Bringing the web to consumers

Web-based kiosks have had a long, slow road to slog. Retailers and analysts have long recognized web-enabled kiosks for their potential in extending retail e-commerce, but that potential has remained unfulfilled as retailers focused their technology sights on different targets.

Now kiosks may finally be getting some respect. From J.C. Penney Co. Inc.’s Academy Awards-timed kiosk-based virtual store in New York’s brand-crazed Times Square, to DVD-rental kiosks in hundreds of McDonald’s restaurants and Ahold grocery stores, to the appliance section in Home Depot stores, where shoppers will soon be able to try out life-size virtual refrigerators, kiosks are beginning to play a more central role in multi-channel retailing strategies.

“Kiosks are hotter than ever and they’re definitely getting more respect from retailers,” says Francie Mendelsohn, president of Summit Research Associates Inc., which studies kiosk market trends.

Greater flexibility

Driven by a rising demand among Internet-educated consumers for more options to research and shop for products—and by the evolution of web technology that makes it easier to integrate kiosks with e-commerce and enterprise operating platforms—kiosks are now being deployed in retail environments with functions unknown to most people just a year ago.

“These are not the old kiosks we’ve been used to seeing,” says Jim Okamura, an expert in multi-channel retailing and senior partner with consultants J.C. Williams Group.

At the same time, the increase in retail e-commerce is leading to increased consumer expectations of how retailers can leverage the web’s shopping flexibility in additional channels—like kiosks, experts say. “We are seeing more demand for kiosks because consumers are demanding more ease of shopping in the store,” says Craig Stevenson, IBM Corp.’s solution manager for distribution and commerce strategy and planning. “The Internet has provided consumers with so much power to find any type of product information without anyone helping them. Even if they like face-to-face service from store sales associates, they want to have the choice not to speak to that associate and find the information on their own.”

Popping up in Times Square

At J.C. Penney, kiosks are expanding the use of “pop-up” stores, which are small, temporary retail locations that retailers set up with limited product offerings to promote the kick-off of seasonal merchandise in high-traffic areas. “They’re adding another dimension to these pop-up stores, showcasing their full line on kiosks,” Okamura says.

Indeed, J.C. Penney chairman and CEO Mike Ullman, who was on hand to kick off the opening of the Times Square store, tagged the “JCPenney Experience,” underscored its importance to a corporate strategy that has been putting the retailer on a more positive course of performance. Supported by steady increases in e-commerce sales that rose 22% last year to surpass $1 billion, J.C. Penney’s total net sales rose 3.8% last year to $18.78 billion.

“The JCPenney Experience will be a dramatic statement reflective of the changes taking place at J.C. Penney,” Ullman said before the opening of the Times Square store. “From one of the most visible and visited spots in the world, J.C. Penney will highlight all that is new at our company. Shoppers will also experience first-hand the incredible power of JCP.com, the largest online department store in the world.”

The 15,000-square-foot Times Square store, which was open from March 3 through March 26, presented in museum-like displays a limited selection of apparel from exclusive J.C. Penney brands from designers including Michele Bohbot and Nicole Miller, supporting the retailer’s efforts to position itself as more than just another retail chain with copycat merchandise. J.C. Penney personnel were also on hand to answer questions, and celebrities appeared for a pre-opening charity event.

Entertainment, too

To make purchases—whether of the store’s featured merchandise or any of the other 250,000 products available on JCPenney.com—visitors used one of the 22 interactive web-based kiosks. The strategy, Okamura says, served the dual purpose of expanding J.C. Penney’s brand image with consumers while promoting its expertise as a multi-channel retailer.

The kiosks—which use operating software from Branford, Conn.-based Netkey Inc. and feature moving images of brands on touchscreen home-page displays—raised the entertainment value of the pop-up store, helping to draw consumers into the retailer’s brands as well as to its expertise as a cross-channel merchant, Okamura adds. “They’ve been a leader in cross-channel capabilities, which has been a differentiator for them,” he says. “For them not to showcase that in part of a pop-up store marketing vehicle would be remiss.”

The Times Square store, whose opening was timed to coincide with J.C. Penney’s TV sponsorship of the March 5 Academy Awards show on ABC TV, played up the retailer’s JCP.com along with its “Big Red Box” logo and the “It’s all inside” tagline. And in true cross-channel fashion, its TV ads complemented the web-based kiosks by appearing on the retailer’s web site as well as on the Oscar sites of Yahoo and AOL. By clicking in the video of one of the online versions of the TV commercials, online shoppers can go directly to buy pages on JCP.com for the advertised merchandise. (See cover story, page 32.)

