Article
US-China trade war alarms kiosk providers; long-term outlook uncertain
Kiosk manufacturers are watching the developments closely, but decision makers hold mixed views on what the long-term impact will be on their business.
September 2, 2019 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times
The U.S.-China trade war that sent stocks tumbling in August is stoking fears of recession, but whether that materializes is far from certain at the present time. Companies that use and produce interactive kiosks are watching the developments closely, but decision makers hold mixed views on what the long-term impact will be on their business.
The tariffs have already boosted costs for some products kiosk manufacturers use, according to an informal survey of Kiosk Marketplace readers. A significant decline in consumer confidence, should it occur, could affect the demand for kiosks, but even how that will impact demand is a matter of debate.
No one disputes that short-term developments are alarming.
The University of Michigan consumer sentiment index fell to 89.8 in August, from 98.4 in July, its lowest mark since October 2016, the university reported Friday, according to Marketwatch. The decline was driven by negative expectations from tariffs cited by one third of the respondents. Similar declines in consumer confidence were reported in a late August survey by Lendedu.com, an online financial marketplace, which found 42% of respondents plan to spend less and save more due to recession fears.
As of Sunday, the U.S. imposed a 15% tax on about $112 billion of Chinese imports, including textiles, clothing shoes, sporting goods and other consumer goods, according to the Associated Press. On Dec. 15, another round of 15% tariffs will be placed on around $160 billion worth of goods, covering all Chinese imports.
Should such additional tariffs be imposed, it's unclear how China would respond, according to a U.S. Chamber of Commerce analysis. Some economists think China could boost its own tariffs from 5% and 10% to 25% and place new restrictions on U.S. companies operating in China.
Tariffs boost costs
Kiosk manufacturers that source products from China have already taken a hit and passed costs on to customers, said Chuck Lewis, vice president of Palmer Digital Group, a development that favors U.S. kiosk manufacturers such as his company.
"Most, but not all, U.S.-based commercial display companies that have their product manufactured in China have raised their prices by as much as 10%," Lewis told Kiosk Marketplace. These price increases have been evident from kiosks made in China, he said.
This isn't to say U.S. manufacturers aren't affected. Stainless steel and aluminum prices have already increased for U.S. manufacturers, Lewis said, although the 30% increases that hit in January have since fallen by 20%.
"If the tariffs on goods we purchase stay the same or go higher for the foreseeable future, we definitely believe it will have an adverse effect on the industry and economy as a whole," said Jeff Goldstein, vice president of sales at Seepoint LLC, a U.S. manufacturer that purchases industrial motherboards, LCD/touchscreens, and peripherals from China.
Glen Cowie, director of sales at Fabcon, a U.S. manufacturer, believes the tariffs are favoring U.S. manufacturing. Customers have to consider lead times, transportation costs, order minimums and intellectual property risks when buying from China, he said.
"More and more kiosk customers are moving their manufacturing back to the U.S. because of the uncertainties surrounding the tariffs, so we have actually seen a nice increase to our bottom line and an increase in the number of projects we are currently working on," said Cowie.
Impact on supply chains
Tariffs have also created issues for supply chains, said Marcos Fugulin, business development director at Apek International, a global kiosk manufacturer. Supply chain issues can affect the cost of manufacturing and distributing.
"According to the International Monetary Fund, in the first quarter of 2019, the trade tensions helped pull a sharp slowdown in some market segments as the global technology supply chains were threatened by the possibility of the United States imposing sanctions," Fugulin said. "This is extremely damaging the market for digital kiosk and correlated markets, and as there is no such ecosystem in the U.S. to guarantee national production of these products, it must be created (or recreated) to keep the business running and will take a long time, longer than the market can afford."
Fugulin sees such a scenario favoring manufacturers that provide complete solutions, combining hardware and software.
Juan Perez, president and CEO of ADUSA Inc., a kiosk software provider, thinks the kiosk industry could be adversely affected by a recession.
"One thing we've learned over two decades working in self-service is that kiosks have not yet reached the same level as POS systems, scale management systems, etc., in terms of being mission critical, and so when times get difficult for retailers, the technology is more susceptible to cuts as well as projects getting delayed, shelved, or eliminated altogether, in order to pay for price reductions to pass along to the consumer," Perez said.
Long-term impact uncertain
But not everyone foresees doom and gloom.
"If China devalues their currency by the same rate as the added tariffs, then U.S. consumers should be unaffected," said Akshay Sharma, a technical advisory board member of Grubbrr, a platform for kiosks, point-of-sale, mobile and online ordering.
"If an agreement were to occur which allows for patent protection for U.S. firms, this should help U.S. businesses, and if these U.S. firms leverage cheaper supply chains and manufacturing elsewhere, like India, Vietnam, or bring these operations back to the U.S., or the Americas in general, could be a net positive, but this may take a decade," he said.
If a recession does materialize, Sharma won't worry a lot about it. "People still eat, replace things like clothes, and equipment, and merchandise in general," he said. "Trillions were still spent in the 2007-2009 great recession by consumers."
A recession will also drive businesses to seek ways to streamline operations and enter new markets, which can present opportunities for technologies like kiosks, Sharma added.
Saleem Khatri, CEO of Lavu, a provider of POSs technology for restaurants, agrees a recession could boost demand for labor saving technology. "Independent restaurants will need to find alternatives to more efficiently serve their most loyal customers rather than adding to their staff," he said.
"That regulation, combined with a desire for patrons to get things done quickly with technology, is going to make kiosks essential for restaurants. Kiosks allow customers to independently order and pay for their meals, with their menu tickets sent straight to the kitchen for preparation."
"We keep on hearing that there could be a recession looming in the near future," Palmer Digital Group's Lewis said. "Based on PDG's current work load and quoting activity it doesn't appear that a recession is currently in sight. In fact, PDG is busier than we ever have been especially from June until today."
"I think it's inevitable that at some point we're going to see a change in the economy and the timing of that can't be predicted," said Steve Latham, CEO of Banyan Hills Technologies, a software provider, integrator and consultant focused on the kiosk industry.
About Elliot Maras
Elliot Maras is the editor of Kiosk Marketplace and Vending Times. He brings three decades covering unattended retail and commercial foodservice.
Included In This Story
Palmer Digital Group
Palmer Digital Group specializes in indoor and outdoor digital kiosks and kiosk enclosures. Palmer Digital Group leverages 40 plus years of digital enclosure fabrication capabilities from its highly reputable parent company IEC. PDG manufactures digital kiosk solutions for virtually any industry from QSR to retail to transportation.
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