Success with Self-Serve Kiosks

It was nearly 15 years ago when Mike Kasavana developed what was then considered a revolutionary concept: Hotel self-check in. This may be looked back on as a seminal idea for retail.

Kasavana, now the National Automatic Merchandising Association endowed professor in hospitality business at Michigan State University, remembers that initial reactions to the concept were not encouraging. “No one goes to a place, especially a hotel, without a face-to-face person,” was the common response. Chicago-based NAMA is the trade association for the automatic hospitality vending, coffee service and food services industries.

Those concerns couldn’t have been more misplaced. Now, almost all hotel chains—Hilton, Marriott, Sheraton, Fairmont, and Starwood, for instance—offer self-check in and, often, the ability to print flight boarding passes as well.

The attraction of self-serve

In a weak economy, businesses look to trim costs on all fronts. In that respect self-serve kiosks are especially attractive since they are less expensive to operate over the long term.

“The kiosks report to work every single day, and never call in sick, unless there’s a malfunction or something,” says Kasavana. “Once you plug them in, they work day in and day out.”

For Virginia-based Rosetta Stone, which dispenses its language learning DVDs via kiosks at airports and malls through a partnership with San Francisco-based Zoom Systems, having a sales outlet that worked 24/7 was a big plus, says Ellery Bowman, director of specialty retail development.

It’s not surprising then that businesses across industries are welcoming self-service technologies to cut operating costs.

The variety of products and services sold by self-service kiosks has grown. Consumers can now get an eye check-up, pay bills, check in to a hotel room, order deli meats at the grocery, buy stamps, print photos, and even check out compatibility of lipstick shades. This is in addition to the range of retail products one can now buy at these kiosks—from language learning software to ice cream, and from cosmetics to iPods.

Doing the numbers

It’s a market that’s growing, according to many estimates. Investment in self-service solutions is estimated to be at around $3.2 billion, and is expected to grow to nearly $5.8 billion in 2013, according to “Self-Service and Customer Interaction Management Solutions (SS/CIM)” a report released by VDC Research, a technology research company based in Natick, MA.

The money spent at these kiosks will also increase, according to IHL Group, a research company in Franklin, TN that focuses on technology for the retail and hospitality industries. It estimates that self-service kiosk transactions will be worth more than $775 billion this year, and is expected to hit $1.3 trillion in 2013. The number of self-service kiosks in the United States and Canada is 1.2 million, according to research by Rockville, MD-based Summit Research Associates, a firm focusing on the research, evaluation, consulting, and appraisals of kiosks.

Kodak, one of the early adopters of kiosks for its prints worldwide, deploys nearly 55,000 kiosks in the United States. With the kiosks averaging nearly 200 prints a day, the kiosk market is huge for the company, says Rowan Lawson, worldwide marketing director for Kodak’s kiosk products.

Reasons for success

Customers are warming up to self-serve. In a 2009 survey titled, “2009 Self-Service Consumer Survey” sponsored by the Self Service Kiosk Association, customers said that their top three reasons for choosing self-service technology over traditional methods of retail purchase were speed, convenience, and a liking for the technology.

Kasavana says that kiosks are growing in popularity for a variety of reasons—the increase in reliability, for one, mirroring the confidence that people acquired for transactions over the Internet.

He says the main attraction of a kiosk for customers is that they can control the transaction. “The world’s largest self-service device is the Internet,” he says, adding that its success can also be partly attributed to the control factor.

Familiarity with the technology is a huge part of the success of kiosks, says Francie Mendelsohn, founder and CEO of Summit Research Associates. The Rockville, MD-based company is an international consulting firm devoted to kiosks. Mendelsohn has noticed customers will often wait in line at a self-checkout kiosk even when manned registers have no customers. People find self-serve is more fun, she adds.

Mendelsohn points out that advances in technology have removed earlier limitations to the kiosk experience—customer adoption being one of them. She says that with the kind of technology available now, providing visually intuitive content and enabling a kiosk to do more than just vend a product is easier.

