Kiosks and Self-Service

KIOSKS - NCR launches new website

It's been 3 years but NCR launched a new website last week. It has a new Self-Service Kiosks section in its Self-Service segment. The newest member is the new Easy Point Advantage which is a 15" panel-pc that can be mounted any number of ways. Solutions featured include the hotel check-in, QSR ordering, medical check-in and Bill Payment Express.

NCR - Transforming Transactions into Relationships

The new EasyPoint Advantage panel-pc appears to be a lower priced unit that is designed to compete better with the Anyplace from IBM. For now it is 15" with 17" to follow in the future.

The other units seem to share a common enclosure which is your plain square unit with room for devices.

We're a little surprised that the Payment unit is still offering Windows 2000 and that it doesn't address VISA PED and uses the strapped-on Verifone.

All in all though it appears NCR is developing more focus across its POS and Retail Check-Out solutions while also expanding it Teradata-related solutions.
It has definitely raised the visibility of their self-service solutions.

Interesting article on the side is the Forbes interview of Mark Hurd, former CEO and now in charge of HP that covers quite a bit of NCR along with HP.

NCR has always been a bit of three-headed monster (Retail, Financial, Data) and it has stayed focused on that though the Financial side seems to no longer be the dominant thread like it has been historically.

KIOSKS Research -- Distance Education Kiosks

Research reports from The University of Texas at Austin and its Center for Black Business History publish reports on the need/viability of kiosks and Distance Education Enrollment.

CBBH Research Projects

REPORTS’ OVERVIEW: “Kiosk Technology and Distance Education Enrollment"

REPORT PART 1: "The Distance On-Line Industry: Competitors For Kiosks and Traveler Enrollment Booths"

REPORT PART 2: "If You Build It They Will Come: Kiosks and Traveler Booths for Distance Education Online Enrollment at Airports, Train Stations, and Retail Venues"

REPORT PART 3: "Advantages to Locating Distance Education On-Line Enrollment Kiosks and Traveler Booths at Baltimore-Washington Thurgood Marshall International Airport"

CBBH - Links

Kiosk Case Study -- Hackers Find A Way

Nice report by on Zoom vending kiosks being "tricked". We've looked at the unit in Flatirons in Colorado and were unable to find that weakness so this could be a new version being deployed (without sufficient testing perhaps).

Davis Freeberg’s Digital Connection - Zoom Kiosks Hacked - Hackers Can’t Resist Free iPods

Zoom Kiosks Hacked - Hackers Can’t Resist Free iPods

BacklightOne of the major advantages to using kiosks at a retail store is the reduction in shrinkage that retailers see, once they introduce kiosks at the retail level. Because customers have to actually pay for a product before they can get their hands on it, vending can save retailers significant amounts of money by reducing the amount of theft from shoplifters and unscrupulous employees. Like anything though, if you give someone enough incentive, people will always figure out a way to get around theft deterrent systems.

When I was a kid, people took the time to figure out a way to short circuit Coke machines into giving away free sodas, by spitting water into the slot for dollar bills. Considering that Zoom systems is catering to a much higher end of the retail market with their iPod and cell phone kiosks, it shouldn’t be much of a surprise that hackers have already figured out a way to get around the theft protections built into the Zoom vending machines.

Because Zoom is using internet explorer to run their kiosk software, hackers have figured out that it’s relatively easy to bypass their security protections by accessing the file explorer window and then tricking the machine into thinking that you’ve already paid.

Since most of the Zoom’s kiosks are either inside of a Macy’s location or in an airport, this limits the effectiveness of this hack because there are still security guards that can watch out for this, but this hack could still undermine the usefulness of kiosk technology, if you have to have physical security monitoring the machines. While I’d be surprised to find out that Zoom hasn’t already responded to this threat by making it more difficult to gain access to the file explorer window, this hack still highlights an important issue for kiosk manufactuers to consider when designing their vending solutions.

By removing an actual human from the transaction process vending can save time and money for many businesses, but without the right theft controls, it can also expose retailers to even higher levels of theft. Even with this exploit, I would still be willing to bet that retailers see significant less shrinkage with Zoom kiosks than without them, but for a technology that depends upon removing humans from the transaction process, these sorts of exploits are a significant threat to the kiosk industry. If retailers can’t feel comfortable in having an unmonitored vending machine selling their inventory, it will greatly diminish the appeal and convenience that vending can have as a retail solution.

