Retail Kiosk – Plug and Profit

By Sangita Ghosh

Images Retail

December 2008

THE INDIAN RETAIL SCENARIO HAS BEEN WITNESSING SIGNIFICANT ADVANCEMENT WITH TRADITIONAL RETAIL FORMATS MAKING WAY FOR MORE INNOVATIVE AND TECHNOLOGICALLY EVOLVED FORMATS. ONE OF THE INNOVATIONS TO WATCH OUT FOR IS THE ‘RETAIL KIOSK’, WHICH TRULY MAKES BUSINESS SENSE FOR RETAILERS BECAUSE OF ITS COST BENEFIT STRUCTURE AT THE ‘POINT OF SALE’ ESTABLISHMENT PROCESS AND EASE AND CONVENIENCE FOR THE CUSTOMERS TOO.

The concept of ‘Kiosk Retailing’ in the Indian retail scenario was virtually unknown until a few years-ago. Over the past few years, however, retail kiosks or mall kiosks have become an increasingly ubiquitous component of the retail and real estate landscape. The kiosk concept started gaining broad-based acceptance and success among the international retailers in the 90s; the model is now gradually getting a foothold in India.

Certainly, there are reasons for a kiosk scoring over a full size store – in terms of presenting a cozy yet convenient and eye-catching venue to attract the impulse buyers that pass through a mall aisle or a shopping centre space. According to Devangshu Dutta, CEO, Third Eyesight, "Kiosk retail can be defined by the presence of outlets with a small physical space in an open format with ‘temporary’ or even mobile fit-outs, but may be stationed at a place for a long time. The structure of a kiosk could be designed as a standalone structure like a terminal, or a semi-enclosed booth."

In general terms, kiosk retailing programmes are specified as ‘speciality leasing programmes’ and the retailers are called ‘speciality retailers’. Dutta says that any product that does not require a large amount of storage, can be sold without any preparation and served with minimal staff, is an ideal to be traded through the limited and open format of a kiosk. These can include physical products such as snacks, jewellery, holiday merchandise, novelties, or services such as financial products, simple medical check-ups, grooming and services etc.

The benefits of a kiosk format include:

• Avoiding unnecessary in-store product inventory and associated warehouse costs
• They offer promotional opportunities for the retailer
• Help increase active footfalls for mall owners
• Reduce input costs by lowering employee headcount through self-service and multi-use models
• Offer extremely lean and mean communication
• Facilitate interaction with the service retailers and ease the way of availing their services
• Thus, result in incremental sales even at off-site locations with more compelling revenue returns

In India, retail kiosks can be seen in shopping plazas and malls as small retail outlets to sell products or to facilitate services. A few examples of the retailers leveraging the kiosk opportunity include fruit juice brand Mr. Orange from MX Foods, Candico India, Boost, wellness retailers such as Kaya Skin Clinic and Lakme, financial companies such as ICICI Bank, Citi Financial and Reliance Money, holiday package providers such as Club Mahindra or insurance firms such as Max New York Life Insurance etc. In each case, the mall allots a space either on rental or revenue sharing basis to the retailer depending on merchandise. A relatively advanced form of kiosk retailing can be seen in Europe and US. In Europe, kiosk retailing has evolved as a special, advantageous and cost-effective category in retailing and is strategically located in the malls at frequent stops. In the US, kiosk retailing has emerged as one of the effective platforms of low-cost, low-risk entrepreneurship. These retail kiosks are also known as ‘creative entrepreneurship’ showcasing product categories such as handicrafts or other essential low-budget home improvement essentials or personal usage products. One of the leading global kiosk consultants and trade magazine publisher Patricia Norins quoted that in the US about 25 percent of the 50,000 -plus kiosks in shopping malls are owned or operated by recent immigrants – thereby giving them a low-risk option to establish themselves.

STARTING OUT
For a greenhorn, kiosk retailing provides easy but effective branding with a much smaller space leading to lower rents but with satisfactory sales that can establish a brand much faster in high-end malls. Candico forayed into the Indian retail scenario with its innovative kiosks designed in Dubai. Mr. Orange sells fresh fruit juice from its orange shaped kiosks that were innovatively designed in Spain. If the concept is applied correctly and effectively in mall spaces, the format of kiosk retailing would prove to be an extremely effective profiting model, turning a large amount of under-utilised floor-space in a mall’s common area into an innovative revenue stream.

THE FORMATS
As the face of Indian retail changes, the structure, design, functionality and application of retail kiosk is also evolving. Generally ‘kiosk’ refers to a booth-like structure where simple and inexpensive merchandise in isolation is sold. But of late", the retail kiosk has evolve&" from this typically four-sided, square structure to a limitless array of colours, shapes and designs selling ice cream to jewellery to service messages from concepts financial giants and real estate companies. Then, there are technically evolved electronic kiosks, also known as ‘interactive kiosks’, where a customised software enables the user to access the system flawlessly for a specific purpose. This structure could simply be a standalone computer terminal with a keyboard or the latest touchscreen facility, financial services or simply a tool to disseminate free public service information. As outlined by Technopak, retail kiosks in India have evolved in two formats. The first variant is in the form of a small-sized shop, having a semi-permanent fixture and is generally present within a larger establishment such as a mall, department store, etc. In India, there are quite a good number of F&B retailers across categories who have explored the idea of retailing through kiosks – Candy Treats, Cookie Man, Domino’s, Yo! China, Cafe Coffee Day, Corn Man, Baskin Robbins, Mr. Orange, Nestle etc.

