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The Box That Rocks


One hot day this spring, a neighbor wanted a big cooler to lug lots of food to a picnic. She checked at Kmart (KM) but didn't like the selection. It was, after all, Manhattan. There's not much demand for mammoth coolers in the urban jungle. Then a clerk suggested she try the in-store kiosk--a PC hooked to BlueLight.com, Kmart's e-tail Web site. Click to the cooler, the clerk said, and it will be sent to your home in time for the picnic. My neighbor was impressed. "I didn't know Kmart had delivery," she said.

It doesn't. But BlueLight.com does. In fact, BlueLight has lots of things a shopper might like. And in that transaction, the in-store kiosk did more than sell a cooler. It sold the e-commerce site. Kiosks are "a powerful tool that connect Kmart to BlueLight.com," says Steve Chaffin, director of in-store marketing for BlueLight. It worked with my neighbor: She wouldn't have learned about the site otherwise.

Kiosks, once regarded as the low-rent customer service desk, are rising to a new role: pitchman-in-chief for the company Web site. Retailers have spent big on e-commerce, but they have no proven way to direct shoppers to their virtual stores. TV ads cost too much, banner ads don't bear much fruit, and you can generate only so much buzz plastering a Web address on bags. Kiosks bridge the gap between brick and click. "It's like training wheels," says Yankee Group analyst Kevin Noonan. "It makes the first-time customer more comfortable."

Retailers are starting to see the impact. Five months after installing 3,500 kiosks nationwide, Kmart reports that 20% of shoppers at BlueLight.com come from inside Kmart stores. That makes the kiosk army the second-strongest draw for the e-tailing site, behind only Kmart's free Internet service. Bookseller Barnesandnoble.com Inc. (BNBN) saw its first-quarter growth rate top rival Amazon.com Inc. (AMZN)--thanks in part to B&N's kiosks funneling sales to the site. Office-supplies superstore Staples Inc. (SPLS) says its kiosks are helping lure store customers online. Other retailers are noticing: The number of kiosks hooked to the Web grew by 25% last year to 40,000 and is expected to jump at least another 20% in 2001, says Summit Research Associates Inc., a retail technology consulting firm.

Don't kiosks cannibalize store sales? Sure, at first. But there's a payoff, and it's a good one. Shoppers who purchase both offline and online from a given retailer tend to buy more. When Recreational Equipment Inc. added an e-tailing arm and kiosks in its 60 stores, it made the cash registers ring. Customers who shop both online and in stores spend 22% more than those who buy only from the real-world outlets, says Joan Broughton, REI's vice-president of direct and online sales. The kiosks helped introduce store shoppers to the online experience. Kiosks have "become an essential tool," Broughton says.

Enlisting kiosks as marketers isn't always a picnic. For one, it's expensive. While the computers are relatively cheap, once you throw in maintenance, training, and networking equipment, the tab can run anywhere from $3,000 to $25,000 per kiosk, according to Yankee Group figures. Second, there's no guarantee consumers will flock to the machines. Gap Inc. is abandoning its experiment with kiosks because shoppers didn't use them enough to warrant the cost.

Kiosks may not be sexy, but they're a tool the store shopper understands. They can encourage regular customers to branch out and shop online, where they'll spend more and the merchant's costs are usually lower. In the long run, they may be the best way for brick owners to get their customers to click. By Ellen Neuborne


Silicon Valley State of Mind
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