Links

http://machinetricks.indieword.com/view/vending-machine

Content Channels - eMusic Hits 100 Million Downloads

With all the talk about Zune and iTunes, the "no-DRM" solution from eMusic notes that they are nearing the 100 million download mark. Its worth noting the iTunes hit the Billion downloads-to-date mark recently and that the sharing services still see over a billion downloads every week. eMusic delivers its music in Open MP3 format (unlike the Windows WMA DRM or Apple's Fairplay).

Independent digital download store eMusic is nearing the 100 million-mark, a milestone that should arrive within "the next few weeks". eMusic started its download ticker on November 1st, 2003, the point at which the company moved away from an unlimited monthly download model. Ahead of the accomplishment, the company has tapped pop rock group Barenaked Ladies to pen a song for the winner, a unique digital commission. The lucky downloader will also receive a lifetime eMusic subscription, and inclusion within an upcoming print advertising campaign.

eMusic has long billed itself as the number two paid download provider behind iTunes, and the latest tally helps to validate that claim. eMusic is catered towards a targeted audience, one that prefers lesser-known indies over blockbuster artists and smash hits. Depending on the specific tier, the company offers its users a fixed number of downloads per month, part of a hybrid subscription and download model. And eMusic offers all of its tracks as open MP3s, enabling iPod compatibility. Meanwhile, Apple has crossed the 1.5 billion mark on its iTunes Store, a number that eclipses eMusic and other competing download providers. Others like Napster, MSN Music, and RealNetworks have not shared download figures.

For Better or Worse -- self-service

Nice article from Wall Street Jounal on self-service and the limitations of it that people see. Could be when they call in for the voice-recognition system for the airline reservation or just checking-in. Last week Target found itself on the spot with its website and how its design did not accomodate certain users.

For Better or Worse
High-tech tools can be a godsend for companies looking to improve customer service. Or they can be a nightmare.
By DIONNE SEARCEY
October 30, 2006; Page R5

One evening last year, Faye Kiefer was supposed to pick up her daughter at the airport. But she wanted to check the status of the flight before she left home.

So she phoned Northwest Airlines, and its automated customer-service system picked up the call. Again and again, Ms. Kiefer spoke her daughter's flight number into her speakerphone. But the system couldn't understand her, and she couldn't find a way to get to a live operator. Frustrated, she hung up.
THE JOURNAL REPORT

[See the full report]
Faced with new pressures, offshore resourcers are striving to make call centers more efficient…and less infuriating. Plus, how US Airways tries to achieve the holy grail of customer service: consistency.
• See the complete Leadership report.

The automated phone system is "a wonderful feature to make your life simpler so you don't waste time," says Ms. Kiefer, a homemaker in Madison, Wis. "But if you can't get your message across or you can't make them understand you, then you're just sitting there...speaking to a robot."

According to Northwest, the trouble, most likely, was Ms. Kiefer's phone. The airline says its voice-recognition system may have trouble understanding some callers with poor speakerphone connections.

Ms. Kiefer's complaint, though, sums up a glaring truth about modern customer service: Technology has made life a lot easier for customers. And a lot harder.

Over the past few years, companies have plowed billions of dollars into automated customer-service systems, from call centers to Web sites to self-checkout lines in stores and hotels. When they work properly, they can simplify a host of chores. But tiny problems can sometimes throw these systems for a loop -- leaving customers feeling cut off and frustrated.

Some voice-recognition systems have trouble deciphering speech across a fuzzy phone connection. Company Web sites can take customers on virtual tours to nowhere with broken links or incorrect information. Self-service checkout terminals sometimes jam, leaving customers to search for a clerk to help them out.

The solution, say customer-service experts, is the human touch. Too often, companies abandon service workers altogether, or dramatically reduce their role, when installing automated systems. Companies must ensure that employees monitor and regularly update the technology to weed out glitches, keep the systems running smoothly and gauge customer satisfaction, the experts warn. Otherwise, frustrated customers may take their business elsewhere.

"Automation really just complicates things more unless you have a lot more knowledge and you have people behind it," says Howard Lee, chief executive of HyperQuality Inc., a Seattle firm that helps companies improve call centers and other customer-service operations. "People expect technology to be a magic bullet, and it's not and never will be."

