Article

The Circle K Experiment

Two kiosk vendors are working with the convenience store chain on a kiosk project that everyone involved anticipates developing into an industry leader.

February 9, 2002

In the continuing journey to discover feasible applications for the kiosk industry, the convenience store is a source of frequent conjecture.

A steady, diverse clientele means each store presents a cornucopia of opportunities. But the rapid-fire nature of the c-store experience - convenience in the U.S. does equate to speed, after all - means customers often get in and out with blinding speed.

The key to winning the hearts - and wallets - of c-store customers, therefore, is built around the ability to supply a product that will either A. appeal to customers, yet get them out of the store quickly, or B. appeal to customers while giving them a reason to hang around the store a little longer.

For c-store chain Circle K and kiosk deployers Global Access Alliance (GAA) and Info Touch Technologies Inc. (CDNX:IFT), the great experiment in winning over customers has just begun. The two companies are in the midst of rolling out Circle K's ZapLink public-access kiosks to stores in the Phoenix and Philadelphia areas, along with several stores in Texas and truck stops in the Southeast.

For Info Touch and GAA, it is a story of competition and cohabitation. If the program is successful and Circle K goes ahead with a national rollout, the two companies will deploy kiosks across the United States. And while ideas and information will be shared, both companies will be seeking market share.

"There will be an exchange of technology and information between the two vendors," said Robert Needham, GAA president and chief executive officer. "Circle K sets the requirements - who does what - and we're left to decide how to do it because we're really a Coke-Pepsi relationship."

The genesis

Circle K and its parent company, petroleum provider Phillips 66 Co. (NYSE:P), are not strangers to the kiosk sector. The chain has worked for four years on designing an in-store kiosk program, trying out several models before deciding on the current ZapLink program.

"We have conducted focus groups, kiosk placement studies and gathered metrics. We think we have a good idea of what the consumer is doing on the kiosk and at what location." said Jason Broussard, Phillips 66 director of Internet services.

The Circle K ZapLink kiosk was designed to fit at the end of an in-store aisle.

The end result, the company discovered, was that speed and versatility matters.

"Kiosks are not inconsistent with our vision, there isn't anything we can sell that you can't buy anywhere else, so it's a matter of time and speed. That's the focus of this kiosk. We're talking about better access and quicker access to information where you need it and when you need it." said Scott Templeton, Phillips 66 innovation manager.

Keeping this in mind, Phillips 66 envisioned a machine that would execute numerous functions - from Internet and e-mail access through a dedicated phone line to music downloads to video postcards - while allowing customers to get through the process as quickly as they like.

But having conceived this plan, Phillips 66 decided to bring in outside companies to make the project happen. In the end, the decision was made to share the project, rather than put all their eggs in with one deployer.

So Info Touch was given the Phoenix area, where it has deployed 35 ZapLink kiosks. GAA is preparing to roll out nearly 50 kiosks in the Philadelphia area, plus several more in Texas.

"We had strategic meetings with companies and we found two that could best realize what we had to offer, develop it, and bring it to market," Broussard said. "Why two companies? I'd just say both companies have performed reasonably well."

All about functionality

Phillips 66's vision of public access is a metallic, multi-colored kiosk that stands at the end of an aisle. A clear plexiglass sign above the kiosk identifies it without blocking a customer's view of the store around. But while Phillips 66 has made good its concept, GAA and Info Touch have, frorm an application standpoint, brought their own unique touches to the project.

"Both companies offer something we see of value, so there's no reason to eliminate one or the other," Broussard said. "GAA has mp3 availability, whereas Info Touch doesn't. But Info Touch has established a relationship with Comedy Central."

Info Touch's relationship with Comedy Central is the kind of unique application that Phillips/Circle K wants to develop for ZapLink. Working with cable television operator Cox Communications Inc., Comedy Central and Info Touch have developed a "Speak Your Mind" public video program that works on the ZapLink kiosks.

Customers can use the video camera on the kiosk to record a message, perform a stand-up routine, or do whatever else comes to mind. Comedy Central is using selected videos as part of a homegrown humor initiative, and Cox is chipping in by offering $170,000 worth of promotional advertising on its cable systems.

"You can get whatever you want off your chest," said Hamed Shahbazi, Info Touch president and chief executive officer. "You've got a guy trying to pick up girls or someone telling their best joke, it's pretty neat."

Along with mp3 technology, GAA also plans to offer video games. The company recently reached a deal with uWink On-Line Entertainment Systems Network, an Internet games community founded by video game pioneer and Atari founder Nolan Bushnell. Customers can play uWink games on a pay basis at the kiosk, which accepts bills and credit cards, playing by themselves or linking up with uWink players at other ZapLink kiosks.

"We have uWink's featured games sitting on the kiosks, along with other games which people can pay and play," said Robert Curtin, president of Digital Matter Corp., which is providing software support and services for GAA. "We believe gaming in particular in some venues will be very important."

The kiosks also come with a 17-inch, multimedia screen that appears at the checkout counter. The main screen includes broadcast content, store information, and advertising, while smaller screens flash current news and weather information.

Pick a store, place a kiosk

While the initial news touting the ZapLink kiosks referred to the deployment as a test program, Broussard, who would not disclose how much Phillips 66 is bankrolling on the project, said the company is treating it as the first phase of a multi-phase rollout.

Phase two, planned for later this year, will add roughly 500 more kiosks to the program. Broussard said the final number will be determined by additional studies of metric and usage data. There will also be a third phase, which he said could create a level of nationwide Circle K/ZapLink ubiquity.

"Hopefully, what you're doing is adding more functionality to what you offer and making it more appealing to the consumer so they become visible at all stores," he said.

Shahbazi, noting a potential merger between Phillips and Conoco Inc. (NYSE:COC), said the ZapLink program, if successful, could be a watershed moment for the kiosk industry.

"If this all happens, we're talking about a Fortune 10 company with $77 billion in revenue," he said. "Right there we have the potential to work with a retail network of 20,000 stores. It's gigantic, ginormous, whatever you want to call it."

But to make it successful, the kiosk has to pay for itself and provide a strong return on investment for Phillips 66, Info Touch, and GAA. That is not lost on the people behind the project.

"The first thing we have to do is make the machine make money," said Needham, who estimated each one of GAA's kiosks would cost $10,000 to $12,000 to produce and deploy. "Monetization is a key directive to the project, from applications to advertisements."

E-mail access, online games, and other functions will produce revenue for the project, but customer awareness is crucial. Phillips 66 is making people aware of the kiosk through in-store programs. The company ran a promotion in December where customers could buy one soft drink and get another free. But they had to obtain the coupon at the kiosk.

"We ran the (offer) on the 17-inch screen (at the counter) and that drove people to the kiosk, where they got a coupon," said Broussard, who would not disclose how many coupons were printed. "We were very pleased with it."

If ZapLink can meet the expectations that have been placed on it by the people rolling out the program, soon many more people will be pleased with the initiative.

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