Redbox Stores Are Out-of-Order

Nov 12, 2003
George Anderson

By George Anderson

McDonald’s venture into operating automated convenience stores is finished, caput, over. You can stick a fork in it.

Initially hailed as the future of convenience stores, McDonald’s shut down the four Redbox machines it was testing in the Washington, D.C. area when it became clear consumers weren’t buying it.

Each of the 18-foot wide units contained 130 items, including milk, eggs, sandwiches and a variety of food and non-food products.

Although the company did not comment directly on the performance of the Redbox units, the decision to end the test is a clear signal that consumers did not care to buy bread or toilet paper out of a vending machine.

The Redbox was also plagued by higher-than-expected operating costs.

Richard Geerdes, president, National Automatic Merchandising Association told the Washington Post that profit margins for the machines were approximately five percent.

“The technology to vend a gallon of milk is not cost-effective right now,” he said.

Moderator’s Comment: Was the Redbox automated convenience store an idea before its time or is it a concept that simply will not work in the U.S. for
the foreseeable future?

We wrote in a previous story on automated convenience stores, “The novelty will attract attention. Repeat purchase will follow trial if (Big If) the shopping
experience (convenience, price, quality of product) meets the expectations of shoppers.”

It would appear from the McDonald’s story that the novelty did not attract attention consumers and those who bought did not come back to buy more, or at
least not enough anyway.
Anderson – Moderator

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