The good news is that companies are starting to pay attention to the complaints. Here's a look at some of the biggest gripes about the most popular automated service systems -- and what companies are doing to fix them.

VOICE RECOGNITION

Dialing into an automated phone system can be one of the most frustrating customer-service experiences out there.

If conditions are right -- the caller has a land-line connection with a quiet background and enunciates carefully -- the systems can work like a dream. Needless to say, conditions are often less than ideal. Systems sometimes can't understand callers using a speakerphone with background noise or a cellphone in the middle of loud traffic (or sometimes any traffic, for that matter). And even if the connection is crystal clear, the systems may stumble if the caller has a speech impediment or foreign accent.

Silvia Mazzucchelli, a native Italian who lives in the Los Angeles area, says she has learned to "Americanize" her accent when dialing directory assistance or other voice-activated systems. "I hate them, I hate them," she says. "I always try to get to the operator. I just can't stand it. Most of the time they're giving me information I don't want."

Sometimes even regional quirks can hinder voice-recognition technology. When Verizon Communications Inc. rolled out its new automated 411 directory service system in Boston about two years ago, callers were greeted by a recorded voice that chirped, "City and state, please." But the system had a big problem: It couldn't understand a Boston accent. Callers who pronounced "Worcester" and "Peabody" in the local fashion ("Wooster" and "PEE-buh-dee") were told, "I'm sorry, I didn't get that." The system eventually transferred them to a live operator for help.

Fortunately, experts say, companies commonly check their automated systems to fix the glitches. Verizon tweaked its system after complaints, and says it has had few problems since. Similarly, Northwest says it constantly updates its system based on customer feedback and the comments of employees it hires to track the system's performance. The company also brings in speech experts to tweak the system to ensure that customers looking for information about, for example, flights in and out of Asheville, N.C., aren't fed information about Nashville, Tenn.

In some cases, advanced voice-recognition systems such as Verizon's can actually fix themselves if a critical mass of callers continue to pronounce a word a particular way. Moreover, some companies are trying to make the caller's experience as smooth as possible if the system screws up. Northwest, for instance, says that if its system fails to understand a caller's request twice, the caller is now routed to a live operator -- instead of getting stuck repeating the information again and again.

Companies are also increasingly using a "whisper," or a recording of the caller's request, to make things easier for customers. If an automated system can't answer a caller's question, it plays the whisper for a live operator before transferring the call. By listening to the whisper, operators know what the customer is looking for. That way, the caller doesn't have to repeat information they've spent the past few frustrating minutes trying to convey to a computer.

TOUCH-TONE SYSTEMS

Some companies don't splurge on high-end voice-recognition systems and instead ask customers to use touch-tone keypads to input information such as account numbers or other data. "The nice thing about touch tones is they're reasonably reliable. If you push the button, it does what you want it to do," says Paul Kowal, a customer-service specialist who runs the Cambridge, Mass., consulting firm Kowal & Associates.

But too often, Mr. Kowal says, companies spend money only on the initial programming of the system -- and don't invest more as customers' needs and expectations evolve, or as the company itself changes. Recorded information may grow outdated, or calls may get routed to departments that no longer exist.

Even worse, many touch-tone systems trap customers in a seemingly endless automated loop in which they can't easily reach a live operator. Dialing zero doesn't always work. Sometimes there's a secret code for reaching the operator, but the system won't tell you what it is. Other times there's no operator at all.

As customers become more vocal about their unpleasant experiences, more companies are learning to stay on top of problems, Mr. Kowal says. And some amateurs are lending a hand, as well. Frustrated by his own experiences with automated phone systems, Boston-based consumer advocate Paul English began asking associates how they get through to humans when phoning various companies. He compiled a list of their answers and last winter posted it to his Web site, gethuman.com. The site now contains the tricks to escape phone loops at more than 500 companies.

"There are lots of conditions where the caller knows more than the machine, and the caller should decide when it's time to talk to a human," Mr. English says.

WEB SITES

For the most part, customer-service experts report overwhelmingly positive consumer experiences with company Web sites. Many credit-card, phone and bank customers love the convenience of paying bills and monitoring account activity online at any time of the day or night. And more Web sites are offering convenient new features and sales help.

