Kiosks & the Reseller Channel.

By Kenneth Brant, Gartner Vice President and Manufacturing Research Director.

VAR repondents predict double-digit growth for their kiosk business.

This year, for the second time, we included a separate set of survey questions specifically for value added resellers, or VARs. Of our VAR survey respondents, 38% said that their company is involved in kiosk deployments [62% were not yet involved, and exited the survey]. Only those VARs with kiosk involvement completed the rest of the survey. Of these, 69% said they provide hardware resale, 68% provide support, 52% project management, 50% application development and 46% networking services [this was a 'check all that apply' question.

We then asked in which vertical markets their company deploys or has deployed kiosks. The majority, 59%, chose retail (supermarkets, c-store, department store, etc.), followed by hospitality with 37%, of which 20% chose food service and 17% chose lodging. Next came health care with 30%, government (federal, state, local) with 28% and education with 23%. The Growth Opportunities chart indicates those verticals that our VAR respondents feel have the most future potential for their businesses. Their selections are similar to those verticals in which they've done kiosk deployments, with retail garnering 55% of responses, hospitality (food service and lodging) with 39% and health care with 34%. Interestingly, travel & tourism was seen by 28% of our VAR respondents as having strong kiosk deployment growth opportunity, but only 17% indicated that it is a part of their current business with kiosks.

To better understand the growth of kiosks in the VAR channel, we asked our respondents to select the most important factors fueling this growth [this was a 'check all that apply' question]. The key factor is increased consumer acceptance, with 69% of responses, followed by growing demand from end user businesses with 61%. Technological advances are increasingly important, with 57% of responses, as are new and robust applications, with 47%. Responses given for 'other' included government requirements for availability of services, like ADA (Americans with Disabilities Act) requirements, which can be met by kiosks. Our respondents all expect their kiosk business to increase in the next 12-18 months, and 8% expect that growth to exceed 100%. Over half (56%) of our VAR respondents expect to experience double-digit growth from kiosks over this period.

With any relatively new technology, there will be challenges. Our VAR respondents selected the biggest business challenges they've experienced in working with kiosks [this was a 'check all that apply' question]. By far, the biggest hurdle is integration with other systems, chosen by fully half of our respondents. End user buy-in and providing maintenance each drew 38% of responses, followed by installation difficulties with 28%, and consumer acceptance with 27%. This last challenge remains, despite the fact that it is transitioning to become a growth factor for self-service applications. Once consumer acceptance grows into consumer demand, kiosk numbers should skyrocket, and this hurdle will eventually be eliminated. One VAR sums up his experience: "Kiosks give our solution immortality after closing for the day. We have changed the face of our business, earning profits 24/7."

Collaboration is Key - Manufacturing should work with retailers to deploy profitable kiosks.

Consumer goods manufacturing still lags behind retail, transportation, hospitality and banking in the adoption of kiosks. In this most recent annual Kiosk survey, respondents indicated that the top drivers for kiosk deployment are 'improving customer service,' 'generating revenue,' 'increasing customer touchpoints,' and 'providing product information.' Manufacturers certainly do care about all of these objectives. In fact, Gartner's research has determined that the clear #1 strategic management priority of manufacturing CIOs is delivering IT projects that enable business growth. Yet, only 4% of the Kiosk survey respondents indicated a kiosk has been deployed in a manufacturing facility (only 3% indicated deployment in a warehouse or logistics facility), compared to 70% who cited inside store, restaurant, or hotel for customer use.

So why is kiosk adoption lagging in manufacturing? The main reason is that manufacturers lack the physical space to deploy kiosks that serve their customer-facing, growth-oriented interests. Our research shows that IT budgets are not growing rapidly in manufacturing, so CIOs must allocate scarce IT resources (both people and dollars) to projects that will drive additional sales and improve customer service. Until manufacturers can solve the puzzle of where to locate kiosks that promote their products and prove an ROI on customer-facing kiosks, they are likely to pour more of their IT dollars dedicated to marketing into Web site development, adding analytical capabilities, customer relationship management systems and incentive/promotions management. Is there any major technology change that is likely to spur a wave of kiosk adoption in consumer goods manufacturing? No but there are several scenarios manufacturers should explore and trial to better understand the business cases.

Potential Areas for Collaboration:

Collaborative development of kiosks by consumer goods manufacturers and retailers is a win-win for the manufacturer seeking kiosks to provide a differentiated, branded product experience in the retail environment, and for the retailer who struggles with high employee turnover and/or difficulty in training staff on complex, custom or technical product features. If the retailer is the 'channel master,' then their overriding interest in presenting consumers with a choice of options across a product category will likely be the result. However, manufacturers should seek joint investment and development with the retailer so that they can use the kiosk to promote their own brand and product(s). This approach is especially useful for fitted products (golf clubs) or configured products (computers). For broad product ranges, specialty retailers with limited shelf space could offer consumers more choices without the costs of additional inventory. Ordering abilities are integrated with product information in the kiosk.

Single product or single brand kiosk experiences for high margin, high demand products (e.g. iPod, Playstation, xBox). Here development is owned by the manufacturer and space is acquired in the manufacturers' own stores, in big box retail stores or at a mall, sporting event or concert. The manufacturer may have leverage in these cases and retailers would provide the floor space for the kiosk if sales volumes and margins on the product(s) justified the promotion.

Manufacturers compete in a dynamic marketplace increasingly defined by the 'long tail' product lifecycle. That means much more 'value capture' occurs in the later stages of a product's life, and product features, functions and key specifications are likely to change more frequently. So the ROI for kiosks that serve manufacturers' interests will depend on their ability to update demos, product information, configuration options and pricing while also monitoring consumer interest and activities via the kiosk. Content refresh and new model product information will be critical to achieving ROI. Consumer goods companies could embed online 'agents' in the kiosk experience to assist consumers in their product choices; they will also need to monitor consumer interactions without relying on retail channel partners. The Internet is the manufacturer's connection point to customers in all of these scenarios and this connection should not be negotiable with their retail collaborators.