Self-Serve Kiosks Address A Changing Consumer

March 8, 2006
The emerging self-serve kiosks are borrowing some payment and audit technologies from vending. Consumer product manufacturers are following these developments closely.

Did you know you can buy a $199 ipod® from a glassfront machine using a credit card? You might not be in the market for an ipod, but lots of teenagers are, and they are tomorrow's work force. If they're comfortable making a $199 purchase from a glassfront machine, what does that say about their level of trust with automated payment technology?

As technology creates new possibilities — remote machine monitoring, electronic security, Internet-fed audio-visual content, cashless payment, computerized touch screens — it brings opportunities for a much wider range of products and price points.

Traditional retailers and consumer product manufacturers alike have been following these developments and investing in new automatic retail concepts. Retailers for many types of consumer products are finding that automated, self-serve kiosks allow them to serve more customers faster with fewer salespeople. Supermarkets in particular are investing aggressively in self-service checkout and providing in-store kiosks where consumers can look up product and ingredient information.

Self-serve kiosks that allow consumers to conduct a variety of transactions — including credit purchases, getting cash, accessing the Internet, enrolling in loyalty programs, and more — are becoming more pervasive. As self-serve kiosks advance and offer more payment options, many are integrating some of the hardware and software used in vending machines.

And as brick and mortar retailers are finding use for technology developed in the vending industry — such as bill validators, currency acceptors and telemetry-based remote machine monitoring — the vending industry has begun incorporating some concepts developed in other retail channels to offer new customer conveniences.

Case in point is the Freedom Shopping kiosk that utilizes radio frequency technology to allow a consumer to make a credit or debit purchase in an enclosed space by waving an RFID tag over a reader. (See article on page 62.)

Technologies create new retail formats

Retailers and consumer product manufacturers alike are exploring new business models that utilize new technologies to give customers access to more convenient retail formats. Key technologies driving this are:

  • contactless credit cards, which have multiplied exponentially in the last year;
  • wireless telemetry networks, which are becoming more reliable and also multiplying exponentially;
  • RFID product tagging, which is becoming more affordable, quickly.

While technology evolves, new concepts emerge on the retail landscape. The rapid growth in DVD rental machines and Ipod dispensers are two of the more widely publicized developments.

The potential investment from retailers and product manufacturers will grow even more once successful delivery models are developed. How long this will take remains uncertain at the present time.

Some projects have been under development for several years and face uncertain futures.

The DVD rental machines are an offshoot of an early attempt to bring large brick and mortar-based, glassfront vending machines to the U.S. These fully automatic convenience stores built into the location have existed in Europe for decades. The concept was introduced to the U.S. by Philadelphia, Pa., area entrepreneur, Hettie Herzog.

Herzog's system, Shop 2000, is a self-contained glassfront merchandiser that has up to 200 different SKU facings of varying shapes, sizes and temperature requirements. The 150-square-foot machine accepts cash, credit and debit cards, and is monitored in real time via a computer modem.

Redbox predecessor: Built-in glassfront vending machine

The Shop 2000 was tested as a free-standing unit with fuel pumps in York, Pa., in 2000, and in some McDonald's restaurants in the Greater Washington, D.C. area. The York, Pa., test lasted six months, while the McDonald's test ended as a result of a change in corporate management.

McDonald's opted to downsize the unit and only carry DVDs. It spun off a separate company called Redbox LLC, which is installing DVD rental machines in supermarkets and drug stores nationwide. There are currently more than 800 Redboxes.

Greg Westnedge, who marketed the Shop 2000 for Herzog, said the target market was convenience stores. While the convenience store operators liked the reduced labor cost, their focus was on seeking larger, not smaller, retail spaces. Westnedge currently works as assistant to the president at American Food & Vending, based in Syracuse, N.Y.

All Seasons introduces the Shop24 built-in Glassfront

Herzog, president of Automated Distribution Technologies Inc., Exton, Pa., is presently involved in some European installations for her system.

Meanwhile, a similar unit, the Shop24, has been introduced in the U.S. by All Seasons Services Inc., the Brockton, Mass.-based vending and foodservice operation. McDonald's used the Shop24 after the Shop 2000 for one of its early Redbox units.

All Seasons Services recently installed its first Shop24 this winter at the State University of New York at Morrisville.

The Shop24 machine holds up to 200 stock keeping units and has refrigeration. It accepts credit cards and can vend items as diverse as refrigerated food to products weighing up to 7.3 pounds. The machine is serviced by a regular vending route.

"I haven't seen anything this interesting in a long time that works," said Bob Carmichael, executive vice president of sales and marketing at All Seasons Services. He said there are plans for four more Shop24 installations.

