October 3, 2002, 12:00 AM

Getting in-store kiosks to produce incremental revenue

The key to the success of kiosks that sell items a store doesn’t usually carry is marketing support, says a provider of such kiosks. But retailers are constrained by how much promotional space they can provide any one program or product, retailers say.

Retail store kiosks can generate substantial incremental revenue as well as provide a higher level of customer service for ordering unstocked products, says Lisa Kent, CEO of Nexpansion, a provider of kiosks and complementary web-based systems to retailers like Lowes Foods and Clemmons Family Market. But realizing those revenues requires a commitment to marketing support on the part of the retailer, she adds.

Kent figures that a good kiosk program can net a 200-store supermarket chain as much as $11 million and that’s just in the first year of the chain’s implementation of the program. Based on an actual average kiosk purchase Nexpansion has recorded of $32, Kent estimates that a 200-store retailer can expect to reap first-year sales of $2 million to $6 million. But that’s only if the retailer provides effective marketing support, such as prominent mentions in weekly printed fliers and well-placed signs in stores.

Kent adds that if the program is marketed successfully enough to elicit a 10% increase in loyalty among its base kiosk customers, the retailer should realize another $5 million. She also figures that kiosks enable retailers to save up to $500,000 a year in operating costs related to handling special orders for products not normally offered in stores. In addition, the loyalty points shoppers earn on kiosk-based purchases are automatically applied to the regular store loyalty program.

Some retailers, however, say that promoting kiosks with in-store displays can be difficult, because they need to dedicate as much floor space as possible to promoting in-store products. "We have to offer values in every in-store category every week and communicate that to customers," says a spokesman for P&C; Foods parent Penn Traffic Co., Syracuse, NY.

Moreover, they must also factor in the cost of installing and maintaining the kiosks. Mukul Krishna, an analyst with San Antonio, TX-based Frost & Sullivan, says it would cost $1.2 million to deploy 200 kiosks, figuring an average per-kiosk cost of $6,000. In addition, he says, retailers may have to take on other costs for content creation, kiosk systems management, Internet access fees and network costs. "It is, therefore, more of an uphill battle for kiosk vendors to convince potential clients of the return on investment in the present economic climate," he says. "I’m not saying that this is how it will remain, but as of now this is something that potential customers are going to pay a lot of attention to in making their decision."


Kent says that retailers should be able to recoup these costs by selling advertising on the kiosks to manufacturers who offer products through the kiosks. She adds that kiosks can also be used for more than one type of service, such as providing bank account access as well shopping portals.



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