In its second-largest acquisition, Amazon buys the company for $970 million.
REI’s 160 kiosks bring the web site into the store; online ordering gives store shoppers home delivery within days.
When the store shelves are virtual, stores may require less of that oh-so-costly real estate – far less, in the case of Seattle-based Recreational Equipment Inc., which is using its web-enabled in-store kiosks to try out smaller store formats in selected markets. REI’s 160 stores average 25,000 square feet and larger, up to 75,000 square feet, says Brad Brown, vice president of information services at REI. “We also have some that are 10,000 square feet and don’t have room to carry that much, but the kiosks make every item in our off-site distribution center available to someone in the store. With a kiosk in a 10,000-square-foot store, we can have any item at a customer’s door in a couple of days.”
That’s smart thinking says Jupiter digital commerce analyst Heather Dougherty. “As real estate gets more expensive, you’ll see a lot more stores consider this,” she says. “You might have a skier come in to a store at any time, but it’s not profitable, for example, for REI to carry skis at a store in Ohio year round. This is a way for them to extend their reach, by using kiosks to augment on-site inventory. They can figure out what each store needs to keep in stock, and what people will wait a few days for. It also makes it more cost effective to go into certain new markets; it’s helping them to shrink stores where they can.”
Brown says reducing store size isn’t an objective at REI, but does say “We’ve felt more comfortable experimenting with smaller stores because of the assortment we can add to that store from the kiosk.” And while REI says it launched its kiosks in 1997 as a customer service without a defined financial ROI, there’s no doubt the kiosks are boosting sales. Collective sales at the 160 kiosks equal the average sales of one 25,000 square foot store, Brown says.
REI hasn’t pursued metrics that would separate out kiosk sales that are incremental from sales that would otherwise be rung up at store cash registers, Brown says. But he maintains that tracking kiosks` specific contribution matters less than actually getting the sale through whatever channel. “The important thing is that we get the sale versus not getting it,” he says. “Once a customer leaves the store without finding what they want, they’ll go to a competitor or perhaps order it online at home from REI.com,” he says. “If they buy it online at a kiosk, we’re getting a sale in a case where there’s a high probability we wouldn’t have gotten it.”