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'High-Perceived Value' Remains Essential, But Elusive In Bulk Sector

Posted On: 8/21/2008

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U.S.A. -- Though it might be common to talk about "high-perceived value," it often is difficult to actually define the traits and characteristics that give this designation to both capsuled and flat-vend merchandise. Why will one line quickly attract consumers' attention while others remain unsold?

This proves to be a particularly tricky question in bulk vending. With cellphones, for example, it is easy to pinpoint perceived value via the features offered -- the more innovative and useful they are, the higher it (and the price) is. But because of multiple constraints, manufacturers of bulk vending merchandise must add value to products in other ways.

"We're finding in some cases that high-perceived value has nothing to do with the size of the capsule," said Dax Logue of Brand Vending Products. "It has to do with the key ingredients, like playability, collectability, trending and all the rest. Since 60% of our products are toys, we're always looking at playability. For instance, we constantly re-analyze the high bounce ball. We look at that from a purely playable standpoint. If it has playability, it brings added value to the buyer."


Licenses, many suppliers claim, add value to products. A high-profile license related to a movie, musician or celebrity brings with it the benefits of instant recognition among a targeted demographic. Miley Cyrus, a favorite of pre-teen and tween girls, has been a huge success in the industry. Bolstered by sold-out concert tours and a highly rated television show, the young performer's image on stickers is a favorite among bulk vending consumers -- at least for now.

However, for every Miley Cyrus there are a dozen or more less-than-successful licenses. Operators with long memories will remember a sticker series many years ago based on a movie remake of the television show "Flipper." Touted as "fun, family entertainment," the film lasted barely a week in theaters. "It's like they made a bad movie on porpoise," one operator, who purchased a quantity of the ill-fated stickers, quipped.

Licenses are a tricky business. What's hot with young consumers one week may be cold the next. And licensors seeking to maximize profits are "slicing and dicing" licenses in new and innovative ways. For instance, Disney Princesses is actually a license that includes characters from multiple animated films, while a license for Spider-Man may be based on recent films or the classic comic books.

Trends are nearly as tricky as licenses. They tend to cycle through more quickly every year, and are often prone to so-called "market flooding" by competitors. Typically not licensed, once a trendy concept is spotted and certified as a bestseller, the bandwagon quickly fills with companies eager to get a share of the market. This is particularly true for flat vendibles, because lead times from concept to finished product are particularly quick.

Oval stickers are a good example of the "market flooding" phenomenon. The stickers, which bore "wisecrack" sayings in an oval shape, spread from a single manufacturer to multiple ones within a month or two of hitting machines. At the height of their popularity, virtually every major manufacturer was boasting at least one line of ovals, with some already into their third or fourth series.

But according to suppliers, sales began to flatten out and quickly tapered off as the market reached its saturation point.

Authenticity has become an increasingly critical factor when products target a specific niche market. Both operators and manufacturers have learned -- often the hard way -- that authenticity is a vital component of any bulk product in the increasingly important Hispanic market. There are other markets where it plays an equally key role, including products aimed at fans of hip-hop music, skateboarders and essentially any group in which a hobby is also a "lifestyle."

The search for authenticity with flat vendibles and capsuled products has led suppliers to seek both licensed and commissioned original artwork. One of the major bulk vending success stories of the past decade, Homies, was based on an existing comic strip featured in a magazine dedicated to enthusiasts of "low rider" cars. The search for authentic designs has also prompted suppliers to seek out well-known tattoo artists to create temporary tat lines, and even artists specializing in creating images for cars.


An emerging element in the bulk vending marketplace today is functionality. Tomy Yujin's recently released line of dangles that also act as screen cleaners for cellphones and portable videogame devices is just one example of functionality coming into the industry.

"Figurines used to be popular, now I notice that anything that has a keychain or a strap attached to it sells way better than just a figurine," said Adam Dorfman of Allstar Vending. "Anything that attaches to your cellphone, purse or backpack is better than something that sits on your desk. If you want to get into real utility then you're talking about watches, and if you combine that with a license, then you have a good product."


Dorfman, along with others in the industry, has expressed concern over the use of high-value merchandise strictly as sales generators. Premium merchandise, which came into its own when vend prices  jumped from 25¢ to 50¢ several years ago, is now being mixed with much less desirable merchandise to attract customers. This practice, while not new to bulk vending, has increasingly been creating an ill-advised gap between products in the same bulk head.

"To put it frankly, what's killed a lot of the business is kids getting disappointed by mixes with unbalanced value," said one operator. "You can only disappoint a kid once before you lose a customer."

According to the experts, this disparity in mixes has been a consequence of rising overhead, such as fuel costs, that has resulted in shrinking profit margins.

Rather than increase the perceived value and vend prices of their offerings, some operators have chosen to decrease the cost of product. In fact, what these operators may very well be doing is lowering the perceived value of entire bulk racks among potential repeat customers. To put it simply, if the value of what they purchase differs significantly from what is featured on the display card, they will stop buying from the machines.

"It's a mistake," said the operator. "Kids know the value of what they buy and they know when they've been ripped off."

In the chaotic marketplace of creating products with high-perceived values, one thing remains certain. The industry can't move backwards and restart offering products that are less appealing, even if they boast a lower price. Even the youngest bulk vending consumers are savvy shoppers -- and if a product doesn't capture their interest, then operators won't capture their quarters.