Self-Serve Motivators

Many retailers are evaluating kiosk deployment based on how well the self-service units fit supermarkets' strategic initiatives at the front end, which has often been a no-man's-land of real estate. Retail giant Wal-Mart Stores, Bentonville, Ark., decided to reconfigure its front-end operations this year with the help of partner Coinstar, Bellevue, Wash., a company that has evolved from coin-counting

Many retailers are evaluating kiosk deployment based on how well the self-service units fit supermarkets' strategic initiatives at the front end, which has often been a no-man's-land of real estate.

Retail giant Wal-Mart Stores, Bentonville, Ark., decided to reconfigure its front-end operations this year with the help of partner Coinstar, Bellevue, Wash., a company that has evolved from coin-counting to a variety of other kiosk services, including gift cards and redbox DVD rentals, which offer overnight rentals for $1 plus tax.

Redbox Automated Retail, Oakbrook Terrace, Ill., which provides the redbox kiosks, is owned by Coinstar; McDonald's Ventures, which is a wholly owned subsidiary of McDonald's Corp., Oakbrook, Ill.; and private investors. Coinstar markets the kiosks to supermarkets and other retailers.

Other vendors are also offering $1 overnight rentals from DVD kiosks, including iMozi, of Vancouver, British Columbia; DVDPlay, Campbell, Calif.; Sioux Falls, S.D.-based Prairie Video; and The New Release/moviecube, Houston.

Wal-Mart, which dropped some entertainment installations in the front of the store in favor of kiosks, hopes to become a dominant player in DVD rentals.

Wal-Mart expects its redbox rental initiative to help it achieve other merchandising goals as well in the current economy. “With redbox, busy moms can pick up a take-and-bake pizza and rent a movie for an evening of entertainment for the whole family for under $10,” said Christi Gallagher, a Wal-Mart spokeswoman.

Wal-Mart's latest efforts with kiosks demonstrate a strategy touted by Coinstar as the “4th Wall” concept, which the company launched to explore and address opportunities on the “4th side of the perimeter.” This year Coinstar developed a set of best practices to reveal execution gaps in retailer programs, and is leveraging this information to improve profits for both retailers and Coinstar.

The 4th Wall strategy, said Gretchen Marks, Coinstar's vice president of marketing, began with the application of category management to front-end space and has evolved into two critical considerations. “First, we're looking at assortment in the space and planning for that; then we're looking at creating a destination out of that product portfolio,” she said. Coinstar is working on expanding promotional elements that can tie kiosks to other store departments for 2009.

Nash Finch, Minneapolis, is completing its own evaluation of DVD rental kiosks, and chose a vendor close to its home base that was best able to meet its unique needs.

Regional affinities played a role in making the match between Nash Finch and Prairie Video work, said Rob Burrel, Nash Finch's director of retail operations. For one thing, Prairie Video required less customer traffic to support its business. Prairie Video offers kiosks in two different sizes, with the smaller one being appropriate for serving stores with as few as 5,000 customers a week. In contrast, iMozi needs 10,000 to 12,000 store customers per week, while redbox looks for 18,000.

Burrel said Prairie Video's Sioux Falls location also proved beneficial to the service element of the partnership. “We have a lot of isolated rural stores in places like Nebraska,” he said. “Sioux Falls is centrally located for us. It makes it easy for [Prairie Video] to get out to our stores.”

Prairie Video's ability to service small and rural locations trumped some technological advantages iMozi and redbox offered, particularly links between the kiosks and the Internet that enable customers to determine, for instance, a movie's availability online before going to the store.

Nash Finch looks to use kiosks in support of its larger priorities. “They help us compete with mass merchants — especially in small communities, where customers can come in and find all those extra services” at the kiosks, Burrel said.

Safeway, Pleasanton, Calif., is also expanding its kiosk operations, which include entertainment units and ScriptCenter prescription drug kiosks from Asteres, San Diego. “We have DVDPlay machines, which are DVD rental machines,” said Safeway spokeswoman Teena Massingill, in addition to a “number of stores, maybe 15, [that] have a machine that delivers prescription drugs.”

Photo service kiosks are also being tested by retailers, many of which are scaling back or eliminating photo departments and see the kiosks as a logical replacement.

A photo-processing kiosk partnership between Hewlett-Packard, Palo Alto, Calif., and Grand Rapids, Mich.-based Meijer, called ‘Meijer Photo powered by HP,” launched almost two years ago, is doing well, according to the retailer.

“They have been very well received, and it's not unusual to see a customer come in and spend an hour or so on the kiosk, looking through their photos or creating specialized prints or cards,” said Meijer spokesman Frank Guglielmi.

Meijer operates the photo kiosks as part of a comprehensive HP-branded photo center that fits into an electronics department strategy emphasizing the latest technology and services as a consumer option. In those circumstances, said Guglielmi, the kiosks are part of a package devised “to provide a service and various photo options to customers. ”

Publix Super Markets, Lakeland, Fla., is taking a comprehensive approach to its kiosk program. “We offer kiosk services such as Coinstar, DVD rentals, Blackstone calling cards, etc.,” said spokeswoman Marie Brous. “We consider these options services for our customers.” The idea is to enhance Publix's standing as a one-stop-shopping location.

Lee Holman, lead retail analyst at global research firm IHL Group, Franklin, Tenn., which recently published the North American Self-Service Kiosks market study, said that kiosks provide a significant customer service advantage — in part, he noted, by shifting the service burden to customers and eliminating labor costs. Shoppers can be expected to support a self-service kiosk program if they believe they are gaining some additional value, Holman added, noting that while any savings on the price of a product or service is significant, saving time is important to customers as well.

“That's part of what we're seeing with redbox and The New Release. People are just going through the checkout, and the machine is right there — instead of their going to Blockbuster, getting out of the car again and going through a maze to get the movie they want to see,” Holman said.

As has been true of self-service checkout, self-ticketing kiosks at airports and even ATMs, consumers gradually accept innovative platforms over time, based on speed of service and convenience perceptions. Yet at the point of acceptance of this technology, something occurs that can improve relations between a store and its customers, said Holman.

“After a while, you have adoption turning into expectation,” he said. “Then, the retailer with the kiosk has an advantage over the one that doesn't. That's where the loyalty factor comes in.”

IHL's survey indicates kiosks that perform service functions like DVD rentals and coin-counting are growing at a double-digit rate. The expanding variety of new kiosk applications can be expected to help keep growth going strong for some time.