So it's even more frustrating for consumers when they run across a site that doesn't do it all. Some companies simply don't have the money or wherewithal to offer anything but a basic site that answers generic questions. And sometimes, out of sheer sloppiness, they don't even get the basics right. Important information, such as phone numbers or driving directions, may be incorrect, or the links to the information may be broken. In some cases, there won't be phone numbers at all; some companies don't employ live operators, to push customer transactions onto the Internet.

But there's good news, according to the experts. As Web business becomes increasingly important to even the smallest companies, more businesses are making an effort to fix their sites. They're asking customers for their feedback, and assigning employees to monitor the sites as well.

As part of the cleanup, experts stress, businesses should always offer real-world sales assistance to customers. The very same technology that makes life better for some customers can make it miserable for others, depending on their age, familiarity with computers and other factors.

Consider Ms. Kiefer. When she has a banking question, she drives to her nearby branch, pulls into the drive-through lane and speaks with a teller. She knows she could use her bank's Web site from home. But she rarely turns to the Internet for help because she doesn't want to waste time firing up her computer.

"Of course everybody wants to give you their Web site," Ms. Kiefer says. "Well, for someone in their 60s, as I am, we've learned the computer but we aren't as adept at it as all the young people are."

SELF-SERVICE CHECKOUT

Increasingly, grocery stores, hotels and fast-food restaurants are installing self-service kiosks that allow customers to ring up their own purchases. The services can offer speedy checkouts for customers who have few purchases and don't want to wait in long lines.

But customers can end up frustrated and embarrassed when scanners don't ring up a price or kiosks won't accept their crumpled dollar bills. In April, a Texas man was arrested for shattering the screen of a self-service kiosk at a Wal-Mart when the machine jammed as he was entering his debit card.

For some customers, the possibility of problems keeps them out of the self-checkout lines altogether. "What do you do when it scans the wrong item or the item isn't scannable? You have to get someone to come over and make you feel like a moron because you can't get it to work," says Peter Ambrozaitis, vice president of Novations Group Inc., a Boston-based customer-service consulting company.

Many of these systems are fairly new. But experts say that businesses, facing lines of grumbling customers, realize they need to do more to ensure the technology works smoothly. One common solution: positioning workers near the checkout lines to help customers who encounter problems.

Customer-service consultants say businesses must also make sure they have enough information-technology workers behind the scenes to keep the systems working properly. And until consumers are comfortable with self-service kiosks, they need to have enough live checkout clerks available to cover demand.

--Ms. Searcey is a staff reporter in The Wall Street Journal's New York bureau.

Write to Dionne Searcey at dionne.searcey@wsj.com

Case Study: Customer Focused Self Service

Making self-service add up so that it is not only cost-efficient but also customer-effective is premise for this whitepaper which creates the ROC factor for building Balanced Business Case for Self-Service. That would include self-service terminals providing web-based help systems for customers ala kiosks.

Download Whitepaper

Excerpts

Meet Albert
With an important business trip coming, Albert is about to place a rush order for a set of long
sleeve shirts with coordinated wool trousers from the Web site of a retailer he has used on
several prior occasions. This time, however, Albert has questions about the products: Should he
choose a 100% cotton fabric or a wrinkle-fighting polyester blend? Does the retailer offer a
tailoring service? He types “tailoring” into the Web site search engine and receives 542 “matches.”
Lost in a sea of options, he does a second search under the term “wrinkle-fighting polyester
blend.” But this time, his search produces zero matches. Albert sends an email request to
customer service, but in return receives a polite but uninformative, standardized response. As a
last ditch effort he places a call, but soon hangs up because the interactive voice response “menu
tree” doesn’t have options corresponding to his questions.

The good news is the retailer saved $8 by deflecting Albert’s request to automated self-service
channels.The bad news is that Albert is frustrated and abandons his shopping cart, which costs the
retailer a $271 purchase.At a competitor’s Web site, he finds the products and information he needs,
and places the order. Happy with the self-service experience and support from the competitor,
Albert shifts his clothing purchases–about $1,500 a year–to the competition.

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By 2010, says Gartner, self-service will account for 58% of interactions.

