Canada banks on automated kiosk market
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TORONTO - A growing number of retailers are installing automated kiosks in the corners of their stores, hoping to drive product sales for DVD rentals or even iPads in a space once reserved for dust bunnies and trash bins.
It's a trend that's gaining momentum in Canada after several years of success in the United States, where everything from acne face wash to live bait has been sold out of the automated dispensers.
"Look at the advantage, you don't need a clerk and your rent is a fraction of the cost," said Shamira Jaffer, the founder and president of Signifi, a company based in Mississauga, Ont. that's developing the technology for the retail market.
Jaffer hopes Canadians will warm to buying a wide array of items from machines, such as cosmetics, electronics and video games.
"It's only a matter of time," she added.
Elsewhere in the world, automated kiosks have been operating for years. In Japan machines dispense fresh meat, underwear, toilet paper and potted plants. In the U.S., test markets made way for selling fashionable purses and even a round-the-clock convenience store called Shop 24.
Then there's the "Gold to Go" machine in Abu Dhabi that sells small, customized gift-wrapped gold bars at the daily gold price.
Canadian businesses are taking a more conservative approach, choosing consumer favourites like DVD rentals to test the market, but creators of the kiosks are optimistic that this is just the start.
The concept seems to be working for a handful of companies that dove into the Canadian DVD rental kiosk business to take advantage of a nationwide shuttering of video chains.
Blockbuster Video sold off all its Canadian assets last year while Rogers Communications (TSX:RCI.B) has announced plans to completely exit the physical rental business in favour of its on-demand cable services.
"That leaves a billion dollars worth of business open in Canada," said Jim Gormley, the former head of Jumbo Video who has now launched a kiosk business called Planet DVD in the Toronto area.
"A lot of people still like renting" physical DVD discs, he added.
The concept has been tested in Canada before, about 20 years ago, when The Amazing Video Machine rolled out at convenience stores, renting VHS tapes to consumers 24 hours a day. The concept was popular at first, but gradually died off in favour of major video chains that offered up to hundreds of copies of new releases.
Players in the kiosk industry said the machine was ahead of its time because consumers weren't accustomed to paying with their credit cards at a relatively anonymous machine. But now, in a world where many Canadians shop online, using a credit card regularly doesn't seem so risky.
Kiosks, while expensive to install at first, run at a relatively low cost for retailers. That has encouraged a rush of companies to hit the market, including Best Buy Canada, Playdium, and Zip.ca, once only a mail-order rental service. Each charges about $2 or $3 per night for a DVD.
While the plan might seem breakthrough, DVD kiosks have been a huge success in the U.S. for years, where Redbox is considered the biggest threat to the market share of Netflix, which delivers movies by streaming and DVD-by-mail. Last week, Coinstar boosted its first-quarter and full-year outlook on the success of its Redbox kiosks, sending the company's stock to a 52-week high.
In Canada, all of the kiosk operators are private companies, so their revenues aren't made public, which makes it tough to determine whether Canadians are adopting the concept en masse. According to a report from Convergence Consulting Group, kiosks are just two per cent of the market in Canada.
Outside of the movie rental business, the success of kiosks has been mixed.
Canadian Tire (TSX:CTC.A) briefly tested the market with a handful of kiosks that sold clothing and accessories from its Mark's stores. One was placed at the highly trafficked Union Station transit hub in downtown Toronto, generating plenty of attention. But the kiosk didn't catch on and the retailer decided to retire the pilot project.
"There was never really a full-fledged plan to roll it out, but certainly it didn't meet expectations," Mark's spokesman Rocky Hynes said.
Retail analyst Maureen Atkinson, a senior partner at J.C. Williams Group Ltd., said she's a bit skeptical about the widespread success of automated kiosks for retailers.
"In my mind where kiosks work best is where there's very high traffic, and people have time," she said.
"It's not necessarily at Union Station where people are running by to catch a train ... but it can be airports where people are sitting around waiting for their plane."
Last month, Best Buy unveiled six kiosk machines at Toronto Pearson International Airport selling an offering of up to 60 electronics, including headphones, ebooks and iPads.
"What we found is people will forget things ... they need to take with them to make their phones and iPods work properly," said Martin Caines, director of new business at Best Buy.
"From a cost perspective we can put in a machine and it doesn't take up a lot of space. We don't have to staff it."
Caines said the company has also considered installing kiosks at other locations like resorts and casinos where shoppers may be left hanging without an electronic they need.
Kiosks could also find a home in electronics stores where higher priced products, like music players and video games, have traditional been kept under lock and key in glass cases to avoid theft.
The Amazing Video Machine commercial: http://www.youtube.com/watch?v=q9b0AdetkxE