By Andrea McKenna Findlay
Fifteen years ago, convenience stores realized they could capitalize on selling convenient services as well as products. They went on an ATM binge, with the result that 63% of the nation’s 120,000 c-stores have ATMs. The success of ATMs has kept c-stores on the look out since for new technology that could mean additional convenience sales. The Internet is now supplying the opportunity.
Two major convenience store chains—Phillips Petroleum Co.’s Phoenix-based Circle K chain and Dallas-based 7-Eleven Inc.—are installing web-enabled kiosks to make accessing technology as much a convenience as picking up a gallon of milk and some lottery tickets. In addition, Phillips is installing kiosks in truck stops. “The core value of our business to the consumer is convenience,” says Scott Templeton, innovation group manager in charge of kiosk deployment for Phillips Petroleum. “We’re pretty good at understanding how consumers define convenience because there is nothing we sell that consumers can’t get somewhere else. Most of the products and services on the kiosks have that convenience tie.”
Circle K’s kiosk program is the more ambitious. The 2,000-store chain is offering a range of services on the kiosks, from voice over Internet phone calling technology to video conferencing with other Circle K sites, checking e-mail and the ability to download content to wireless devices. 7-Eleven, by contrast, is limiting kiosk services to financial services—ATM cash dispensing, check cashing, money order purchases and money transfers—and plans to add functions later.
The programs are limited for now, at least by c-store standards. Phillips is testing the concept in 36 Circle K stores in Phoenix and 41 Circle K stores and truck stops in Philadelphia, while 7-Eleven is testing in 100 stores in Texas and Florida. But many believe web-enabled kiosks have the same future in c-stores as ATMs have enjoyed. “Kiosks will become a trend in c-stores just like ATMs,” Templeton predicts.
In fact, it is convenient access to the Internet that gives kiosks their appeal, analysts say. “The growth in the kiosk industry is in web-enablement. This is a really attractive and promising market,” says Rufus Connell, industry business manager for market researchers and consultants Frost & Sullivan who has researched the kiosk business and written several reports on kiosk use. “E-mail is one of the largest forms of communications and providing public access to that is a pretty positive story.”
While an early reason c-stores liked ATMs was that the machines put cash into customers’ hands which they could then spend in the store, the appeal of kiosks is different: C-stores view them as products on which they can make money. It wasn’t until the ATM networks eased up on their rules prohibiting ATM owners from charging consumers to use ATMs that c-stores began to make serious money on the transactions themselves. Web-based kiosk deployments until now have not been direct revenue producers, either. “Kiosks today are more like helping hands, providing directions in hotel lobbies or electronic tickers for users,” Templeton says. “The monetization of those activities into income for the company is very weak.”
But Phillips, while hoping kiosks will drive traffic to the stores, is planning to make kiosks into revenue centers right off the bat. “What we’re doing is very different,” Templeton says. “Our program is about providing a convenient customer service.” Translation: Customers will pay for convenience.
Phillips, which has branded its kiosks ZapLink, is testing two approaches in its different markets. The company selected two kiosk vendors—Burnaby, B.C.-based Info Touch Technologies Corp. and Bessemer, Ala.-based Global Access Alliance Inc.—to provide basic services in both markets:
- Voice over Internet phone services
- Video teleconferencing
- Local news and information,
including mapping and directions
- Bill payment, including cash
payments for Internet purchases
- E-mail access
- Online shopping
- Internet surfing
- Entertainment and games
- Capabilities to download music
and software to wireless devices
- Product coupons.
Both machines accept cards and cash for payment.
While the vendors are providing many of the same features, there are enough differences between the Phoenix and Philadelphia tests to give Phillips Petroleum insight into what works and what doesn’t. “The company has told us standard capabilities they want, but they’ve also given us the opportunity to prove out different capabilities,” says Robert Needham, president and CEO of Global Access Alliance, which manufactures the Philadelphia kiosks. Aside from the features, the two kiosks look different. The Global Access devices, for examples, look more like ATMs, with a touch screen for selecting services and a telephone pad for making calls. The Info Touch kiosk screen looks more like a web browser.
A laughing matter
In Phoenix, Info Touch has installed kiosks that, in addition to the basic list of services, provide video postcards and the ability to participate in a global interactive video message board called “Speak Your Mind.” This interactive video function allows store visitors to record personal messages with the video and audio equipment attached to the kiosk. Anyone using Info Touch’s kiosks and can see and hear the messages and the company plans to make them available on the web eventually. Info Touch plans to spin the interactive function into a dating service.
An interesting twist with the Speak Your Mind service—and one that is sure to attract young people—is a stand-up comedy contest. The cable channel Comedy Central sponsors the contest and will run 1,800 30-second ads in Phoenix to entice would-be comedians to audition at the Circle K kiosks. “Comedy Central will pick the best ones to come to their studios in New York,” says Hamed Shahbazi, chairman and CEO of Info Touch, a company that is 20% owned by Compaq Computer Corp.
Meanwhile, the kiosks in Philadelphia feature a $1-per-20-minute-phone call service using voice over IP technology. The kiosks include a phone receiver and a bill acceptor and credit card reader to pay for the calls. Customers can make as many calls as they want to any of 16 countries within 20 minutes for $1.
