Coinstar counting on new kiosk concepts to expand footprint

March 20, 2012

Coinstar is combing America for the next big thing in self-service, testing concepts in a variety of markets, including coffee, gadgets, recycling and health care.

Although the company has the coin-counting kiosk market cornered as well as a strong hold on movie renting with its redbox kiosks, Coinstar is looking to add a third major prong to its portfolio to keep its momentum.

"At the highest level, we view ourselves as a growth company and have been for years," said David Veenstra, Coinstar. "First, in the coin business since the '90s and then with redbox over the past 10 years, but to continue to grow we have to find new channels of growth."

The company has put in place three categories to help discover those growth channels: Organic, Investing and Mergers.


The company's organic ventures are kiosk ideas created internally. Teams are now testing a coffee kiosk as well as a gadget-dispensing kiosk called Gizmo, but it's also working on four other concepts that it's keeping under wraps, Veenstra said.

About 50 of the 3-foot-by 3-foot coffee kiosks are running in locations around the country, but Veenstra expects that number to grow to 500 by the end of the year. The company has partnered with Starbucks, which have labeled the kiosks with its Seattle's Best Coffee brand.

Gizmo, which sells used video game consoles, iPads and other electronics, is the other concept Coinstar has launched publicly. Eight retail locations in Texas and California are testing the concept.

The company got that idea from an employee who entered one of Coinstar's biannual contests asking workers for kiosk ideas, Veenstra said. The top three ideas win cash prizes.

"Two of our six organic concepts came to us that way," he said. "It's a really rich source of ideas and shows that it's not always the most senior folks that come up with these things. It this case, it was a smart gentleman in our IT department."


Instead of simply buying companies, Coinstar sometimes chooses to back kiosk concepts it believes have promise and could eventually help its own business grow. Two kiosk concepts that fall under this category for Coinstar are ecoATM, an automated recycling station that captures, tracks and recycles mobile devices, and SoloHealth, a consumer-driven health care technology company that develops and deploys health-screening and information kiosks.

Veenstra was not able to comment on the financial details of the ecoATM nor the SoloHealth deals but is excited about how they could each help Coinstar expand its presence in other markets.

Another way Coinstar invests in outside kiosk ideas is through its annual contests at business colleges, including NorthWestern's Kellogg School of Management and Booth School of Business at the University of Chicago.

"We are able to give out modest prize money to get these kids engaged to think about what the next automated retail concepts are," Veenstra said. "They are able to think about it and to solve consumer needs."

Each White Board Challenge, as Coinstar calls the contest, brings seven finalists to company headquarters who present their kiosk concepts to executives.

"It's been a source of rich ideas for us," he said.


The final way in which Coinstar hopes to expand is through buying other companies. In fact, it made headlines last month when it agreed to purchase NCR's Blockbuster-branded kiosks for as much as $100 million.

The playbook

No matter which of the three business ventures Coinstar is exploring, Veenstra said the company operates from a playbook borrowed from the venture capital community. Specifically, the company has integrated three elements into its business operations:

  • Hiring talented general managers and entrepreneurs.
  • Developing advisory boards and
  • Paying for performance.

Hiring talent: Some may think it's not necessarily important to hire super stars to run a business when it's merely an idea, however, Veestra disagrees.

"Even when it's just an idea and there's not yet much to manage, you gotta invest in talent," He said. "You have to find people who have that entrepreneurial background."

Advisory board: The second key to succeeding with a new business venture is creating a strong advisory board.

"Let's make sure we have right boards in place within the company and with the right expertise," Veenstra said.

For example, Coinstar CEO Paul Davis serves on the boards of three of the company's new ventures. The boards also help each business develop and measure goals and milestones to ensure success.

"We try to get them the right exposure and we also try to bring in external folks with the intent to make sure we are being objective," Veenstra said.

Paying for performance: The third element taken out of the venture capitalist playbook is paying for performance, according to Veesntra, who said Coinstar has created a creative corporate incentive structure to motivate employees to help grow the business.

"We compensate our venture teams for creating value, or said another way, for building and growing profitable businesses," he said.

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Topics: DVD Kiosks , Kiosk Design , Retail

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