Article

Kiosk rookies think inside the box

Tired of missing parcel deliveries, entrepreneur Paul Hansen spent $800,000 to develop a parcel delivery and shipping kiosk called Your-Box. If all goes as planned, you may be shipping your boxes in his boxes.

April 25, 2002

Entrepreneur and venture capitalist Paul Hansen often came home to yellow slips telling him he'd missed a parcel delivery. When he was forced to flag down a delivery truck for a computer he'd been expecting, he decided there had to be a better way.

He reasoned he wasn't the only one frustrated by missed deliveries, but he didn't have a solution until a few weeks later, when he drove by an ATM. Why, he asked himself, couldn't there be a similar option for package delivery?

A few sketches, $800,000 in development costs, and approximately one year later, Your-Box, an exterior kiosk designed for 24-hour package pick-up and delivery, made its debut in Fitchburg, Wis. The kiosk was financed by Hansen's company, Nesnah Ventures. In addition to Your-Box, the company, formed a year ago, is funding seven other ventures in the gasoline, ethanol, human resources, and agricultural fields.

Paul Hansen said that the kiosk was one of his lower cost ventures. It and any future pick-up and delivery stations will be operated by new Nesnah subsidiary, Your-Box LLC.

During this test, customers are currently using Your-Box for free, but Hansen anticipates that they will pay an annual subscription of $35 to $55 to use the kiosk as a mailing address.

The idea for a shipping kiosk isn't new-other companies are working on similar products, including the Worthington, Ohio-based self-service kiosk maker AARSYS-but in this case the prototype was created by kiosk novices.

Rookies

Because Hansen knew nothing about the kiosk market, he began by contacting the company that made the ATM that inspired him, Heritage Industries.

The Your-Box shipping kiosk cost $800,000 to develop.

Ray Nelson, Heritage's general manager, said that Heritage primarily manufactures ATM enclosures, though the company has considered expanding into exterior kiosks.

"There's not a lot of standalone exterior kiosks that are out there in the elements: the rain, the wind, the snow," Nelson said. "They wanted a product that was going to stand up to that type of use. We took it on as another avenue to increase business."

Heritage Industries was accustomed to creating shells with one standard door and lock, plus an opening for the ATM. Your-Box required 40 receptacles of varying sizes, all with doors that could be opened and locked by the kiosk's computer. The doors also had to shut automatically.

"It really was quite different. Normally we build a steel building with a hole in the front for the ATM to slide through," he said.

Your-Box's networked computing system and application was created by AXCess Computers Inc., another kiosk newcomer whose business previously focused on computer network consulting and providing Internet service. AXCess, also located in Fitchburg, is owned by Stuart Click. Hansen choose AXCess after being told by several computer development firms that Your-Box couldn't be done. Click believed otherwise.

"After about two days of really just thinking about this, I had the general concept of how all this would work and how to tie it all together," Click said. "I think only a couple of things have changed since the very concept that I have of how to make it work."

A look inside the Box

Your-Box runs on the Linux operating system, and connects over the Internet to a wide area network using VPN technology. VPN, or virtual private networking, is a way of sending secure data over the Internet. Using VPN helps reduce operating expenses, Click noted.

"The beauty of the VPN is that we don't have to have a dedicated leased line between kiosks and data center," he said. "We don't have to have a phone line where it dials long distance. The VPN dials a local provider and hooks up via Internet. It can stay on 24/7."

If the VPN should go down, there is a back-door dial-up connection that will receive calls from AXCess' call center, where staff can complete transactions. For security, Your-Box uses 128-bit encryption, with a firewall on both the kiosk's computer and the wide area network server.

Another cost-saver: Your-Box's application, including the user interface, is Web-based, allowing AXCess to roll out changes through the Internet connection rather than sending a crew to update every individual kiosk.

In addition to operating the kiosk, AXCess operates a help center users can call if they're encountering problems. The help center staff can view security cameras mounted on the kiosk. They can also monitor the network in order to assist customers. The call center is staffed from 8 a.m. to 9 p.m., but as Your-Box expands, Click anticipates moving to 24-hour coverage.

Money box?

Hansen believes travelers, two-income families, and businesses and apartment complexes will be interested in using Your-Box.

He said that Your-Box will rely primarily on subscriptions for the bulk of its profit, and data mining obtained from customer information for additional profits. He cited two reasons why consumers would respond to Your-Box: convenience and cost-savings.

"Everybody's schedule is getting busier and busier," he said. "This just affords people a wonderful opportunity."

In the future, Your-Box will likely charge a small handling fee per package. Subscribers will be able to drop packages off at Your-Box as well as pick them up. The kiosk will also offer packing materials for customers to purchase.

Subscribers would receive an ID number and a PIN, allowing them to retrieve their packages. They would be able to have orders sent to any Your-Box location, a big plus for business travelers, Hansen said.

Click and Hansen both said they would like shipping companies to offer discounted delivery to Your-Box users. They pointed out that the last mile is the most expensive part of any delivery. In addition, shippers generally factor the costs of failed deliveries into their rates.

"What would they charge to deliver it if they knew they could deliver it the first time every time, and they won't have to drive through a neighborhood to do it - they just deliver it to a Your-Box. Maybe it only costs 50 cents or a dollar," Hansen said.

The Your-Box team is waiting until the prototype delivers 100-200 packages before they approach shippers like United Parcel Service Inc. and FedEx Corp. about using the kiosks. However, reactions from local drivers have been positive.

"You talk to the drivers, and they don't want to say this to their boss, but they feel like they could probably deliver twice as many packages if they're always going to these kiosks versus running around to everybody's home," Hansen said.

For even more revenue, Your-Box hopes to offer banner ads both on the kiosks and on the Your-Box Web site. It is considering partnering with e-tailers and charging a fee to companies that wish to offer a Your-Box at their location. Eventually, Hansen and Click plan to franchise Your-Box.

Two-years to ROI

Hansen and Click are unsure when they'll reach a return on investment (ROI) on the $800,000 start-up costs. However, they believe once the kiosks are mass-produced, each machine will recoup its cost within one to two years.

But first, the company must drive down production costs.

The prototype's production tally reached approximately $30,000, excluding the price of software development. Part of the reason, Hansen said, is that the shell was over-built. It is made of stainless steel, painted steel, and aluminum.

"The first one is built like a fortress and we obviously don't need that," Hansen said. "So we're looking at different alternatives, either composite plastic or aluminum or a combination or whatever."