The kiosks cost about $15,000 and up to $150 a month to operate. Global Access says its devices could drop below $6,000 as the kiosks become more popular. Consumers pay 19 cents a minute for all services on the Info Touch kiosks and $1 for five minutes of usage on the Global Access kiosks. Templeton says 40% of the income from the ZapLink program will come from advertising that appears on the screen and on electronic tickers on the devices. The other 60% will come from sales of kiosk services. Circle K is in a revenue sharing agreement with both vendors, which own the kiosks and the technology, says Jason Broussard, director of Internet services at Circle K. Circle K has already determined from its testing that the kiosks need to run for three hours a day to meet expenses.
Target: Connected consumer
Unlike an earlier test of web kiosks in which the target market was the unconnected consumer, these kiosks are aimed at experienced Internet users. “They are mobile. They use e-mail, PDAs, cell phones and other technology devices because they want convenience,” Templeton says. The sort of consumers that Circle K is targeting are not tied to one place all day, such as construction workers, salespeople and college students. In fact, there are two ZapLink kiosks on the Arizona State University campus, Templeton says.
Circle K is promoting the ZapLink web kiosk program through its web site, which provides a kiosk locator, while the stores are promoting through signage and brochures at the kiosks. Circle K also plans to distribute 100,000 free 15-minute web surf cards to customers by the end of March to get customers to try the kiosks, Broussard says.
While Circle K is focusing on hot, new technology, 7-Eleven is building its kiosk strategy on its already established foundation of providing financial services to customers. 7-Eleven’s 100-store test is expanding on its ATM capabilities. Working with leading ATM manufacturer NCR Corp., 7-Eleven is branding its kiosks as Vcom devices.
The interactive kiosks, owned by 7-Eleven, are provided in conjunction with Certegy Check Services, American Express Co., Verizon and Western Union and include ATM cash dispensing, check cashing, money order purchases and money transfers. The web capabilities will initially allow users to access travel directions and maps, weather, news and winning lottery ticket information. “We’re already in the financial services business because we provide ATM access through American Express and we sell more money orders per year than most other stores,” a spokeswoman says. 7-Eleven sells more than $4 billion in money orders per year and has ATM transaction volume of 100 million per year.
Unlike Circle K, which targets experienced web users, 7-Eleven is catering to new and current customers who may already have online access but want access to the financial services offered by the Vcom kiosks. Current functions available include money order purchase, wire transfers and traditional ATM services. This summer, 7-Eleven expects to offer check-cashing services as well. 7-Eleven is promoting the kiosks through point-of-sale signs. The kiosk monitors also have information on the services. Other marketing includes radio and television advertising and publicity and promotions with local radio stations.
The company says Verizon will eventually provide telecom services. But 7-Eleven is determined to go the financial services route first. The company says it plans to offer other types of banking and insurance services before adding web-accessing services. “We’re looking at that but we’re far from adding the ability to make online purchases,” the spokeswoman says. “We have success selling financial services so we’re starting with that.” Future applications include bill payment, event and transportation ticketing, advertising, loans, accepting bank deposits, lines of credit, insurance, credit card sign up, stored-value services and eventually telephone services and online shopping.
Although the web access services may be a long-term goal for 7-Eleven, the company understands that there is a variety of possibilities with that technology. Future applications could allow customers to tap into 7-Eleven’s daily distribution of fresh food and even hot-off-the-press magazine issues. “We have thought about bundling an Internet service as part of our convenience retail strategy,” the spokeswoman says. “We could leverage our distribution infrastructure and combine that with an online shopping option so customers could have a choice of what they want, when they want it and where they want the items delivered.”
Readying a rollout
So far, results for the web kiosks show customers are responding well but 7-Eleven says it’s too early to say how the Vcom program will develop. Still, 7-Eleven is optimistic that web kiosks will make sense as a convenience service and expects to do a national rollout to 5,200 remaining U.S. stores later this year.
Circle K is similarly positive about the future of kiosks because an earlier test proved the concept could attract good users. Templeton says the strategic goal of Circle K’s first kiosk test, e-place.com, which ran just over two years ago, was to give customers that may not have access to the Net a way to get online. “What we found, however, was that the unconnected crowd was not the crowd using the kiosks,” he says. “Most of the people using e-place.com had more than three years of Internet connectivity. They had credit cards and they knew how to shop online. More than 70% of the traffic was from people checking e-mail.” That bodes well for the future of the ZapLink program, he says.
Circle K has tweaked its program based on early results. “We found out that Thursday was the highest day of usage in the Phoenix area because users were checking the lottery results,” Templeton says. “So we repositioned the lottery information so now it reports the results on the track loop that shows advertising and messages.”
Furthermore, advertising tests have proved to be fruitful as well. “There is a strong correlation between those who advertise with us and the web links that ZapLink users connect to,” he says. The stores did a promotion in which consumers could buy a 20-ounce Coke and get one free with a ZapLink coupon. Templeton says well over 70% of the coupons were redeemed.
Circle K expects to roll out ZapLink web kiosks to at least 60% of its 2,000 stores. Furthermore, Templeton sees the ZapLink brand being used by other Phillips retailers. “We intentionally developed the kiosks to have different colors than our Circle K brand,” he says. “We see this as something we can offer to other channels within the Phillips Petroleum Co.”
In spite of web-based kiosks’ early successes, Frost & Sullivan’s Connell says no clear-cut model has emerged to prove the ROI for web kiosks. But he says the fee-based models are likely to change that as consumers start to see and use them in stores. “Convenience stores have a real opportunity to draw people into their stores to access e-mail and from there to capture revenue streams from additional services,” he says. l
andrea@verticalwebmedia.com
2002
Guide to Retail Kiosk Suppliers