The virtual refrigerator

Kiosks are also playing a central role at The Home Depot Inc., both to virtually expand the customer-serving capabilities of its selling floors and to reach beyond its stores to engage consumers in new places like shopping malls and airports.

“We’ll be using kiosks extensively,” says Harvey Seegers, president of Home Depot Direct. “We want to provide new experiences for customers coming to Home Depot for products and innovative solutions.”

Seegers, former CEO of GXS, the Internet-based exchange that helps retailers and suppliers trade information electronically, says kiosks will play an important role in extending the electronic selling and services capabilities of Home Depot’s stores. “We want to challenge ourselves to have more innovative product categories not in stores,” he says.

Home Depot’s kiosks, with operating software from Netkey, will facilitate store customers and sales associates in ordering products from the web not found in store aisles, but they will also support faster and more accurate processing of the billions of dollars worth of in-store special orders now processed by paper, Seegers adds. “We’ll transform analog orders to digital,” he says.

Using Endeca Retail for Kiosks site search and navigation software from Endeca Technologies Inc., Home Depot will be able to tailor content available through the kiosks, such as making particular inventory and cross-sell opportunities available to in-store shoppers.

Home Depot is testing kiosks in two shopping malls in Atlanta, and it’s working with Maynard, Conn.-based Kaon Interactive Inc., a provider of three dimensional graphics software, to roll out this year life-size kiosks capable of letting shoppers virtually open and reconfigure parts of a refrigerator in its full size.

At a Shop.org meeting earlier this year, Seegers demonstrated on an overhead screen how customers in the appliance section of a Home Depot store will be able to view a life-size image of a refrigerator on a kiosk, manipulate the image to open doors, take out and replace shelving, even replace a water filter.

The goal, he says, is to use the kiosks to virtually expand the selling floor. Consumers usually want to buy only refrigerators that they can touch in the store, but no selling floor is big enough to display all the different models of refrigerators Home Depot offers, he adds.

Kaon offers its 3-D software as a hosted application, through which retailers (or Kaon itself) can develop the initial interactive product demonstration files, says Kaon CEO Gavin Finn. Retailers can access the hosted application to modify the demonstrations, then download them as Java applications to their own web servers to distribute over their corporate intranet to the kiosks in their stores, he says. “We’ve never had a customer who had to change their web infrastructure to run our applications,” Finn says.

Kaon’s subscription fees start at $25-$35 per product per month, in addition to initial set-up fees of between $5,000 and $10,000, Finn says.

Kiosks for everybody

IRCE 2008 Conference Multi-Media CD-ROM

It isn’t only large retailers that are putting kiosks in key roles in new multi-channel merchandising and marketing strategies. Redbox Automated Retail LLC is the new gorilla in the business of Internet-connected kiosks that rent and sell DVDs. Owned jointly by McDonald’s Ventures, a unit of McDonald’s Corp., and Coinstar Inc., Redbox has an exclusive deal to roll out its kiosks in the fast-food company’s restaurants as well as deals with other companies including grocer Ahold U.S.A—but other players are cropping up to serve smaller slices of the retail market.

ELO Media LLC, for example, has placed about 40 of its web-based kiosks in locations throughout the U.S., including two on Marine bases, says CEO Oren Hon. “In the next year or two, we’ll have close to 1,000 machines in the market,” he predicts.

ELO Media currently sells most of its DVMatic kiosks—including a 330-DVD kiosk for $17,000 plus $100 per month maintenance, and a more expensive kiosk that holds 500 DVDs—to third-party companies like Box Office Video that install and operate them in stores under contract with retailers. ELO Media’s clients also get their own web site tied to DVMatic.com, where customers can research videos, check availability at a particular kiosk and use a credit card to reserve a DVD. Once at the kiosk, the customer uses the same credit card to pay for the DVD, which the kiosk identifies by its attached RFID tag and automatically dispenses it. When customers return DVDs, the same RFID tag enables the kiosk to record the return and update information on the DVMatic web site.

Gary Pierce, the owner of Box Office Video, based in the Houston suburb of Tracy, Texas, says he rents an average of 4,000 DVDs through his single DVMatic machine, which is located in a Houston-area convenience store. Videos rent for $1 a day for an unlimited number of days, plus he sells about 100 used DVDs a month for about $5 each. After spending about $1,500-$2,000 each month for new DVDs to stock his machine and paying a 10% commission to the store owner, he says he can make a monthly gross profit of about 25%.

