Winter 2009 ZoomShops Flying High in Airports-and Beyond

Gower Smith, Founder & CEO|ZoomSystems Ranked #14 on “Fast 50”

Company: ZoomSystems
Headquarters: San Francisco, CA
Phone: 415.864.8100
Website: ZoomSystems.com
First location launched: 2005
Locations today: 750+
High-traffic locations: Airports, shopping centers, supermarkets, big box stores, resorts, etc.
Airport locations: 73 in 14 airports
Strength of his concept: ZoomShops are “the most productive retail space in the airport.” |

In November, ZoomSystems was ranked #14 on Deloitte’s Silicon Valley Technology Fast 50, a list of the fastest-growing technology and software firms in the San Francisco Bay Area. In announcing the pick, Deloitte called ZoomSystems “the technology leader that created the automated retail channel.” Zoom’s revenues increased nearly 2, 200 percent from 2003 to 2007.

In a statement announcing the Fast 50, Mark Jensen, managing partner, national venture capital services for Deloitte & Touche in Silicon Valley, said ZoomSystems was “one of the very few to accomplish such a fast growth rate over the past five years.” Companies on the Fast 50 list, he added, “have shown the strength, vision and tenacity to succeed in today’s very competitive technology environment.”

What’s a ZoomShop? It’s a sleek, interactive automated retail store that uses cutting-edge technology to attract shoppers’ attention, answer their product questions, run in-depth product demos, guide shoppers through the buying process and close the sale. Oh, and report inventory and customer data back to the home office in a flash.

Brand-name retailers love ZoomShops because they expand their brands’ visibility, generate revenues and deliver a fast, convenient buying process to customers-without the expense of employees. Airports, malls and other high-traffic retail venues welcome ZoomShops because they give shoppers expanded product selections, a positive buying experience and generate leasing revenues-in a very small footprint.

Shoppers love to buy from ZoomShops because the touch-screen technology is approachable and intuitive, they can get as much product detail as they want before making a buying decision at their own pace (without a salesperson as intermediary), and the buying process is instantly gratifying as the robotic arm gently picks up the customers’ newly purchased tech gadget (or other product) and deposits it gently in a bin for retrieval.

With all that love, it’s easy to see why ZoomShops have processed more than 1 million transactions since the first store launched four years ago.

“This is not your parents vending machine,” says Gower Smith, ZoomSystems’ founder and CEO. As the inventor, he would know.

From concept to cash

When Smith launched San-Francisco-based ZoomSystems, he already had four successful overseas start-ups under his belt, including several tech-services companies and Computerland, Australia’s first retail chain for computer sales. The seeds of ZoomSystems were planted in the early ’90s, when he started yet another business, Boomerang, a printing-supplies company in Sydney that sold printer cartridges to large corporations and government agencies.

As a more efficient way to distribute cartridges throughout large office complexes and sprawling government agencies, Smith developed and patented an automated supply cabinet where workers could get new cartridges and deposit used ones for recycling. By the turn of the millennium, he had transformed his initial idea into an innovative new “automated retail store”-a vending machine on steroids-that could stock virtually any relatively small product and had virtually unlimited potential in light of consumers continuing embrace of do-it-yourself shopping technologies. Venture capitalists saw it that way, too, investing millions and propelling ZoomSystems to the next level.

By mid-November ’08, there were 770 ZoomShops in the US and four in Japan. Most are in airports, shopping centers, supermarkets, big-box outlets and resorts. Products sold from the units include electronics from Apple, Sony and Best Buy, skincare products from Proactiv Solution, Avon’s cosmetics line, Rosetta Stone language-learning CDs and more. ZoomSystems focuses on attracting brand-name retail partners whose products are well known, and gives each ZoomShop concept its own custom branding.

In 400 Macy’s stores shoppers can purchase iPods, digital cameras and other Apple electronics through Macy’s e.Spots. Macy’s started with a test of 100 e.Spots in late 2006 and the program grew to 400 locations by the end of 2008. Best Buy, which recently launched its first ZoomShops in airports, calls them Best Buy Express stores; they stock consumer electronics and accessories. In airports and malls, Sony Access stores stock a range of electronics and Proactiv Solution stores carry the Proactiv line of skincare products. More brands are in the pipeline for launch in 2009, although details are still under wraps.

Smith says ZoomSystems’ success comes from offering well-known leading brands’ best sellers and giving buyers a consistent, fast, reliable shopping experience. In airports especially, ease and speed of purchase are crucial elements of the sale.

More than 70 ZoomShops operate in 14 US airports, with more expected in 2009. Dallas/Fort Worth International Airport has more than a dozen throughout several terminals. Los Angeles International Airport will soon have more than 20. Airports offer a captive audience, with the average traveler spending 79 minutes past security waiting to board a flight, Smith says. It’s a big audience, too. In 2007, 48 million passengers traveled through Las Vegas’s McCarran International Airport, which has seven ZoomShops.

