The kiosk business is booming.
A recent report from BCC Research shows a growth spurt in self-service, which BCC analyst Francis Duffy predicts will more than double from $11.3 billion in 2005 to more than $24 billion in 2010. The report details growth in three self-service industries: kiosks, ATMs and vending machines.
Self-Service World: Of the total revenue growth of self-service until 2010, how much of it will be developed by ATMs and vending machines?
Duffy: Kiosk-specific technology will account for 6 percent of total global machine shipments and 3 percent of total global sales in 2010. In dollar terms, that translates into kiosk segment sales of over $700 million in 2010 alone.
SSW: Can you tell me a little about your own background and interest in this field?
Duffy: I earned a B.A and M.A in English from Columbia and an M.B.A. in information systems from New York University. This is my 14th major market research study to be published.
As an analyst, I have always been drawn to the subject of new retail technologies’ profit potential. I researched and wrote six major studies on credit and debit cards, smart cards and ATMs in the late ‘80s and early ‘90s and then moved on to research and write another handful of major reports in the telecom field during its boom times.
There I made a lot of quick money and experienced what it felt like to know you were living on the outside of an ever-expanding bubble and that its wall, against which you flatten yourself as you held on for deal life, was getting microscopically thinner by the hour. The whole episode also convinced me T.S Eliot was right: Things end with a whimper, not a bang.
SSW: Why did you study self-service?
Duffy: I perused the ATM field again in 2004 with an eye towards doing another study only to discover that in the years since I last looked into the subject that this entire new, related, but distinct technology market — the self-service kiosk — had established itself.
That discovery got me to thinking: almost 70 percent of the U.S economy is now service–related; what kinds of customer-facing technologies could capitalize the most on this shift in the long-term?
In reviewing the literature, I realized that the self-service field was the most technology-intensive in this respect. I was also struck by how the field was still conceived largely as a set of different vertical markets and covered by the trade press and the analyst community as a bunch of silo industries. Given how each performed roughly the same function and how each was increasingly electronics- and computer-driven, I thought the time had come to base a study on these separate markets’ commonalities, to take a more horizontal analytical perspective.
SSW: Why is the vending machine industry growing? Is it due to automations like cashless vending?
Duffy: Cashless vending has helped to reinvigorate the vending industry’s waning sales in the U.S. much as the introduction of the bill-accepting mechanisms in machines did in the 1980s. The cardinal rule of vending is, make the entire purchase experience as easy and convenient for the customer as possible. Credit, debit and stored-value card payment options do exactly that; Bluetooth extends this principle even further.
Electronic transactions also appreciably lower operators’ costs, so they are happy to oblige. The necessary computer "networkification" of machines to support cashless vending yields additional operational dividends such as just-in-time restocking by route drivers and accurate and timely per-machine and per-site sales data.
In the developing world at least, and in the U.S. vending operator industry, outsourcing has shrunk its largest money-making market-segment — the manufacturing sector. Telecommuting, corporate downsizing and the increasing number of smaller, satellite office complexes aren’t helping either.
The painful shakeout has led to a far greater degree of market concentration. Large service firms alone can leverage economies of scale on the one hand and negotiate bulk purchases on favorable terms from OEMs the other to eke out slim profit margins. Their best chance of improving these margins is to micromanage their operation on the individual machine level; thus the importance of computerizing their entire operations.
Real growth in vending over the next year will occur in the places the outsourced manufacturing and service jobs of the developed countries migrate to. Any profitable, multi-machine vending site has to have a sufficient semi-"captive" customer-base. My study looks in detail at world markets as well as the U.S. and pinpoints the most likely candidates among developing countries.
SSW: What is the most important idea this research reveals?
Duffy: If I had to choose the single most important ideas I came away from after a year and half’s worth of research and analysis, it would be these:
1) All self-service technologies are alike in that each is a purposely-built device a person on his or her own can, for a fee, use at anytime and anyplace to obtain goods, services or information for his or her personal consumption.
2) The underlying value proposition of any self-service technology is the proximity, autonomy, timeliness, and above all, the unparalleled convenience the device uniformly offers to the consumer.