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A recent study shows that 99% of U.S. adults said that, if they had a positive customer service experience with a company, they would be likely to recommend that company to a friend or colleague. Eighty-five percent said that if they consistently received excellent customer service from a company, they would be most likely to greatly/somewhat increase their business with that company.iii

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Traditionally the self-service business case has focused on lowering costs-and for good reason.For every email that selfservice prevents, about $3 is saved. For every telephone call, $5 is saved (and as much as $30).

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According to a 2005 survey of Forrester’s 200-plus member Customer Experience Peer Research Panel, 65% of respondents from companies with $200 million+ in revenue said Web-based self-service was critical or very important to their 2006 customerexperience spending plans.

Software Brief: Microsoft Vista too late?

Much has been made of Vista being delayed and now we have Boot Camp from Apple so we can run XP on imacs. Vista will come in 6 different flavors though not sure if that includes all of the embedded variants (CE, WiPOS, etc), which will impact self-service and POS. Nice comprehensive article on outlook for Vista rom newsfactor. Is it too late? Has Microsoft finally lost the monopoly of Windows?

Microsoft's Worst Nightmare

Mark Long, newsfactor.com

Few events in the technology sector generate more scrutiny than the release of a new operating system from Microsoft. The world's biggest software company had planned on releasing the next version of its flagship product, which runs nearly 90 percent of the world's computers, in time for the holiday season. But when Microsoft announced in March that its new Windows OS, Vista, would be delayed until January 2007, some observers smelled blood in the water.

The delay is only the latest roadblock for the first new OS from Microsoft in five years. Vista's development has been marked by setbacks, including scrapping the data-driven system that was the hallmark of "Longhorn," the project's former code name.

Meanwhile, Microsoft's competitors have been busy. Apple recently released Boot Camp, software that enables its Intel-powered machines to run Windows XP, giving customers a choice of OS on the same computer. While the release of Boot Camp in and of itself shouldn't affect Microsoft's market share (it might even sell more copies of XP), it could draw people to the Mac platform, where they could eventually abandon MS altogether. What's more, now that Macs can run XP, speculation continues that Apple's OS X will someday run on PCs built for Windows.

There is also the question of which company offers the better operating system. Apple has made accessibility, security, and cool graphical touches its stock in trade, and Microsoft has placed much emphasis on these features for Vista. On the open-source front, Linux on the desktop has advanced by leaps and bounds, garnering praise for stability, flexibility, and a user-friendly interface.

Is the venerable Windows OS finally vulnerable in the market it has dominated for years?

You bet, said Louis Suarez-Potts, community manager of OpenOffice, a free, open-source office suite. The longer the delay on Vista, he said, the bigger the opportunity for vendors of OS alternatives. But the greater issue, he said, is that the delay affords the opportunity to evaluate not just OS alternatives, but also strategies. "Does one really need, in practice, the overhead Vista will demand?"

'A Scary Proposition'

For its part, Microsoft says that the extra time is necessary to ensure quality, and that business versions of Vista will be available in November of this year. In fact, Microsoft is planning to offer Vista in six versions. Only the higher-end iterations will feature the snazzy new "glass" interface, however, and some business versions will require a subscription to Microsoft's Software Assurance service.

This tiered approach has some people wondering if it's all just too much to keep track of. Others have predicted that consumers and businesses using older machines won't even bother to upgrade because these PCs won't be able to support the more-advanced features of Vista.

"Microsoft has lost the monopoly logic that made it the most powerful and richest software company in the world," Suarez-Potts said. "I don't think an eventual Vista -- perhaps better named 'RearView' -- will help; it's already a lost cause."

However, not everyone is convinced that Redmond will suffer. "Microsoft may be more vulnerable than it's been in the last 10 years, but I don't think it is going to lose to an open-source alternative, because I don't see any other cohesive capability to match them," said Jim Murphy, a director at the advisory firm AMR Research.

"They continue to provide features and functions that are pretty compelling once you see them," he said. "And for the most part, the customers we serve are not in a position to want to experiment with drastic alternatives, because that's a scary proposition."

Microsoft appears to have the most at risk in the basic terminal and kiosk markets, where companies are looking for ways to minimize costs. "Microsoft has never liked the idea of a thin client, like Novell and Sun offer, because it threatens their desktop business," Murphy said. "But they've had to make some concessions to it. This has placed Microsoft in a position of having to hedge its bets, by supporting a hybrid approach that will support a rich desktop experience as well as kiosks and smart devices in the field that don't require a rich OS and the extra hardware that goes with it."