Business has picked up after a slow start, he adds. “People at first were a little distrustful because they hadn’t seen one before,” he says. “Now every month business goes up.”

Big Mac and a DVD

Although ELO Media, Piscataway, N.J., and others like Centerport, N.Y.-based MovieMate Inc. (which sells smaller kiosks starting at $8,000 for 100-DVD capacity) are further ahead than Redbox in web functionality, their bigger rival has ambitious plans to roll out up to 2,000 kiosks with full web features later this year, says Gary Waring, vice president of marketing for Redbox.

Redbox, based in Oak Brook, Ill., has 800 kiosks already installed for renting and selling DVDs, with about 750 of them in McDonald’s locations, the remainder in grocery stores. The kiosks are all connected to the Internet, but for now their only web feature is the e-mailing of receipts to customers who provide their address. By year-end, when it expects to have 2,000 kiosks installed in the market—including several hundred in Ahold’s Giant Food and Stop & Shop supermarkets and others in The Kroger Co.’s Smith’s grocery chain—Redbox plans to offer online ordering and real-time inventory lookup for each kiosk in its network.

Redbox will either sell or lease kiosks to retail partners, but unlike ELO Media, it will directly operate all its kiosks over the Internet instead of farming them out to third-party operators, Waring says. That will enable consumers to find and reserve a DVD online, pick it up at any Redbox kiosk, then return to any kiosk. “You can pick one up in Park City, Utah, and return it in Chicago,” he says.

More roles

As kiosks become more widely used in key retailing strategies, merchants can be expected to continue finding new uses for them, says Mendelsohn of Summit Research.

Still, there are lessons to be learned. Mendelsohn notes that kiosk innovator Home Depot aborted a plan to put kiosks in its stores to help shoppers find plumbing products, which are too numerous to completely stock in most stores. “The kiosks were hard to find, and there was no signage,” she says.

One of the more popular new uses of kiosks, she adds, is for letting customers apply for instant in-store credit card services—for example, to pay for a high ticket item or to take advantage of promotional financing offers—instead of filling out a form at the POS counter.

By offering customers service they wouldn’t otherwise get, kiosks can continue to play a broader role in retail environments, Mendelsohn adds. “Kiosks have to offer some special use to bring value to the shopping experience,” she says. l

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Easing the data flow from HQ to kiosks

Although web-based kiosks have been around for years, their application has been limited due to several reasons, including complicated implementations of technology to connect kiosks with back-end operating software, the need to invest in other more pressing technology project, and a lack of strong interest from consumers, experts say.

The same evolution in Internet technology that’s bringing more integration to multi-channel retailing platforms—namely the spread of XML and other components of web services supporting the integration of disparate operating systems and applications—is providing more flexibility and cost effectiveness in deploying kiosks, making them a key component of cross-channel retailing strategies.

In the past, while each retailer may have had its own planned uses for kiosks—ranging from granting full web-surfing capability to limited product information or product configurators—deployments were hindered by technology that made it difficult to roll out particular applications by building new data files to copy information from web sites or back-end enterprise systems, experts say.

“In the past, if you put kiosks in a store, you had to duplicate data that was hard to maintain,” says Craig Stevenson, manager of retail e-commerce solutions for IBM Corp., which provides both hardware and software for kiosks. But now web services technology makes it possible to re-use the same files on kiosks that are in other environments. “We’re seeing a lot more re-use of data, so you can re-use the same data that’s on your web site and pull data from the same back-end master file,” Stevenson says. Not only does this allow merchants to use data more efficiently, but it also allows retailers to use a single team of merchandising and marketing experts for multiple applications.

As a result, retailers can more easily include kiosks in a coordinated multi-channel strategy, assuring that kiosks are offering the particular content that complements what a retailer wants to show on its web site and offer through call centers and in-store campaigns. Web services are also making it simpler to update information across multiple kiosks in the same store.

Many conventional kiosk deployments require connections from enterprise software to each individual kiosk to insert or modify content. Now, using XML, Java and other web services technologies, retailers need to change content on only one store kiosk through a remote connection, then let that kiosk automatically pass on the new content to other kiosks in the store.

“If you have 10 kiosks in a store, they can now talk to each other peer-to-peer to update their records, reducing the amount of information the retailer has to transfer from a main server to the store,” says Robert Ventresca, director of marketing for Netkey Inc., a company that provides kiosk software to J.C. Penney, Home Depot and dozens of other retailers.