April 25, 2005

Self-service trends

self-service-research.jpeg Self-service kiosks and self-checkout are among the hottest products in the integrated systems industry group. The sector includes companies making specialized computer systems for a host of vertical markets, such as banking and finance, government, broadcasting, retail and restaurants.

New Technology Checks Out
Fri Apr 22, 7:00 PM ET

Patrick Seitz

The self-service revolution that started with automated teller machines and pay-at-the-pump gas stations has spread to the retail, travel and hospitality industries.

Grocery stores, hotels and restaurants increasingly are installing self-service stations. And that's ringing up sales for integrated systems vendors like NCR (NYSE:NCR - News) and Radiant Systems (NasdaqNM:RADS - News).

Self-service kiosks and self-checkout are among the hottest products in the integrated systems industry group. The sector includes companies making specialized computer systems for a host of vertical markets, such as banking and finance, government, broadcasting, retail and restaurants.

Shoppers like the new self-service options because they speed the checkout process and put them in control. Businesses like them because they improve efficiency and customer satisfaction.

Consumers have embraced such self-service technologies as airline kiosks for printing boarding passes and choosing seats. Now grocery stores are getting in the act with self-checkout lanes. And hotels are adding kiosks for check-in and checkout.

"It's a self-everything world," said Michael Webster. "Consumers overwhelmingly are voting in preference for using self-service because it gives them greater convenience. It expedites, whether they're trying to finish a shopping trip or get the boarding pass to get through security. Self-service is just a much more efficient process."

Sales of interactive kiosks totaled $492 million worldwide in 2004, a 6% increase over the prior year, according to researcher Frost & Sullivan. Sales are expected to grow at a compound annual rate of 8.1% between 2003 and 2010.

It's just one healthy niche in the overall market for information technology in vertical industries.

Corporations worldwide spent $965 billion on IT last year, says researcher International Data Corp. The largest vertical market was banking, which represented 11.9% of the total. Discrete manufacturing was second, with 11.8%, and government, with 11.3%.

A common theme linking these companies is they sell systems that do more than record transactions and other tasks. They provide useful data for companies to gain insight into their operations and their customers.

Name Of The Game: Businesses and government agencies are looking for new computer systems that can improve efficiency and give them data to make better decisions.

Sales of integrated systems can be hurt by a slowing economy. But some areas, such as self-service technologies, are seen by customers as a necessary expense.

Other products -- like ATMs -- are going through a replacement cycle. Banks are looking to upgrade old ATMs with systems that provide advanced services and meet new regulatory requirements.

Self-service technologies can ease the perpetual shortage of sales clerks, says Rufus Connell, an analyst with Frost & Sullivan. Self-service terminals let one employee do more, such as manage four checkout lanes instead of one.

Retailers also can deploy sales clerks to other areas of the store for better customer service.

"Businesses have a choice," Connell said. "They can either improve their customer service or take advantage of the cost savings."

The resurgence in business travel is prompting hotels to upgrade their information systems, says Jim Yin, an analyst with Ehrenkrantz King Nussbaum. Micros is one company benefiting from the trend, he says.

"Business travel since 9-11 has continued to improve," Yin said. "And only recently have they done anything to upgrade their infrastructure. So they're doing a little catch-up in trying to rebuild their reservation systems and their checking-in and checking-out process."


Self-service technologies are expanding into new areas and offering better capabilities.

Pennsylvania-based Wawa convenience stores, for instance, use touch-screen kiosks for customers to order sandwiches and pick the toppings.

"They've had tremendous success with it, just taking a piece of the process and automating it and putting it into self-service," said Stephen Smith, an analyst with research firm Gartner.

It speeds up the ordering processing by eliminating the "um" moment when the clerk asks customers if they want mayonnaise or mustard, he says.

Companies are looking to put speech recognition, biometrics and radio frequency identification capabilities into future self-service and self-checkout systems.


IDC expects worldwide IT spending by vertical markets to reach $1.24 trillion by 2008. That represents a compound annual growth rate of 6% between 2003 and 2008.

Some customers, such as banks and hotels, are replacing and upgrading their systems. Others, like retailers and restaurants, are adding entirely new technologies.

Retail systems, including self-checkout and photo kiosks, made up 25% of interactive kiosk sales worldwide last year. Tourism, transportation and entertainment was the second biggest category, with 9% of sales.

The U.S. is the biggest market for interactive kiosks, including self-checkout terminals. It accounted for 66% of sales last year.

Europe was second with 21% of sales, followed by the Asia Pacific region with 9%, Frost & Sullivan reports.

Upside: Integrated systems vendors are benefiting from increased spending in vertical markets for new information systems.

Their customers want systems that can improve productivity and customer service. They also want to be able to use data gathered by these systems to hone their businesses.

Risks: The rollout of self-service systems could backfire if customer service declines.

The success of such systems depends on how retailers use them, Smith says.

"If they only move on it as a way to deal with labor issues or as a way to improve their productivity, it's going to disappoint customers," he said.

Posted by keefner at April 25, 2005 02:28 PM