Part of the company’s success comes from landing the right space in the right airports. “We partner with the airports and secure rights to offer automated retail,” Smith explains. “They have limited retail space and require long-term commitments.” ZoomSystems then brings in retail partners interested in the space.

“We’d still be on the waiting list” to secure airport space without the partnership with ZoomSystems, says Mike Silverman, director of business development for Rosetta Stone, which has five airport ZoomShops selling its language-learning CDs.

ZoomSystems not only procures airport locations, it maintains them as well. Because each ZoomShop purchase is transmitted back to the company in a centralized system, Zoom handles replenishment when inventory gets low, a system that’s particularly attractive to its retail partners.

“One of the beauties of working with ZoomSystems is they present us with a bulk order and they handle distribution and replenishment,” Silverman says.

A marketing and sales bonanza

Sales aside, the ZoomShop itself is an effective brand marketing vehicle, with large, eye-catching graphics and signage that gets seen by millions of airport visitors every year. “It’s a good venue for us,” Silverman says. Rosetta Stones does “a lot of television advertising… one advertising medium feeds the other” to increase brand awareness across the board.

From the perspective of airport management, ZoomShops are welcome on several levels. “They give us products we can’t traditionally get,” says Scott Kichline, business director at McCarran airport in Vegas. The presence of big brands also is
a boost.

“The brand names Best Buy, iPod, Sony and Proactiv to name a few, are immediately recognized by our passengers,” says Michael Baldwin, assistant vice-president of concessions for the Dallas/Fort Worth International Airport in Texas. “With the retail prices the same as offered in other retail stores, it makes the [ZoomShop] units ideal for that last-minute gift, or the opportunity to learn more about a particular product a customer has heard about.”

Because ZoomShops only require about two-dozen square feet of space, the small footprint is very attractive for airports, which “tend to be fairly crowded, without a lot of opportunities for build-outs,” Kichline says.

Then there are the astronomical sales per square foot. “Our airport stores-[so small they] may be replacing a potted plant-do $4,000-$40,000 per square foot annually,” says Smith. “The average retailer in the airport does $1,000 a square foot in revenue per year.” That makes the average ZoomShop “the most productive retail space in the airport.” At McCarran International in Vegas, Kichline says Apple iPods sales topped $100,000 one month.

Traditional vending machines generate about $360 a month in sales per square foot, Smith adds. Mall-based ZoomShops (not including Macy’s department store locations) bring in between $3,000 and $10,000 per square foot.

How do they do it? A masterful blend of technology and a keen understanding of the consumer’s thought patterns and buying habits.

How a ZoomShop works

Buying from a ZoomShop makes it clear how far vending has evolved from its origins. Put yourself into an airport consumer’s shoes. First, you see the vending unit, in this case a bright yellow Rosetta Stone location with eye-catching travel
photos wrapping around the ZoomShop and rows of language-learning CDs displayed behind glass. Atop the unit, an LCD monitor plays an A/V demonstration that gives you an overview of the Rosetta Stone learning methodology.

Intrigued, you use an interactive touch screen to learn more about the CDs, drilling down the menus to get as much
information as you want. You can even test the Rosetta Stone learning method for yourself.

“There are special speakers installed above the touch screen for the interactive demo,” says Silverman. “It quizzes [the
customer], to see how our method works and to begin to learn the language.”

The various elements join together to create “a consistent brand experience with accurate information being presented to the customer,” says Smith.

Once you’ve made the decision to purchase, you swipe your credit card and the robotic arm gently selects and deposits your product in a special compartment for retrieval. Only after a sensor detects that the product has been retrieved does the system charge your credit card (and produces a receipt along with instructions for any product returns or other issues).

Of course, customers can interact with ZoomShops any time to learn more about a certain product or company, regardless of whether they intend to make a purchase. “I see [consumers] touching the units all the time” at McCarran airport, says Kichline.

“They can touch the screen and browse. It’s like a webpage, but it pulls up information faster and gives you details on the products.”

Some might wonder about price resistance at ZoomShops, but the stores sell iPods, $300 Sony digital cameras and a host of other above-$50 tech gadgets. “The popularity of some of the higher-priced ticket items are reflective of the higher income level of travelers going through the airport,” says Kichline. For these shoppers, “Time is important-and the convenience of buying it right there.”

Zooming forward

ZoomSystems has big plans for the future, among them: Establishing additional locations in the top 50 US airports. Smith is bringing aboard more product partners for airport locations as well as those in shopping centers and other high-traffic venues.

“We’ve proven our success, so we’re broadening our range of brands,” Smith says. “We’re excited about the future.”

Airport leasing managers are also thinking about the expansion possibilities. “We’re really happy” with ZoomShops, says Kichline of McCarran, who plans to add a few more of the automated stores in the near future. “It’s easy to roll out, to try or test a product. It’s also a way for us to test locations and make decisions about permanent buildouts.”

At Dallas/Fort Worth, Baldwin says ZoomShops have been embraced by travelers. They have “resonated extremely well” with the airport audience, he says. Travelers view the new ZoomShops as an “innovative convenience.”