July 29, 2004, 12:00 AM

Store kiosks finally come of age in multi-channel strategies

Staples, Office Depot and others are figuring out how to useweb-based kiosks to enhance the store experienceand make web inventory available to store shoppers.

Web-based kiosks have long offered the promise of changing the way consumers shop in stores, but retailers have been reluctant to employ them. Some argue that they change the shopping experience too much by implying that retailers need not stock everything that a customer is seeking.

But with the rise of multi-channel retailing, opposition to kiosks is fading. In a study of 100 specialty retailers earlier this year by consultants LakeWest Group Inc., 33% were using store kiosks, the majority web-based, to serve customers, up from 25% a year earlier. In addition, Staples Inc. is talking about the success of its web-based kiosks in promoting sales and allowing it to design smaller, more shopper-friendly stores.

And now Office Depot Inc., the largest office supply chain, is getting on the kiosk train. It announced in June that it is rolling out more than 7,000 kiosks nationwide, going Staples one better in its deployment with eight kiosks per store vs. Staples’ four to six. “Everyone is talking to me about kiosks,” says Sunita Gupta, vice president and retail analyst at Cleveland-based LakeWest Group. “It may not be in their short-term plans, but they’re thinking about what kiosks mean for their business.”

As part of a store redesign program kicked off early this summer, Office Depot is installing eight kiosks in each of its 900 stores that let customers order products from OfficeDepot.com, configure personal computers and research their personal loyalty points and shopping history.

It’s taking a play from Staples, which is cited by analysts as a leader not only in kiosk deployment but also in how it uses kiosks. “Staples is the best at it,” says Francie Mendelsohn, president of kiosk research and analyst firm Summit Research Associates. “They’ve had more success than others. I’m in Office Depot stores all the time, and their kiosks are rarely used.”

That may change, though. In some ways, Mendelsohn notes, Office Depot is raising the bar of kiosk competition by placing more kiosks per store than Staples and deploying them in innovative ways. For instance, Office Depot is using wireless kiosks on portable stands designed to be moved to different store departments as traffic demands, while Staples’ kiosks are stationary.

Whether Office Depot’s new approach will be more effective than Staples’ in generating sales and building stronger multi-channel relationships with customers remains to be seen. “That’s a lot of kiosks per store, and it’s definitely raising the bar, but the retailer will have to make sure the kiosks are offering services that will attract customers to them,” Mendelsohn says. “You have to make them compelling.”

Web access in the store

The investment that both Office Depot and Staples are making in kiosks underscores the growing importance of kiosks as multi-channel tools as retailers seek to maximize use of their offline as well as online merchandising space.

The main purpose for having kiosks is to give customers access to the Internet and an alternate way to shop and conduct product research. 56% of retailers in the LakeWest survey let customers use them to place orders online as well as perform tasks like researching product information and checking product availability. LakeWest estimates that kiosks will generate $6.5 billion in sales for multi-channel retailers by 2006.

Store kiosks also offer new ways for customers to interact with salespeople and provide new cross-selling and customer service opportunities. They also free up space on the selling floor and in back-rooms for items that sell best in stores. In addition, kiosks open up ways for merchants to conduct administrative tasks like having job candidates fill out kiosk-based application forms that managers can also access through a web browser.

Although it doesn’t break out kiosk-driven sales, Staples says its kiosks have contributed to an increase in comp store sales, which rose 4% in the first-quarter of this year over Q1 of last year, and 5% in 2003 over 2002. “We are getting more sales from our existing square footage and kiosks are an element of this success,” says Mike Ragunas, vice president of technology strategy and architecture for Staples.

Making a kiosk program work well is not as easy as it looks and some retailers, though highly successful in other ways, have stumbled with kiosks for lack of an effective strategy, experts say. “You have to keep it simple, to let customers know at a glance what it will do for them, keep the kiosks working 100% of the time, and educate employees to let them know that kiosks are not a threat but an adjunct to the sales process,” says Mendelsohn.

Staples, she adds, scores highly in these areas. “They’ve involved their employees with kiosks and educated them about the value of kiosks as a sales tool,” she says. “In many cases, kiosks are seen as a self-service threat by employees. But Staples has done a really good job in not falling into that trap.”

Just as important, she adds, Staples has taught its employees to support customers in their use of kiosks. “You have to get buy-in from employees, but you also have to make sure the kiosks don’t become a crutch for employees who think they don’t have to help customers anymore,” she says.

Neutralizing the threat

Mendelsohn notes that when one grocery chain failed to educate employees about the advantages of referring customers to kiosks for ordering additional products and generating incremental sales, workers, who feared losing their jobs to the kiosks, covered the kiosks with bags and “Out of Order” signs. Headquarters managers could tell that the kiosks were still connected to the web, but they didn’t know why they weren’t generating orders. So they concluded customers weren’t interested in using kiosks and canceled the program, Mendelsohn says.

Staples has made employee training a corporate policy focused on engaging customers in the store, Ragunas says. “Our CEO has been very focused on driving a customer interaction model, so every associate is taught to engage every customer that comes into the store,” he says. “It’s reinforced in an ongoing program. Our goal is to interact with each customer at least once when they come into a store.”

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