The second variant is the much advanced and technically inclined e-kiosks, which are largely services oriented and generally unmanned. One of the pioneers in this is Reliance Money, which began its operations since its very inception through kiosk retailing to reach out to as many customers as possible. Sudip Bandyopadhyay, CEO and director, Reliance Money, sees a lot of promise in this format, saying, "Kiosks are going to prove like ATMs, which revolutionised the banking industry. We hope our kiosks will change the way people avail financial services over a period of time." Reliance Money, at present, has a vast network of 2,500 retail kiosks at different places across the country based on target customer availability and accessibility.

WHY A KIOSK?
While kiosks can be very profitable for the owner of the real estate considering the high rent, some developers also use kiosks to make the retail environment more dynamic and fluid. This, according to experts, shows the trend of a positive future for the retail kiosks in India.

Rakesh Pandey, CEO for Kaya Skin Clinic, clarifies, "Be it brand building or business generation, the clarity of the parameter itself guides the financial implications of the kiosk model. Through kiosks, are you being able to capitalise on the short window of opportunity with a potential client at the venue? It’s important to remember that a potential client’s live experiences at a kiosk can either positively pre-dispose or completely turn off the client from the brand." Spencer’s Hyper, where Kaya has opened its retail kiosks, is of the opinion that the main retailer should be careful about the kiosk retail partner; the products retailed at the kiosks should have business synergies and target the same market segment. Samar Singh Sheikhawat, VP-marketing, Spencer’s Retail Ltd, elaborates, "Since modern retailing is all about the shopping experience, the partners in kiosk retailing should ensure that they conform to the quality standards and service level agreements as does the main retailer. This is to ensure that consumers have the same experience whenever they avail of any product from a particular retail outlet."

According to industry experts, innovatively positioned kiosks can become the centre of attraction in a mall and create a vibrant environment ensuring higher footfalls and revenue for the shopping centre owner. To create freshness or for a change in the shopping floor environment, one kiosk can be inter-changed with another temporarily, otherwise impossible with a full size retail store. Analysts point out that with the strategic point of sales coupled with the catchy placements in the shopping centres, the kiosk is becoming the new pull for both realtors and shoppers. When the retail kiosks offer services to the customers, it also increases consumer awareness and proposes new strategies for the retail brands to further diversify their business in multiple directions.

The Kaya Skin Clinic, for instance, has prototyped the kiosk model to make expert skin-care easily accessible. Pandey shares, "With the kiosk model, the idea for Kaya was to ‘go where are clients are’, thereby saving their time and also aiding them to make accurate decisions about their skin-care needs." For Kaya, cosmetics account for the majority of sales from these kiosk counters. ‘According to the chain, skin-care product sales contribute to 30-35 per cent of the total sales for the brands that sell both cosmetics and skin-care products through this format.
Bandyopadhyay at Reliance Money says, "Our kiosks are additional touch points for our customers to avail services and it would not be possible to measure revenues separately. Our customers can go online, use call and trade, visit our branches or avail services through kiosks. The same customer may use different modes at different points of time based on his or her convenience."

Coffee Day Xpress, from Amalgamated Bean Coffee Trading Company Ltd, serves food at kiosks called ‘Xpress’ for those who need a quick bite on the move. The growth of Coffee Day Xpress also comes from its innovative franchising model. The low-investment, high-return business model has proved popular with entrepreneurs who are eager to cash in on the brand’s ‘plug-and-play’ kiosk concept that can get started within 10 days of the franchise agreement.

THE MERCHANDISING STRATEGY
The format of the kiosk, its position and its usability demand a specialized merchandising strategy. As observed by Technopak, the low value and impulse purchase appeal facilitate the usage of kiosks for product categories that consume less space – eateries, banking solutions, telecom services, flowers, tobacco, books and music and fashion accessories. Besides these, innovative e-kiosks, which provide multiple services such as ticketing, payment of bills etc. and self-service -kiosks for photo development, are also in vogue. Also, companies are increasingly using kiosks for information dissemination and promotional activities. Punit Khanna, principal consultant, Technopak Advisors, says, "Products that consume less space and are as tentative as impulse purchase items, are best suited for kiosks." Based on the nature and format of the kiosks, the merchandising strategy is crafted. Kaya Skin Clinic – with focus on creating awareness among health-conscious consumers and future clients – has a typical merchandising strategy whereas Reliance Money, which operates self-service kiosks, has no merchandising and depends on software for communication and backend operation. Kaya kiosks have following features:

• Focus on POP material to communicate message
• Take-away skin-care literature to draw the visitor to their clinics
• Arranging skin-care camps along with skin counsellors, doctors for individual consultation
• Skin-care camps arranged usually on weekend, at a high-footfall area in a mall or department store