Retail segment slowly taking off

In spite of encouraging signs, breaking into the mall retail segment has been tricky for self-service kiosks. While it is estimated that 69 percent of the self-serve kiosk industry is represented by the retail segment, they are mainly comprised of photo kiosks, grocery store checkouts, and information kiosks at retailers like Home Depot and Walmart.

While selling products through kiosks is still seen as a non-traditional approach in retail, it’s an idea that’s gaining momentum. Airports are taking the lead with kiosks from San Francisco-based company ZoomSystems.

ZoomSystems has more than 900 ZoomShops in malls, airports, and retailers in the United States and Japan. In the United States, ZoomShops can be found at Macy’s stores, with the shops primarily selling electronics and related items. ZoomSystems partners with well-known brands like Apple, Proactiv, and Rosetta Stone, and provides the infrastructure and support for the kiosk strategy.

Getting down to business

Kodak’s Lawson says that deploying kiosks merely to cut costs can backfire. It is important, he says, to ensure that the consumer experience is positive. Although it might be tempting to think so, kiosks are not meant for just plug-and-play, he points out adding that a self-serve kiosk strategy must not be implemented ad hoc.

With kiosks, business and revenue contracts can run the whole gamut—from outright ownership, to leasing agreements. Rosetta Stone and ZoomSystems have a partnership where ZoomSystems provides the infrastructure, retail space, and some logistical support. Moobella, a self-serve hard-scoop ice cream kiosk, recently entered into an arrangement with a marketing and distribution firm for its 100 kiosks across
New England.

The key lies in figuring out what works for your business, says Lawson. Mendelsohn, who has helped deploy kiosks for companies such as Hilton, Best Buy and Target, says the pilot deployment of kiosks can be off-putting—if the pilot locations are not well chosen. The best idea would be to run the kiosks in a few locations that best represent the target market, she says. Reasonable returns on investment can be expected only after a few years in many cases, she says.

Successful kiosk strategy

To have a successful kiosk at a retail location, employees must be given enough incentives to direct a customer to a kiosk, says Mendelsohn. She says that if, for example, a product is not available at a store but can be ordered through the in-store kiosk, the salesperson may not be motivated enough to pitch the kiosk without appropriate incentives.

Mendelsohn also says that sometimes, it is better to have a mix of a kiosk and human interaction, as car rental companies sometimes do, preferring human interaction when trying to sell a rental upgrade, for instance. “It is very easy to say, ‘No’ to a kiosk,” she says.

Kasavana doesn’t agree. He says that upgrades can be carefully orchestrated through suggestions in kiosks, much like related book suggestions made by when a user purchases or searches for a particular book.

Regardless, there is no dispute that effective kiosk strategies will offer companies cost benefits in the long run. A typical kiosk transaction costs a tenth of a human-mediated transaction, according to research conducted by Mendelsohn’s Summit Research Associates.

Industry players, however, downplay the impact of kiosks on employment rates. “The jobs are changed, not deleted,” says Kasavana, explaining that deploying a kiosk will help those who know what they want to go ahead and get their service/product, so that employees can spend more time with those who need guidance. “You’re performing highly skilled rather than less skilled jobs,” he says.

What lies ahead

The bounce back of the economy may see a shift in kiosk trends, says Kasavana. Already, kiosk technologies are a mix of Internet, vending machine and self-serve kiosk trends, and Kasavana predicts that the lines between the three will only become more blurred with time.

Mendelsohn says that some applications of kiosks, like DVD movie rentals, will be taken up by the Internet in the future. Soon, she says, people will prefer to download a movie of their choice through the Redbox site, and some of that business will shift to online.

She also says that kiosks that are part of a retail set-up may also lose some ground to new applications and services offered by PDAs such as the iPhone. For instance, she says that the Sherwin Williams paint-matching kiosk at a store might soon be replaced by an existing iPhone application that lets a user take a picture of a color, matches it with the paint catalog, and provides directions to the nearest store stock.
While the mode of accessing the products might change, the sale itself is not affected, says Mendelsohn. “For the retail industry as a whole, [the future is] all good,” she says.

Stepping Into Sales

Michael Stead banked on the idea that after an evening in uncomfortable high heels, most women might look for more comfortable options. The product it spawned, AfterHeels, has been a runaway success.

