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Defining the kiosk industry's future

In the first of a two-part series, kiosk consultant John Purcell offers his thoughts on the kiosk industry's direction, and the killer application that could make the road to ubiquity a little smoother.

September 5, 2002

With so many companies pushing their numbers to the right, delaying expected deployment dates and generally weighing prospects a lot heavier than they used to, many are taking stock and asking, "Is there an easier, better or more productive way to be successful in the kiosk industry?"

Or more gloomily, quite a few are asking, "Should I stay in this industry at all?"

It was quite disheartening to read Frost & Sullivan's latest numbers for the kiosk industry. It anticipates a growth of approximately 6 percent per year to 2008. I am sorry, ladies and gents, but I have spoken with Frost & Sullivan representatives and I cannot agree for a moment with those numbers.

A lot of this comes to back to individual definitions of a kiosk. There is a reason why I call my firm a public access technology consultancy and this is why I can't agree with the numbers. I tend to include the verticals that are encroaching on the core `kiosk' space such as telecoms (multimedia payphones), gambling (online tournaments, thin-client betting devices), transport (self-service journey planners) and many more in any competitive analysis or market sizing I do.

What will work?

The kiosk world has always been a nucleus -- and a very small one -- that has sparked life for self-service terminals in many legacy industries, including those mentioned above. But there is not enough visibility for kiosk specialists, hardware and software, in those respective markets.

Believe it or not, I met senior executives of a large European retailer recently and they were amazed that there were companies that worked exclusively in the kiosk space. This is an extreme example, but it is one of the reasons why competition in the kiosk space is mainly from the "not invented here" camp.

In other words, when a company is looking at self-service devices, they normally start at their existing technology suppliers: shop fitters, design consultants, etc. It is only when these third parties find us in the kiosk industry that we get approached or an RFI is generated. At that stage we are already once removed from the project itself, hindering the possibility for success.

I have been asked many times to put my hand on my heart and declare my belief on what is going to be the definitive kiosk or kiosk market. It is an extremely difficult question to answer as business models vary in each vertical market. But I do have a kiosk concept that I think will be extremely successful in the short to medium term. I refer to this type of device as an Automated Transaction Device (ATD).

Why it will work

The foundation is simple: a high-volume, low-margin short duration transaction device. The applications for such a device are many but they all boil down to one common denominator -- the desire to make an everyday consumer transaction quicker and more convenient, thereby providing a compelling reason to use the device.

The top applications that should excel in this area are pre-paid mobile phone top ups, digital photo development, and bill payments. But the single biggest problem in the deployment of these kiosks is the cost of hardware. Having developed business plans and competitive analyses in this niche, the total solution -- hardware and software -- cannot be in the $5,000 bracket; it has to be in the sub-$2,500 bracket.

The numbers simply do not work otherwise.

Mobile pre-paid kiosks work on single-digit margins (typically 3 percent to 6 percent) and bill payments on much less; even with the volume of transactions being very high in trial programs, it still isn't viable.

Business models have been adapted to try and combine features such as loyalty systems, and cross and up-selling of complementary products. But we are now in one of the failure areas for kiosks -- there is too much on the device to make it easy for public use. A maximum of three functions on a kiosk is enough to keep it usable.

Digital photo development kiosks are another hotbed of activity, but to see how removed familiar kiosk suppliers are from this space, I recommend visiting the Photokina show in Cologne, Germany. There you will find many, many self-service, digital photo processing solutions that accept smart media, compact flash, memory sticks, and other digital media for users to develop pictures from their digital cameras.

Users only pay for and print what they want but can also get enlargements, frames, albums, etc. All of this occurs in approximately a 90-second to 120-second transaction. With Gartner and Dataquest forecasting ridiculous growth in digital photo printing, it is a space to watch out for.

ATD's are not going to be the be all and end all of the kiosk business, there will be other variations and hybrids of the concept, but not a lot in this economic climate. Other factors will contribute to the success of ATDs and these are based on the top ten issues in the deployment of any self-service device. We will look at these issues in my next commentary.

John Purcell is managing partner of Purcell & Associates, a consulting firm based in County Cork, Ireland. Purcell is a veteran consultant/executive in the kiosk industry and most recently served as vice president of marketing for kiosk software developer NetShift Software Ltd., where he remains on the board of directors.