Microsoft therefore faces the unpleasant prospect of companies resisting wholesale upgrades and investments, Murphy said. "Fewer workers will need or get full versions of Office, and fewer will require Vista to do their jobs," he said.

A Switch in Emphasis

Microsoft's initial Vista development effort was dedicated to giving PC operators vastly expanded search capabilities. But along the way Microsoft had to switch its emphasis to security, which these days ranks first and foremost in the minds of business managers and consumers alike.

"Microsoft's popularity makes it and its users the continual targets of exploiters, spammers, hackers, and malware makers," Murphy said. "Since they are more vulnerable, they have to find more ways to stem that flow."

For example, Vista will incorporate a technology called BitLocker that will encrypt and password-protect the contents of any desktop or laptop hard drive. This is expected to make it harder for unauthorized users to access data on a stolen PC. The technology should appeal to businesses worried about compliance with Sarbanes-Oxley and other government regulations that incorporate data-protection provisions.

From the home user's perspective, perhaps the greatest upgrade to the Windows OS will be how Vista will provide a multimedia experience that has been optimized for high-definition (HD) wide-screen displays. The move comes as a result of folding today's Windows XP Media Center Edition software into the new Vista OS.

The Media Center embedded into Vista will include the requisite support for allowing people to watch and record premium and HD cable programming on Media Center PCs without the need for a separate set-top cable box. Satellite TV households also will benefit from a partnership between Microsoft and DirecTV that will enable the flow of DirecTV digital content, including HDTV programs, between Windows-based PCs, DirecTV's digital set-top boxes, and even Microsoft's Xbox 360 gaming platform.

From the business perspective, however, there's not much interest in Media Center, and melding such sophisticated software with Vista could prove to be a liability, Murphy said. "Microsoft probably wants to move people forward, but if your choice is between fat-client and thin-client architectures, the fat one is starting to look extremely obese and there's where all the hardware requirements also get boosted."

The extended multimedia capability of Vista is overwhelming for a lot of companies to think about and will have to prove itself as an asset at some point, Murphy said. "But, invariably, there will be demand for that somewhere down the line."

Vista also will sport several enhancements to the Windows graphical user interface (GUI) that is designed to help people find information quickly on their PCs. "There's a lot of 'eye candy' that comes with Windows Vista, including live icons on the task bar and a 3D capability that gives previews of windows as you flip through them," said Michael Silver, a vice president at the Gartner consulting firm. "While attractive to consumers, most businesses won't see a lot of benefits from these features in terms of better performance and management, and you'll need the right graphics card to make it play."

Everything but the Kitchen Sink

Vista will be offered in two versions for businesses, three for consumers, and one geared to "emerging markets." The strategy is meant to ensure that Vista buyers only pay for the feature sets they truly need. All versions will be available for either 32-bit or 64-bit PC systems.

For the PC fanatic who wants the best of all possible worlds, Vista Ultimate will include the entertainment, mobility, and business-oriented features available in all Vista offerings. At the other end of the spectrum, Microsoft will be offering a stripped-down version called Vista Home Basic for the cost-conscious, and somewhere in the middle sits Vista Home Premium, which will ship with most consumer PCs. Companies will have a choice between Vista Business and its security-heavy cousin, Vista Enterprise, in November. The low-cost Vista Starter is designed for families and entry-level PC users in developing economies.

"The number of Vista versions is a little bit overblown, but on the other hand the Vista mix is more straightforward than what happened with Windows XP," Silver said. Windows XP was released in five versions, but these were tailored to specific hardware architectures, not users.

Vista Enterprise is geared to organizations with highly complex I.T. infrastructures. However, the enterprise version will be offered only to customers participating in Microsoft's Software Assurance, a security-oriented subscription service, which will require a multiyear financial commitment.

Linux Alternatives

Ironically, Microsoft's rivals have been among the first to take comfort from Software Assurance. "When Microsoft announced Software Assurance, it was a great day for the Linux desktop, because the multiyear commitment and the large checks that companies have to write will cause them to reevaluate the situation even as the pen hovers above the contract," said Greg Mancusi-Ungaro, director of marketing for Linux and open source at Novell.

