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HMV will try, try again on retail kiosk deployment

When HMV North America decided to test-market retail kiosks at two of its Toronto stores, the music retailer set a few lofty goals. If the presence of the kiosks lengthened customer visits, suffered few breakdowns and produced significant online orders, the kiosk experiment would be considered a success.

April 15, 2002

When HMV North Americadecided to test-market retail kiosks at two of its Toronto stores, the music retailer set a few lofty goals. If the presence of the kiosks lengthened customer visits, suffered few breakdowns and produced significant online orders, the kiosk experiment would be considered a success.

When the four-month test ended in June, the kiosks had delivered on two of three objectives. Customers stayed in the stores longer, and there were a limited number of breakdowns. But the number of online orders per month generated by the kiosks fell well short of HMV's goal of 45 online orders per month.

Sheryl MacDonald, senior marketing manager-strategic development with HMV North America, said the company's Web site has been the HMV's biggest growth area in sales. HMV is the largest music retailer in Canada, with 98 stores.

MacDonald said HMV decided to try Web-enabled kiosks as a way to integrate sales in stores and online.

"Our Web site was six to eight months old at the time, it was successful," she said. "We needed to drive more awareness and usage and trial of that Web site and wanted to integrate that into our stores."

Six kiosks -- four stand-up units and two sit-down models -- were installed at two HMV stores for a 120-day test from February through June 2000. One store used two stand-up units at the front of the store and two sit-down units in back. The second store used two floor-style units at the front of the store.

Canadian kiosk manufacturer VDO Road Digital Inc.supplied the kiosks, customizing four of its RoadAgent kiosks to use as the floor models in the trial run. Road is an acronym for Retail Order and Distribution.

Each touchscreen kiosk was equipped with access to 100 full-length CDs, 20 DVD trailers and a direct link to the HMV Web site, where customers were encouraged to make secured credit card purchases online.

Karen Etingin, vice president of strategic marketing for VDO Road Digital, coordinated the test with the music stores. "HMV is a very innovative retailer and they are very aware of the impact of kiosks and the potential of them in their stores," she said.

"I think that for retail, kiosks and (POS) terminals are definitely the way to go," said Etingen. "Integrating those into a retail environment is a winning strategy that most retailers either have begun to adopt or will adopt in the next two or three years. I don't think it's the only available avenue for kiosks and terminals, but I certainly think it's one of the biggest."

A hit with customers

A sampling of customer reactions at the stores indicated the kiosks were popular with the public. The sit-down kiosks at the back of the store encouraged many to stay longer, while the number of users for the stand-up models was higher.

"Cool," one customer replied.

"Great for sampling a whole CD before I buy it," another responded.

"What we've found is that consumers will wait in line up to 45 minutes to use the unit and will stay on the unit for a great deal of time," Etingen explained, documenting customers who listened to entire CDs or DVDs in the stores.

She added the lengthy listening sessions might necessitate the need for time limits.

"It's almost as if . . . there should be an electronic stick that comes out and drags them off the machine because they've never had this opportunity before."

Operational issues

During the test run, the kiosks broke down an average just two times per week for brief periods, MacDonald said, either because the HMV Web site was down, or because of occasional power or connectivity failures and customer interference.

"The kiosks were monitored remotely by our supplier, and were usually back up in a matter of hours," she said.

Another area still to be addressed is making it easier to go from listening to a CD in a kiosk and purchasing it.

"Right now, there are too many complicated steps between those two processes," MacDonald said. "When you're sampling, you had to back out to the menu page, go into the dot.com site, find the CD again, register and buy. All of that is far, far too complex to expect to capture all of those orders that are potential."

By the numbers

On the financial side, only 10 online orders were placed per month, far short of the goal of 45. Results of the test period showed that most of the kiosk users were sampling the CDs, not visiting the Web site. Each month, 1,900 clicks were racked up on the CD sampling area. The Web site registered 800 monthly clicks, while DVDs had 400 clicks.

"In any kind of retail environment, the focus has to be on converting interested buyers into purchasers. That is true on any level of retail and it's particularly true on a kiosk," Etingin said.

However, she cautioned that not meeting financial expectations in the test is no cause for panic. The learning curve for both customers and staff for such a new and different product, she said, will take some time.

Shortcomings

HMV's experiment in Toronto yielded plenty of valuable information, which the company is considering as it decides on its next steps. HMV beat its competition to the punch in being the first to install retail kiosks, but the overall concept of ordering music online hasn't yet caught on in Canada. HMV also believes it can do a better job of promoting the kiosks outside the store.

Kiosk usage proved popular with customers, and for that reason alone HMV is unlikely to give up on kiosks. The kiosks remain at the test sites and sales there have risen, Etingin said. HMV and VDO believe the kiosks have good potential for increasing online sales, and plan to make some as-yet-unspecified changes to the units and then expand their placement into more stores.

Changes

HMV may make internal changes to its Web site functions, while VDO is making upgrades in the search capabilities and audio of the units.

"I think it's a learning process all the way around," Etingin said."We are both working on our own wish lists."

MacDonald said HMV wants to add a number of functions to make the kiosks more robust and customer-friendly, including the integration of its inventory system, electronic royalty and gift certificate sales programs, personalized CD burning on site, and card swipe and cash acceptance capabilities.

When the new units will be ready is unknown, MacDonald added. She said HMV is exploring off-premise deployment for its second rollout, a move intended to further boost Web site sales.

Both HMV and VDO believe they have a winning concept, and the two companies are working together to produce a winning model, according to Etingen.

"When a kiosk network goes into a retail setup, what insures the success of that kind of a project is that the technical departments from both ends are fairly aware and that they work together," she said. "With HMV, what we found is that really is helping us. The more access we have to an understanding of how they think and where they want to go, the easier it is for us to reach those expectations."