March 31, 2006, 12:00 AM

Bringing the web to consumers

With installations by J.C. Penney and Home Depot, kiosks gaina new respect as a key tool of multi-channel strategies.

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, 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 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 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 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.

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