Glenn Gaslin, general manager for Morrisville Auxiliary Corp., which runs the support functions at the State University of New York at Morrisville, said the Shop24 has been popular with students and has saved his organization money. The unit replaced a money-losing attended store. He said the school is getting a commission and pays All Seasons Services no subsidy.

The SmartMart® progresses in Memphis

The most ambitious automated retailing project to date, in terms of investment, has been the SmartMart®, a free-standing, 450-square-foot kiosk with four touchscreen ports that customers can pull up to in their cars. Memphis, Tenn.-based entrepreneur Mike Rivalto has invested more than $11 million into the project since 1986, and has made numerous revisions.

The current SmartMart® replaced a conventional brick and mortar service station and includes five fuel pumps. Customers can buy products at the fuel pump or at the store. Products stored in a canopy alongside the fuel pumps have built-in delivery chutes that allow customers to make purchases on a touchscreen and receive products while fueling.

Prompted by Lexan-protected infrared screens, the customer can pay with cash, credit card or debit card, and will soon be able to enroll in a preferred customer program.

The screen presents a list of product categories. The customer can view images of more than 2,000 products which can be purchased simply by touching the image. A system of picking equipment delivers the selected product from inside the machine and places it on a conveyor belt which delivers it to a slide-out delivery door.

The SmartMart® is linked to a customer service center that monitors all activity and provides live support to customers who need it. A customer can touch a help button and see a live person appear on the shopping port screen. This also allows for age verification, enabling the sale of tobacco and alcohol. The customer, upon request, slides their ID card into a slot and has it digitally photographed and stored in a database.

New uses for traditional vending machines?

Attempts to convert traditional glassfront vending machines into consumer product merchandisers have not been promising.

John Barsanti, a partner in Torridon Companies, a Syracuse, N.Y.-based investment and management firm, oversaw attempts by Staples, Motorola and Reebok to sell their merchandise in glassfront vending machines.

"It is not a simple business model when you're dealing with products not normally sold in vending-type equipment," Barsanti said. "The retailer who is focused on selling exclusively their products through this new low cost distribution outlet has the greatest opportunity for success.

"Manufacturers who are looking for other outlets for their products need to partner either with their distribution/dealer network or with an organization like Shop24 or Zoom Systems which handles multiple lines of nontraditional vending products," Barsanti continued. "The current vending operator is reluctant to sell nontraditional vending products because of the higher logistics cost (increased SKUs) or unproven sales success."

The automated DVD rental machine, however, appears to be a hit.

Touch Automation recently installed its flagship "TA 10" system in a Scottsdale, Ariz., shopping mall. This is an expanded kiosk designed to allow video stores a 24/7 storefront with no staff. It holds 4,500 units in inventory and services eight users simultaneously. The system is the focal point of a 500-square-foot retail storefront.

The system is strictly cashless, accepting credit and debit cards, and transactions are monitored in real time via a telemetry connection, noted Don Blust, CEO and founder.

MovieMate Inc. recently introduced DVD machines with smaller footprints — 3.5 square feet. The machines offer more flexible vending options and cost less than most competitive models, according to Joe Ianno, the company's CEO. The machine communicates data by means of cellular signal.

Ianno said his Centerport, N.Y.-based company has roots in telemetry technology and became interested in vending after making a module for an intelligent vending machine in Belgium.

MovieMate builds its own vending machines and is targeting existing vending operators, Ianno noted.

Zoom Shops offer electronic consumer products

Zoom Systems, which makes a built-in glassfront shop that features an interactive touchscreen, has 100 Zoom Shops in the U.S. and recently announced a goal of placing 10,000 units in five years. The systems dispense portable PlayStations, printer cartridges, DVDs and Ipods in airports, supermarkets, shopping malls and hotels.

The emerging technologies of in-store marketing via digital signage are also crossing over to the vending industry. Retailers are using in-store kiosks to integrate with customer databases, Web content management, inventory data and loyalty programs.

Vending operators can add electronic video screens to their existing machine banks. State-of-the-art vending machines can have a video screen installed on or near the machine that is powered by the machine's DEX port. Content can be uploaded by means of a telemetry connection.

The purpose of the video screen is to allow the vending operator to provide a more impactful advertising message. The operator can use the screen to promote products. It also gives the operator and/or product supplier a medium for selling advertising.

Sanese Services Inc., the Columbus, Ohio-based vending, foodservice and OCS company, has been testing an ATM machine that has such a video screen. Ralph Sanese, company president, likes the in-store signage. "It (the video screen) is going to make the site say what I want to say to their own people (customers) more effectively," said Sanese.

Sanese has been using the video screen to honor employee birthdays.