Multi-Channel Retailers Increasingly Rely on Internet-Based Kiosks
Nice case study on the NCR site about VANs and KIS
Multi-Channel Retailers Increasingly Rely on Internet-Based Kiosks to Bridge Gap Between Channels
by Timothy P. Henderson, Editor-in-Chief
STORES Magazine, October 2001
Despite advances in technology and consumers' tech savvy, retailers must ensure that kiosk applications provide definite customer value
Three million consumers are projected to purchase nearly $200 million in goods and services via kiosks during 2001, an average of $57 per buyer. By 2006, and in large part due to the ever-increasing number of retailers launching kiosks, those figures are projected to increase to 23 million users, $6.5 billion in purchases and an average of $289 per buyer, according to a Jupiter Media Metrix report, "Kiosks, Empowering Customers to Close the Sale."
Although kiosk technology has been available for almost two decades, it's only been over the course of the past several years that such diverse retailers as Kmart, Crate and Barrel, Gap, Barnes & Noble, 7-Eleven, Wal-Mart and Staples have begun widespread implementation of the devices to help their customers with everything from purchasing out-of-stock and gift registry items to obtaining product information and creating customized products.
Industry observers say the lag time is due in large part to the lowering of technology barriers. Widespread Internet usage and high-speed connections have replaced yesteryear's relatively slow laser discs and CD-ROMs, and PC costs have decreased dramatically.
"Fundamentally, the failure in the initial implementations of kiosks were in and around the technology and the deployment of the technology," says Nelson Gomez, general manager for kiosks at Dayton, Ohio-based NCR.
"The connotations of kiosks in the industry are, 'Temporarily out of order' or 'Please see clerk' -- very bad connotations. That was primarily around the technology that was originally implemented," Gomez continues. "Today, we've had the fortune of technology advances that have enabled us to provide high availability and highly reliable kiosks with management systems that allow us to remotely detect and understand exactly the state of the device."
Despite such advancements, however, retailers must still jump several hurdles to attain successful kiosk implementation. While 77 percent of consumers have noticed kiosks in stores and 41 percent have used one, the Jupiter Media Metrix report also found that of those consumers who have not used a kiosk, 76 percent avoided them because the devices were unable to provide any service they needed at the time.
"This has to be integrated properly. It has to be part of an overall strategy for the retailer that says that this is just another channel or another information portal for the customer to access my value proposition as a retailer," explains Bob Henshaw, business line manager for retail POS and kiosk hardware at IBM. "If it doesn't have that integration, it'll fail."
KID MAGNET
Parallel with the technology advancements that have helped retailers increase their kiosk usage, consumers -- especially younger consumers -- have become more familiar with kiosk-type technology. A recent U.S. Census Bureau report, entitled "Home Computers and Internet Use in the United States: August 2000," indicates that nine out of 10 school-age children (6 to 17 years old) had access to a computer during 2000.
Such data is not lost on Vans, a Santa Fe Springs, Calif.-based retailer of branded, active-lifestyle footwear, apparel and accessories aimed at the youth market of skateboarders, in-line skaters and BMX freestyle riders. At the merchant's 150 stores, customers typically are in their 20s or 30s and are both computer and Internet savvy.
That tech savvy increases among customers at the merchant's eight skateparks, a hybrid of retail store, entertainment venue and alternative sports arena, where the average customer is a 14-year-old male. Vans currently operates eight skateparks, with another four under construction. In addition to the skate areas, the parks offer lounge areas with customized videos, custom-built furniture and a bank of eight kiosks.
"We call it a kid magnet," says Neil Lyons, president of retail stores for Vans. "It's actually a retail footwear, apparel and accessory store. It has a full-service pro-shop that sells over 500 skateboards, all the way down to nuts and bolts. We sell bicycles, BMX bikes, helmets, pads, anything that goes into the sports."
Like some other retailers that have created a lifestyle around their products, Vans is a culture, says Lyons. "We built everything we do around alternative sports," he explains. "We're not a fashion company. We're an athletic company. Our shoes are influenced and signatured by pro skateboarders, bikers, motocross riders, surfers -- all those people. That culture builds around our products."
In addition to e-commerce, the Vans touchscreen kiosks include information on sports, events, tours, athletes, contests, music and other items of interest to customers. Providing Vans shoppers with such information is vital, Lyons says.
"We're a Generation Y company. Kids are our business. Unless you're in touch with the Internet and have a huge Internet site, you're not in touch with kids," says Lyons. "We want to bring that image of Vans to those kids, and the best possible way to do it is to give a kid the opportunity to walk into one of our stores or our skateparks, go into the Vans website and see what we're up to and what we're all about."
While Vans only recently began the roll-out of new kiosks supplied by Broomfield, Colo.-based Kiosk Information Systems, the retailer has actually been using kiosks for much longer. They were custom-built and bulky, however, and involved a process that Lyons says finally became too labor- and cost-intensive. "First of all, they were ugly. Second, we were buying way too many. We needed to go to an expert," Lyons notes, recalling how the merchant first came to work with KIS.
In addition to the skateparks, the KIS kiosks are being rolled out to the retailer's traditional stores. Vans' in-house IT staff handles upkeep of the units. "When we go out to the parks and open them, we have an IT team that goes out and makes sure that they're all unpacked and ready to go," says Lyons. "We also have a manual in the stores and a hotline number to call. We don't like things to go down -- it's very negative. If they have a problem, all they do is call the hotline and they bring it back up."
