October 29, 2003Convenience Store BusinessExcerpt -- Kiosk Information Systems and TouchPoint Solutions Inc. have paired up on another c-store deployment: the new QPIX-2000 Digital Photo and Film Processing Center, a self-contained, photo-finishing station. Easy as A, B, C-store Talk about a match made in heaven. Convenience stores are based on the business of offering a multitude of services in a very tight physical space. They are meant for fast action and ease of use. Their goal is to make life a little bit easier for consumers. Do those definitions sound familiar? They work for "self-service technology," too. 1,2,3s of working with c-store operators: 1. Identify factors of ROI; Indeed, c-stores are a growing market for kiosks. Some technology providers, such as Info Touch Technologies and Cyphermint, have already based much of their businesses on supplying software and services to c-stores. Info Touch�s relationship with Circle K, and Cyphermint�s with 7-Eleven are among the most well-known and successful deployments in the self-service industry. Coinstar is also getting into the game, having just introduced its new Top-Up Kiosk, which offers a range of services like self-serve bill payment, prepaid cash cards, cell phone mobile content, online computer game time, prepaid wireless and long distance, and prepaid Internet. C-stores are a market in which Info Touch has "laser-like focus," said Hamed Shahbazi, the company�s chairman and chief executive officer. He said that there are 120,000 c-stores in the United States alone. C-stores see an average of about 1,000 people walk through the doors each day. Shahbazi pointed to the "c" in c-store: "The operators are selling time. There is nothing they offer that a customer can�t buy cheaper elsewhere. Whether it�s cigarettes, coffee, cold drinks or salty snacks they want, the customer can park and be in the middle of the store within 10 seconds." The point is that c-store operators are not selling products, but convenience. And they are always on the lookout for ways to find new streams of revenue. E-services fit into that mix quite well. With a kiosk, c-stores can deliver a number of products from a small footprint. "In the next 24 to 36 months, self-service in c-stores will be a heavyweight category," said Shahbazi. "There�s not a huge right payoff now, but the future will tell." "Self-service is an absolute fit in convenience stores," added Joe Barboza, president and chief executive officer of Cyphermint. He points to another definition for the "c," and that is "community." He explained that if c-stores are to compete with local grocery stores, they have to offer something special to the communities they serve: something the large stores do not. And that something is e-services. "C-stores can use kiosks to let members of the community pay their bills, do banking, buy movie tickets, shop on the Internet. This variety of goods and services make the c-store environment unique," said Barboza. Complete Circle K There are about 160 ZapLink terminals in Circle K stores in Phoenix and Tucson, Ariz.; and Las Vegas. There will soon be another 50 to 100 terminals added in Arizona. There are also nine in California, and plans call for expansion to Charlotte, N.C.; and Florida. The objective is to have 500 units deployed. The ZapLink initiative was launched in September 2001 with the goal of implementing a sustainable and profitable business model, and introducing innovative e-based solutions to customers seeking convenience. The services include bill payment, money transfers, interactive mapping and directions, e-couponing, point-of-sale-based advertising, purchase of lottery tickets, public and private video and photo e-mail, general-purpose Web surfing and e-mail access. Michele Tihami, director of ZapLink services at Circle K, said, "Our original thought was that pay-per-use Internet would be the driver for these units. But it never was. We added Leap Wireless as a billing partner and realized the potential to make money." Shahbazi said the number of services have grown as Info Touch has sought new business partnerships. One such partnership is with EWI Prepaid, a payment processor. EWI holds the patent on real-time PIN delivery. The vendor will provide Info Touch with a transaction platform for issuing PINs for purchasing items like prepaid phone cards and wireless phone service. Pat Hazel, chief executive officer of EWI, said he was impressed with Info Touch�s emphasis on the business case for self-service in convenience stores. "They have been increasingly successful in placing kiosks. They aggregate the right combination of services," said Hazel. "Info Touch understands business fundamentals and focuses on services that will achieve ROI. They concentrate on the best services, instead of on offering the broadest range of services," he added. Info Touch has most recently partnered with GTECH Holdings Corp. and the California Lottery to offer a self-serve lottery feature on selected ZapLink Web-based kiosks in its California stores. Placing the lottery function on ZapLink