Coffee Day Xpress is a modular kiosk of 60 sq.ft that can easily be set up in short notice. For that, they maintain a specific merchandising strategy with an ease and less complicated and ready-to-eat food on their menu. Other characteristics include:

• Each kiosks comes fully equipped with a hot coffee – bean-to-cup machine, a cold coffee and a thick shake machine, a blender, pastry cooler, microwave oven, griller, and a refrigerator, to serve quickly
• Easy to maintain and clean
• Available in both indoor and outdoor modules

THE BUYERS
Kiosks retailing is driven by impulse shopping and is clearly targeted towards consumers ‘on-the-move’. The customers increasingly see a mall as a leisure zone; stopping by a kiosk and trying out a relatively low value item such as a glass of orange juice or a pack of candy or something higher up in the value chain such as sunglasses or watches is a natural activity in that environment.

“The target customers for a kiosk are the passers-by – often impulse buyers. Therefore, the merchandising and display has to be ‘alive’ and should be able to reach out to grab the customer’s attention in the busy environment,” Dutta points out.

Retail kiosks also have the USP of setting up interesting point of sales, catchy positions and attractive product lines resulting in satisfactory sales figures in comparison to the retail space they occupy, which can be replaced at times for variations.

STRATEGISING THE LOCATIONS
Most analysts agree that the ideal criteria for location selection that a kiosk model looks for should be focused on high traffic, high visibility areas at mall atriums, inside department stores, hypermarkets or supermarkets, and places with higher footfalls such as airports, railway stations and a metro stations. However, meeting these criteria demand high investments from the retailers. Says Dutta, “Kiosks work well in areas with high footfall and high off-take, where the rentals per square foot would also be high. Therefore, the financials of a kiosks generally require high gross margins.”

According to Ali Mir, GM – retail, NCR Corporation, a technology company for Retail Kiosk solutions, “The strategic locations for a kiosk should be at the store entry, entrance of a department in a store, mall entrance, at each floor of a mall closer to the elevators, food courts etc. that give the kiosk higher visibility and footfall.” Kaya Skin Clinic, which banks on its retail kiosk network critically, considers the following factors before finalising a kiosk location:

• Footfall in the mall and that particular location, and the average ticket size of the mall to measure the trend of the weekend skew
• Direction of footfall and also shopper’s mood when visiting their kiosk
• The visibility of the location
• TG of the particular mall or store
• Demographic and psychographic profile of the residential catchments

While the chain is quite enthused by the kiosk format, the extremely high rentals for kiosks, and the point of furthering the ‘no-escalation clause’ of the lease that usually expires after 11 months, can hinder the spread of a kiosk network.

Spencer’s, which has kiosks in its 70 stores, is certainly banking on the point of high rental but at the same time they entertain hopes of ensured returns. According to Sheikhawat, “Kiosk retailers need to be judicious with respect to the financial model they agree to. It can either be revenue sharing or a flat rental, but that of course depends on what is more profitable to the retailer.” High rental payout is definitely something that is currently queering the pitch for this mini-store format. Bandyopadhyay of Reliance Money says, “The rent for the location and the space required to put up the kiosk is very high, sometimes unrealistic and extremely critical. High-footfall retail space is very expensive and the cost-benefit ratio needs to be carefully analysed. The retailer and the mall owner need to understand the same and fine tune the strategy accordingly.”

GOING FORWARD
According to the experts, not just start-ups or speciality retailers but major retail chains and established brands are also looking for kiosk solutions to enhance their retail presence. Even big-box retailers are looking for an easy, convenient and cost-effective solution though network of retail kiosks. According to Khanna of Technopak Advisors, “Given that locations favourable to the kiosk format, such as mall atriums, railway stations, metro stations, airports etc, are being rapidly developed in India, we shall witness a larger proliferation of this format.” Khanna also states that retail kiosk is increasingly spreading beyond the F&B sector to include other products/services as well. Going forward, retailers will increasingly invest in this format for the multiple benefits of:

• Flexibility in moving or transporting to a different location whenever required
• Easy utilization in a format of low investment and of low overheads
• Swift roll-out
• Convenience of 24X7 retail with e-kiosks

Experts say the pace at which Indian retail transactions are increasing, it clearly highlights the need for a more technically developed solution that is designed to constantly evolve with changing needs. The trend shows the need for 24X7 self-service kiosks that mimic the ecommerce model. Demanding customers and best practices adopted by global retail giants are driving Indian retailers to harness the benefits of self-service technology of retail kiosks in bringing efficiencies and retaining consumers. Starting from ordering the products to delivering the same at customer’s doorsteps, cash transaction and checkout self-service kiosks are making an impression. The concept has taken off well and is now being considered as a mode to spread awareness and promote the products across categories.

However, experts caution that too many kiosks in a mall can create disruption in terms of the prospective footfalls and common area of the mall. Balancing factors need to be designed between the mall owners, retail tenants and the kiosk retailers for a truly win-win solution.