Leicestireshire, U.K. — One holiday, Michael Stead’s friend damaged her feet after extensive use of high heels. After he unsuccessfully looked around for products that might solve the problem, the idea for his company’s product, AfterHeels, was born.

AfterHeels is a pair of compact ballerina shoes that is vended at a self-serve machine for around $8 (£5), and is designed to provide comfort to a woman’s feet after extended periods on heels.

Comfort zone

The shoes are made of natural latex and cotton and are biodegradable. The sole offers an anti-slip grip, and glass protection to guard against stray shards of glass on the streets. The shoes are available in a few colors and two sizes—small and medium. The shoe stretches so that the two sizes cover six shoe sizes, says Stead.

AfterHeels is currently the only brand of Stead’s company, Shoomaker Limited. The company, which started in May 2008, had a windfall after the U.K. ban on smoking in public places, which left many cigarette vending machines orphaned. AfterHeels was designed to replace a 20-cigarette carton, and fits neatly into a comparable carton when folded. The package also contains a small foldout bag to hold the pair of heels.

“Our product was designed as disposable,” says Stead, “But girls have worn them for five weeks.” Stead says that the shoes are meant to be emergency shoes that are nonetheless quite durable.

Retail points of sale

The shoe dispensers were placed in 11 locations outside nightclubs across the country. Stead is hoping to expand to other locations such as retailers and grocers.

With the United Kingdom now considering a ban on all cigarette vending machines, Stead is exploring different distribution models, including owning and operating the machines.

He currently operates on a leasing arrangement.

The company sees competition from at least two other companies: Rollasole and Butterfly Twists. Stead says that his is the only patent-pending and ultra-compact product of them all.

The shoes, which were initially made entirely in the United Kingdom, are now made in China. The shifting of production operations has been the greatest challenge so far, says Stead.

Since the shift of production, some machines have run out of the shoes. But the first lot of shoes from China are on their way. Stead says that his company has received numerous international inquiries and that production in China is a step toward ambitious expansion plans. Afterheels will soon be available in the United States.

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Are Kiosks Glorified Vending Machines?

While the technologies may indeed be very advanced, many self-serve kiosks of today bear an uncanny resemblance to vending machines, and perform the same functions. Mike Kasavana, the National Automatic Merchandising Association endowed professor in hospitality business at Michigan State University, says that the main difference lies in technology. The vending machine uses a vending controller board, which is usually a standalone piece of electronic circuitry that is intended for the specific purpose of vending a product. The self-serve kiosk, on the other hand, is a PC-based machine with a range of display and control options, which is usually connected to central network, or the Internet. Until a few years ago, vending machines were used for dispensing products and kiosks, primarily information.

The lines are slowly blurring, says Kasavana, citing the example of Redbox, the DVD rental company from the Coinstar group. “The interesting thing about Redbox is that in 2007-2008, it won a vending innovation award. In the same year, it also won a Kiosk of the Year award,” he says. However, he categorizes Redbox as a kiosk company, because it uses PC-based technology.

Kiosk Technologies and Design

Consumers of these machines, however, are not bothered by semantics. All they want is the product, when they press the appropriate buttons. Designing kiosks is a complex process, and involves concepts of web and vending machine design. One of the cardinal rules of kiosk design is to ensure that a person can complete any transaction with no more than three interactions with the kiosk, similar to the three clicks of the mouse that should take you to any page or product within a Web site.

And even one less button to press can be a critical differentiating factor. Rowan Lawson, worldwide marketing director for Kodak’s kiosk products, says that Kodak kiosks have 20 percent lesser buttons to press.

The airport kiosk space is more advanced, having been an early adopter of kiosk technology. Cheryl Madeson, marketing manager of Kiosk Information Systems, a designer and manufacturer of self-service kiosks, works extensively with airport installations, and sees them as being more mature markets. “Even now, as self-service applications are growing in a number of other segments like retail and financial, the technology in the airport segment is still among the most advanced,” she says.

Latest technologies addressed by the airport sector include kiosk-based biometric passenger identification technology that helps airports automatically capture the fingerprints and video of a passenger, while also processing his passport. This, Madeson says, will free security personnel to perform monitoring activities.