tokyo Suica system, what this transit system have done was focus on making sure the millions of people who use the subway system was able to quickly enter/exit the station and at the same time, pay for using the service. So in modern subway transit, what you have to do now is fill up a prepaid card at a vending station and swipe that card every time you use the transit service. The card automatically deducts the amount and you have to refill when the balance of your card reaches zero. Now instead of a line of customers waiting to pay an attendant, people can freely walk in and out of the subway station and process a transaction at the same time.

Think about how much more revenue they are generating by allowing the customer to do what the customer want to do and not have them wait in line to purchase a fare.

Cigarette Vending Machine

The cigarette vending machine has been banned in the USA because quite frankly, it was so successful. However, it appears few people really understood why cigarette vending machines were successful and replicated the model. The reason why cigarette vending machines were a success because they fulfilled the customer real-time demand and craving for a smoke. This cigarette vending in Tokyo was located near a convenience store and what I realize is most nicotine addicts don’t want to wait in line to get a smoke. So this vending machines gives the smoker the ability to get their demand fulfilled immediately with little wait on the lady in front deciding if she want to drink Snapple or Lipton iced tea.

Now that I think about it, where very few things in the USA you could have put in a vending machine that cost as much as a cigarette back in the day. And if I remember, cigarette vending machines were located in diners and clubs also for easy access. Real-time demand fulfillment at the right place and right time.

Bottled Drinks Vending Machines

In Tokyo, you are pretty much on your feet walking around or on the subway to get to places. When I was on my feet walking around for a mile or two, the best sight in the world to me was a vending machine that had drinks.

Notice how this vending machine carries the type of drinks that quenches thirst or provide energy after walking for a while. Again, I needed something to drink to keep walking and these vending machines were right on time so I put in my money, get a drink, start drinking and kept it moving. Real-time demand fulfillment based on my needs at the moment and they got my money and business.

Now, I haven’t done all of my research but I’m guessing what I see in this picture is not only a camera that can read a QRcode image off a cell phone screen but a microphone that can translate a unique sound played by the cell phone to commit a transaction. This type of audio technology is pretty new and not been seen here in America yet.

Self-Service Vending For Eating Out

In Japan, they had places where you would pretty much pay at a machine before getting your food. At this restaurant in the Tokyo Tower, you see a vending machine that you choose your dish and pay for the food.

After you pay for the food, the guy is in the back waiting to give you your order.

At another restaurant, they have an interactive touch screen that let you choose your meal and even swipe your card to receive your order.

Notice in the picture the QRcode they have on the screen for people to capture information with their cell phone. I found this interesting because the restaurant market in the USA is kind of of tough to sustain. The reason it is tough to sustain a restaurant because of competition and the customer have to wait on a person to get what they want. I cannot tell you the number of times I walked out of a restaurant or vowed never to visit again because they had me waiting all day to get the food.

On the way to Tokyo, I saw Burger King at the T-gate terminal at Atlanta Hartsfield airport with a self-service kiosk but they actually have a person standing next to it doing the orders, nullifying the whole process.

Now with this self-service restaurant model in the USA, I can just sit myself down and place an order when I want, request a refill of water/beverage when I want, make my payment and spend more time talking to the other person instead of being interrupted with a “how everything?” when I’m trying to speak to the dinner party. And the business has less wait staff to keep on payroll. This should be something an entrepreneur opening up a sit-down food service in the USA should really consider. I really think the fact putting the customer in control of when they order and sitting down will go a long way and produce a sense of loyalty.

Summary

What I liked about all of the above I mention was how the Japanese use technology to allow the customer to exercise their demand fulfillment as much as they could without the burden of processing transactions. No waiting in line, no waiting for a person to come to our table, things are positioned when they think I need it is how we need to think about doing business nowadays. We already have these type of self-service here in the USA but there are plenty of more opportunities to bring it to other areas that are untapped. For example, we used to have to go to the gas attendant to fill up our cars but today, we can do the whole transaction at the pump.

The thing I found interesting about the prepaid cards is how powerful it can be. What these prepaid cards basically do is create a virtual bank of your customer cash deposits that you holding on to – now you can stash it and collect interest off the deposited cash. The second thing the prepaid card does is guarantee these customers will do business with you in the future, deducting from their balance. But you don’t need to necessarily have a physical prepaid card and can use this for e-commerce with account numbers. Think about the online casino (or offline casino) that want you to pay $1000 in exchange for $1000 credit or 1000 chips to play within their house – this is the same line of thinking with prepaid balances. I use prepaid balances for royalty free media download sites that charge me a certain amount when I download an image.

So to wrap everything up, I believe entrepreneurs nowadays should look at real-time demand fulfillment instead of paying upfront for inventory, commercial space and employees when starting a retail/commerce outfit. It would be more profitable and scalable to allow customers to have freedom and flexibility to pay upfront with a prepaid balance so they can just focus on enjoying the service. I also believe technology such as mobile phones and QRcodes can be used to help make these type of services possible and low-cost for some industry such as ringtone downloads.