Article

Canada's kiosk climate: the benefits of extremes

Canada's kiosk companies are overcoming hurdles presented by a scattered population in a large geographic area. Sometimes, doing business means looking south.

February 21, 2004

Canadian kiosk companies may experiment with kiosk projects on their home turf, but almost all seek their fortunes internationally-most with their southern neighbor, the U.S.

Being north, looking south

Canada, the second largest land mass in the world after Russia, has only about one tenth the population of the U.S. Both of these facts reverberate in the kiosk business.

Yves Mailhot, president of Moonrise Systems Inc. of Kanata, Ontario, makers of NetStop Internet kiosk software, said, "I have very few customers here in Canada. I would say probably a good 50 percent would be in the U.S., and probably the rest would be divided between Europe and South America. Canada is probably less than one percent of my customers."

Bob Maloley, president of kiosk software company Visible Advantage Corp., agreed that the market is small. "You have to remember though that it's a function of scale," he said. "Most companies such as ours that are trying to address the kiosk marketplace tend to look at a global marketplace as opposed to a national marketplace, per se."

Whatever Canadians gain from having more elbow room than other countries, the low density of Canada's population has two drawbacks for the kiosk trade.

Julian Bowron, president of kiosk manufacturer The Kiosk Factory, based in Toronto, said, "The population is so much more thinly spread out here that getting a national network of kiosks going is very difficult."

There are, in fact, not many potential national customers.

"From a sales viewpoint, the thinness of the population means that it can be very hard to get a national client, because there are so few of them," Bowron said. "Right now 85 percent of our business is in the United States." 

One exception is Info Touch Technologies Corp. The company has deployed about 370 kiosks in Chapters bookstores nationwide.

Hamed Shahbazi, president and chief executive officer of Info Touch, said, "While the geographical layout of Canada certainly does introduce challenges in establishing national networks, there are still national chains."

Shahbazi said companies should continue to make the effort. "You just have to be a little more wily in how you set up your networks; you have to do more homework."

However, Bowron said that The Kiosk Factory, which has deployed 2,500 Fast Lane movie theatre ticketing kiosks in Famous Players theaters, has gone as far as it can in Canada. He has begun a pilot of ticketing kiosks "south of the border," he said.

Brian Sullivan, president of NCR Corp. of Canada, takes a different view, feeling that the way Canadians are spread out creates a desire for technology.

"Europe's very dense. The distance between points is small. In Canada, distances are larger, and therefore perhaps the market is more accommodating in that respect (to kiosks)."

Under the weather

Canada's frigid climate dictates the development of rugged systems for exterior applications.

"We have deployed exterior-grade kiosks, quite a few of them," Bowron said. "I would say there's an element of us having an advantage in that we're pre-conditioned to work in climate extremes."

Oui, bilingual

With two official languages, not surprisingly, bilingual applications that offer both French and English to users is an essential component of Canadian kiosks.

"Here in Canada the market would be very limited if it didn't support this language feature, not only to have one or the other but to have both at the same time," Mailhot said.

However, bilungual applications are not unique to Canada, as Maloley pointed out: "It's not unlike some of the things that happen somewhat more naturally in certain geographies within the U.S."

Often, applications in the U.S. are available in both English and Spanish. In large, cosmopolitan cities such a Boston, Fleet Bank offers ATM applications that allow Fleet customers to use one of a number of languages.

Still, experience with multi-language features helps Canadian companies market their products abroad.

"It turned out to be a great selling feature in Europe as well," said Moonrise Systems' Mailhot.

Transaction driven

Shamira Jaffer, senior vice president of TouchPoint Technologies Corp., said that the Canadian kiosk market is distinguished by an emphasis on financial transactions, rather than advertising-driven kiosks or Internet access kiosks.

"You're actually selling something. You're selling a product, and the person walks away with that product," she said.

Bowron agreed that it is difficult to build profitable kiosk systems that depend on advertising revenue.

"They have not been a success for anybody who's tried them," he said.

He does believe that public Internet access terminals have viable markets elsewhere. "Public Internet access terminals probably stand a much better chance in a second-world environment than in a first-world environment, because here computer use and ownership among the people who would want that service is more or less ubiquitous."

But lack of success doesn't mean it can never be done in Canada.

"I tend to agree that there hasn't been a successful model," Shahbazi said. "But I would really caution as to drawing conclusions from that. I don't think anyone has done it particularly well.

"We feel someone like Chapters will be highly successful because it represents a true national distribution," he said. "I wouldn't rely on advertising as my pure source of revenue."

He said that transactional revenue is more important than advertising revenue because it enables the kiosk to create revenue from its traffic.

One network for all

One plus in creating transaction-based kiosks is there is only one national transaction processing network, called the Interac Association. In contrast, there are about 30 in the U.S.

Canadians use debit cards like nobody's business. A recently-released report by the Bank for International Settlements (BIS) showed that Canada leads the world in debit card use. In 1999 there were 54.3 Interac debit transactions per Canadian compared to 44.2 in the Netherlands, 41.3 in France and 27.5 in the U.S. In 2000, debit transactions accounted for $85 billion in sales.

This high rate of use led to a requirement for debit cards on the kiosks.

"In Canada, because of the pervasiveness of debit cards, that became an integration requirement for us, in that kiosk providers wanted to see the debit or pinpad device connected directly to the kiosk," said NCR's Sullivan.

Canada's climate extremes and smaller market have challenged national local kiosk companies to work hard to succeed at home. Some believe that by perfecting their models in Canada, Canadian kiosk deployers may well have a better chance to succeed worldwide.

Frank Sinatra once sang of New York, "If I can make it there, I can make it anywhere." Perhaps taking a cue from Ole Blue Eyes, Bowron said, "If it will work here it will work anywhere."

[Editor's note: Info Touch Technologies became Tio Networks in April 2006.]