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Summer 2008 Now Playing: Specialty Retail 2.0

The fact that Webkinz, Club Penguin, Neopets and other innovative companies have made millions by successfully merging brick-and-mortar sales with Web-based social meeting places did not escape the notice of Joey Dagony, a retail entrepreneur with more than 10 years’ experience selling various products from carts and kiosks. But it wasn’t until he watched his young nieces putting together a kindergarten class project that his idea for Papaya Entertainment Studios’ new kiosk concept began to take hold in his mind.

Birth of a concept

His nieces’ project involved cutting a face out of a photo and gluing it to a painting they had made of the person’s body. The girls had so much fun creating their half-photo-half-painting person that Dagony started brainstorming how he could apply the same cut-and-paste, mix-and-match principles to an animated DVD that would make the child the star of the movie.

As his idea began to take shape, “I started meeting with people, including child physiologists, technologists, animators, movie producers and directors,” he says. “We conducted comprehensive market research, prepared business plans and went on the road” to test the product with a number of focus groups. “We met with people in the [animation] industry and read crazy amounts of research, but the real school was in the [focus group] field at the time we were making the product for customers. It wasn’t simple. It took us more than two years to produce the final product.” The final product-or rather, the first in a series of products to come-is “My Adventures with Skipper Souly,” an animated video featuring the magical toys Skipper Souly, Wondersoul and Soula, who travel the world in an effort to save the planet from environmental problems while helping others. They’re assisted in their quest by the child star of the movie, whom they interact with and call by name throughout the video.

Using technologies specifically developed for its new kiosk venture, Papaya integrates the child into the video by cropping the face from a photo provided by the customer or taken at the kiosk, and adding it to the pre-made body of an animated character. They then add the child’s name, which the other planet-saving characters use over and over. When the personalization process is complete, the pint-sized customer is thrilled to receive a DVD with his or her name and face on the label. The customer also receives a user name and access code to enter Papaya’s website (, where visitors play games, videos, music, check out the Kids’ Club and, of course, learn more about what they can do to address the environmental challenges of the day (there’s a section for parents, too).

imageTo ensure that after years of research and development Papaya wouldn’t be knocked-off, “We’ve protected all signs, characters, music, movies and other elements by copyrights and trademarks, and we’ve protected our technology with patent-pending registration,” Dagony explains. The kiosk-also protected by trademark-had to be colorful and attractive to kids while clearly projecting the environmental or “green” image at the core of the company’s brand identity. It’s no mistake that “the kiosk is a circle shape-like the globe,” he says. The kiosk design includes two plasma screens that feature samples of the finished personalized videos showing the extent to which customers become part of the final product. Video clips also include meet-the-cast interviews and an animated explanation of the personalization process. Kiosks also have display and storage space for a host of additional products Papaya is developing, both personalized and non-personalized. Personalized products include the “My Adventures with Skipper Souly” video, music CDs, computer games, books, mugs, stickers and many other popular impulse products. Non-personalized products include action figures, T-shirts, plush, watches, key chains, pillows and more. All products feature the animated characters from the “My Adventures” movie.

Tapping a $27 billion market

“The kiosk is very attractive, designed to attract crowds,” Dagony says, but the kiosk itself, he says, is less important than the personalized product, “which remains the ultimate selling point. The personalization industry in the US today generates $27 billion in annual sales and the niche has grown dramatically over the past few decades.”

While developing the Papaya concept, Dagony says he wanted to tap into the expanding personalization market, but he didn’t want to produce a run-of-the-mill product that kids might latch on to for a while but eventually become bored with and move on, as they tend to do. Instead, his goal was to create a completely integrated kiosk/online strategy that would tap into one of the most talked-about issues of our time, environmental stewardship, while at the same time teaching kids positive team-building attitudes. “The hardest part for us was finding the best way to combine all the things we wanted: teaching children how to work with others, how to understand the different countries and cultures in the world, and how to have an awareness about ecological issues and environmental safety. By integrating the child’s name and face into the movie, in a way we make them part of the solution in saving planet Earth.”

The “My Adventures” animated characters, created in collaboration with Pil Animation, were developed over years based on reams of child-development research, feedback from child experts, input from the animation gurus at Pil, and the results of the focus-group research. Dagony says all of this homework resulted in “characters that ‘speak’ to kids,” connecting with them at their level and empowering them to build partnerships with others to achieve common goals.

Ready for launch

Papaya offers independent specialty retailers several start-up packages, which begin at $2,999. “With $2,999 you really get everything you need to get started, including the production stand to create personalized animated DVDs, personalized music CDs and personalized computer-game CDs,” Dagony says. “To buy more products and licenses all the retailer needs to do is order online or by phone.” (A limited number of free licenses for DVDs and CDs are being offered as a bonus during start-up, “but this promotion is only for a limited time.”)

Papaya also helps retailers “at every stage by giving them support in finding locations, signing leases and choosing products, plus we provide training, marketing materials and more,” he adds. “Because we have a low-cost start-up package, almost anyone can open a location and see for themselves how Papaya can drive income year-round. We can create custom packages for each retailer according to their needs.”

Licensees benefit from Papaya’s substantial spending on developing the brand, Dagony says. “We put a large part of our budget into marketing and branding. Our kiosk prototype is part of our branding, but we also provide our retailers with graphic materials they can use to design their own cart or kiosk, if they choose. The branded graphics allow independent retailers to capitalize on our strong and uniform corporate look without investing a large sum. By creating a strong brand that the customer recognizes, the customer trusts what they see” at the company’s kiosks and online.

Kiosk retailers also can generate passive income by referring customers to the company’s website (there’s also a sister site for retailers, Papaya With every kiosk sale the customer receives a user name and promotional code for discounted online purchases. When the customer later buys online, 20 to 50 percent of the sale is credited to the kiosk retailer, who is sent a monthly check for amounts earned (the percentage credited depends on sales volume). In response to the dramatic increase in gift cards over the years, Papaya has also created three gift cards: kiosk gift cards, e-cards for online purchases and multi-cards for use online or off. With the NRF estimating that gift card sales in 2007 topped $26 billion, Dagony wants Papaya and its independent retailers to get a piece of the gift card pie (which grows bigger every year).

The first kiosks in the US are expected to open soon in malls in California, Texas, Arizona, Florida, Tennessee, New Jersey and New York. Canadian locations will likely include Toronto, Montreal and Halifax. “We predict that by October, there will be more than 350 locations across the US and Canada,” a mix of corporate and licensee locations, he says. “We will also serve retailers in South Africa, Europe, Australia and other locations.”

Building for the long term

To ramp up for the expected demand for Papaya’s new concept, by the end of 2009 Papaya plans to have more than 100 employees in its main offices and studio (currently there are about 50) to support an estimated 700 kiosks worldwide. Long-range plans include positioning Papaya as a leader in the “Inter-tainment” industry while creating strong a brick-and-mortar presence through kiosks in major malls, theme parks, airports, public trade shows and other high-traffic retail venues.

Papaya is also “looking to expand the opportunities we offer retailers, as far as developing additional technology and selling options for retailers,” including additional licensed product lines featuring the Papaya characters and brand images (plus more to be released in the years to come).

“It wasn’t easy developing this idea,” Dagony says, “but it was well worth it. We were searching mostly to answer a need that other concepts don’t answer. We were looking for a breakthrough sensation, something extraordinary for the long run, with potential to grow and expand. And that’s what we’ve created.”

Dan Bennett

Dan Bennett is a Las Vegas and San Diego-based freelance business writer. He can be reached at .

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