improves the gaming experience and eliminates the need for lottery customers to go through a cashier to purchase online tickets. Customers may still purchase lottery tickets from a cashier if they choose to do so. Circle K convenience-store customers can now play their favorite online lottery games at nine ZapLink e-services kiosks at select stores in Modesto and Sacramento, Calif. Francie Mendelsohn, president of Summit Research Associates, is impressed with the variety of services offered. She said, "There is an unbelievable number of people using ZapLink each day, and each pays a $2 transaction fee. The revenue that directs into the stores� and providers� pockets is significant." She noted that the units "pay for themselves in no time." The key is a steady stream of customers who gladly pay the service fee. "The un-banked population is used to paying service charges. Two bucks is nothing to them. They are just happy to be able to pay a utility bill at the last minute and know that the phone won�t be shut off the next morning," said Mendelsohn. Info Touch applied a profitable business model by securing multiple streams of recurring revenues from transactional applications, advertising and sponsorship of nationwide brands including Coke, Nestle, M&M and KB Home, and metered or pay-per-use access of services like general Web-browsing and e-mail. Oh, Thank Heaven About 1,000 Vcom units are found in 7-Eleven stores in 15 states. With the units, customers have touchscreen access to services such as bill payment, deposit capability, event ticketing, travel directions and online shopping. The terminals accept credit cards or cash for Internet purchases right at the machines. Vcom merchants include Best Buy, 1800flowers.com, JewelrySprite.com, eBags.com and US Health Services.
Advertising and sponsorships are also available on Vcom. Currently, national organizations including Nestle, Dreyers, Wonka, Pepsi and Instant Auto all promote their brands and products at Vcom.
Barboza said that there is little cost to the store owner to have a Vcom unit on site. The store doesn�t even need to purchase a high-speed Internet connection, he explained. "Vcom will function with a 56-k dial-up connection, which the banking partner is probably already paying part of anyway," he said. Every time a customer makes a purchase at the unit, Cyphermint and the store owner receive commissions. Plus, Barboza said Cyphermint research shows that 73 percent of the customers who use the ATM portion of the Vcom unit will shop in the physical store, as well. The kiosks also offer savings in terms of personnel. "We figure the unit costs about half the amount of hiring a cashier," said Barboza. And the unit makes existing employees more productive, since it can offload time-consuming tasks as checking lottery numbers and cashing checks. Vcom units are found exclusively in 7-Eleven stores today, but Barboza said he is having conversations with other organizations to provide similar functionality to their customers. These organizations include stop-and-go gas stations, pharmacies and community banks. Cyphermint's Vcom Challenges of the Market Barboza said one challenge Cyphermint has overcome is working around c-stores� various existing banking partners. For her part, Tihami said she has very specific challenges training and motivating employees in the convenience-store environment because their turnover rate is so high. "The c-store industry is a tricky one, because you have $5 to $7-hour workers who might not really care about learning something new," she said. "Keeping mindshare is a challenge." Tihami�s solution is to keep a high profile at the stores with Zaplink representatives and to offer regular information to operators via e-mail. "Giving constant support really jazzes people," she said. "You can�t just stick a kiosk somewhere and say, �OK, there you go. Use it.� It takes a concerted effort." Other C-Store Opportunities Pro Tech and Radiant Systems are vendors tapping into the self-service market in gas-and-go convenience stores. The companies are in tests right now with several c-stores, allowing customers to select and pay for quick eats while they are waiting at the gas pump. Kiosk Information Systems and TouchPoint Solutions Inc. have paired up on another c-store deployment: the new QPIX-2000 Digital Photo and Film Processing Center, a self-contained, photo-finishing station. It is compact enough for the space-challenged c-store environment. Powered by TouchPoint's Catapult software, it also offers a credit-card and cash-processing vending machine. NCR has miniaturized its FastLane self-checkout system for c-stores, and has added a lottery ticket-purchasing function. The key to this type of technology in c-stores is clear, according to Hazel. He said kiosks will represent 20 percent of the prepaid world alone by 2007. "Retailers will make $3 billion in commissions by 2007. That�s potent information," he said. "If they can get people out of the queue and over to the kiosks, everybody wins."
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