Vans is using one of the standard KIS kiosk designs: the slim, simple and metal KT-110 Stealth kiosk. "It fits their image, fits the type of thing that they're looking for, the types of transactions they plan to conduct, the types of applications they plan to use. It just worked," says KIS president Rick Malone.
'THREE-TAIL' GLUE
Internet-based kiosks like those installed by Vans are becoming integral to the overall retail strategy, according to Francie Mendelsohn, president of Summit Research Associates, a Rockville, Md.-based kiosk consulting firm.
"It's sort of the glue of retailing, three-tailing as someone put it -- catalog, web and bricks-and-mortar. Kiosks really transcend all those. I consider it the glue of three-tailing," she says. "By itself, could it stand alone? Not really. It's got to be tied in."
At KIS, Malone foresees a time when retail kiosk integration will virtually reach a store fixture level. But he also cautions that kiosks are not the next retail revolution. "I don't think that kiosks can be taken in the same light as retailers and the dot-com economy of a couple years ago like it's going to take over the world. It's simply a supplemental tool that retailers can use to improve their operations," he says.
It's precisely because of the need to properly and carefully integrate retail kiosks that some implementations have failed, and industry pundits predict more such failures. Indeed, says Raymond Burke, a researcher at Indiana University's Center for Education and Research in Retailing, retailers have been struggling for years to develop a kiosk application as compelling as the ATM, which is considered by many to be the grandfather of all kiosks.
The most successful applications, notes Burke, have been those that increase shopping convenience by solving a problem, such as checking product inventory or prices and ordering items. But because kiosks can do so many different things, he adds, retailers are sometimes tempted to do too much.
"One of the areas where retailers could do a better job of implementing retail technology is in understanding how the consumer shops the store and tailoring the kiosk applications to the stage of the purchase process that the consumer is in," Burke explains. "The kind of application that might work well in a dressing room is going to be different than the application you have as the consumer enters the store."
Most industry experts agree with Burke's assessment that retailers need to conduct market tests of various kiosk applications to ensure a successful and larger roll-out that provides definite consumer value, while also providing various in-store kiosks tailored to immediate consumer needs. Both are made possible by the falling price of kiosk technology and shrinking of the typical device's footprint.
"You start with a few, and you get the kinks out," explains Mendelsohn. "You need to be flexible, you need to understand that what you think is the killer application, the public might not. You have to be able to swallow your pride and go with what the customer dictates, what they've shown is of value to them."
ONGOING EVOLUTION
At NCR, Gomez applies the adage "measure twice, cut once" to kiosk implementations. "Do your planning up front, get buy-in, and make sure you have a strong business model around the first-out application," he advises.
"I truly believe that kiosk technology will be, from a retailer's perspective, one of the major points of differentiation in the shopping experience. It will be a competitive advantage," Gomez continues, adding that a retailer's initial application needs to pave the way to a successful implementation.
"This is going to be continuum and an evolution. It's not going to happen overnight," Gomez cautions. "You'll have first-out applications that can warrant the investment in the technology and the infrastructure, and then you'll see an overlay function of additional applications on a specific device."
One company that has developed several unique kiosk applications is Netplex Systems, an Edmond, Okla.-based provider of industry-specialized business system solutions. In 1999, Netplex worked with the now defunct Custom Shop to develop an application that allows for custom design of shirts via Internet-based kiosks. Unfortunately, two weeks prior to completion, the retailer filed for bankruptcy. "That left Netplex holding the bag," recalls Larry Davenport, senior vice president and general manager at Netplex.
The silver lining, however, was that Netplex retained ownership rights to the application. Since then, the company has renamed the application and is marketing it to other component-driven customers. "When you go to build a shirt, for example, you have the ability to choose from a variety of colors, materials, collar settings, pockets, cuffs, whether you want it monogrammed, the buttons you want, do you want a tailored look, a blousy look, a suit-type of shirt and so on," explains Davenport.
"Now this application extends itself to, for example, a bicycle manufacturer that may want sell bicycles over the Internet. They could use the same basic engine, but instead of having a collar, they may have different types of wheels or different types of calipers for the brakes," he continues. "It's a component-driven engine now as opposed to being purely customized, tailored clothing."
Netplex has several prospects interested in the application, according to Davenport. In addition, a number of retailers and cosmetics manufacturers are looking into the company's Kiosmetics application, which allows consumers to interact with a kiosk to select and purchase cosmetics based on their personal input. Users can peruse favorite brands, select their season and enter information on hair and eye color, skin tone and type, and wardrobe style and color. The kiosk then produces a list of cosmetic recommendations.
The Kiosmetics application is still being developed. "The skin tone is one piece of it. What has to fall out of that, in order for it to be something that is extremely attractive for a consumer, is the tie-in from that skin tone back to a specific foundation color, for example," notes Davenport, adding that with any single cosmetics manufacturer, there may exist many different foundation derivatives.
"Somebody has to write the parameters that say, 'When it's this specific skin tone, it goes to this specific foundation model number,'" Davenport continues. "You have to get the manufacturer's involvement in that and their willingness to participate. At the same time, you're getting a retailer to say, 'Yes I want to put it in my retail stores.'"
pdf link
link: http://www.ncr.com/repository/articles/store_automation/sa_stores_oct01.htm
Posted by Craig at November 14, 2003 03:42 PM