"The fact that Vista for the enterprise requires a significant financial commitment opens up conversations for alternate methods for dealing with client-side computing," he said, adding that Novell does not require multiyear commitments for Desktop 10, its forthcoming Linux-based operating system.

Gartner's Silver agreed that the multiyear commitment could be a problem for Microsoft. "Software Assurance is definitely an issue for enterprises, and companies will have to come to grips with it," he said. "It presents an opportunity for Apple, [as well as for] Novell and the other Linux players."

Although Novell's Desktop 10 is much improved over previous versions, the cost of migrating Windows applications remains the main barrier to widespread enterprise adoption, Silver said.

"Novell Desktop 10 is an important milestone but most organizations have to support lots of applications, and so a wholesale migration becomes expensive and not doable due to sheer size and cost," Silver said. "Still, Linux could certainly be appropriate for single-function PCs ... and could be appropriate for users with few applications or browser-based applications. And frankly, that could describe a whole lot of people."

Mancusi-Ungaro pointed out that computing is far different today than what it was even five years ago, when the last Windows upgrade came to market. "It's no longer a one-size-fits-all world," he said. "While I don't think we will see too many headlines of companies doing what Novell has done, which is move its entire work force to Linux, I do think we will read about 10 to 30 percent of the seats in enterprises moving to a commodity-class OS because it is all their users really need."

For example, the cash registers at many retail stores are now special-client computers tied directly into back-office systems. "These transactional fixed-function work stations are used for just one or two tasks," Mancusi-Ungaro said. "This is where Linux is an ideal choice and where we see the first wave of Linux adoption occurring on the desktop."

The second wave is the Linux OS for the basic office worker, he said. "There are sets of users in every organization, which because of job function have a definite need for basic elements such as an office productivity suite, e-mail, a file system and printing, but very little else in the way of additional demand. Dollars previously allocated to proprietary operating systems therefore could be reallocated through the deployment of low-cost Linux desktops that provide all of the set functions that the user needs."

Coercion and the Courts

Few large businesses expect to implement Vista in one fell swoop, according to AMR's Murphy. "Some will upgrade in conjunction with hardware upgrades and updates while others will upgrade incrementally based on company division, employee role, or geography," he said. "In addition, many believe, based on past experience, that early iterations of Vista will present too many stability and security risks."

The number-one reason for enterprises to upgrade from Windows to Vista continues to be the threat of discontinued support for older products, Murphy wrote in a recent research note. Executives will need some serious convincing, he said, and decision makers "will continue to bristle at what looks to them like coercion rather than a value proposition."

When all is said and done, just how nervous should Microsoft really be about losing more market share to its OS competitors?

"Microsoft is one of the more paranoid companies in the world, and they always worry about all of these things," Silver said. Nevertheless, as Richard Nixon famously observed, just because you're paranoid doesn't mean they aren't really out to get you. Microsoft not only must contend with its OS competitors, but also must deal with the threat of future antitrust actions in Europe and Asia. One rumor points to this potential litigation as a reason why Microsoft decided to hold back on its Vista plans. Another rumor suggests that Microsoft decided that a wholesale rewrite of the OS code was necessary.

"Vista is ambitious, and it has a fair amount of compatibility challenges to it in terms of the user access control," Silver said. "I think they did not budget enough time for betas, and as things turned out to be more complex, there was no possible way to remedy those in the short amount of time that they had allotted themselves."

Whatever the reasons for the delays, the real proof will be in the pudding. By and large, beta testers of the new OS have had good things to say, and the January 2007 rollout is sure to attract early adopters and generate a ton of news coverage. No matter the result in the marketplace, however, one thing is certain: the hindsight on Vista is sure to be 20/20.

Case Study - GM Test for Kiosks

General Motors Tests Kiosks to Gather Car Buyer Leads: 7 Lessons Learned (Plus Results Data)

SUMMARY:
Last year General Motors decided to junk their paper-based lead generation systems completely in favor of electronic kiosks at autoshows and summertime events across Canada.

It was a huge risk that got great results. This exclusive MarketingSherpa Case Study outlines the nitty-gritty details of the program. (Example: Did you know you should always bolt your kiosks to the floor?)

CHALLENGE
Every year General Motors Canada exhibits at about 50 autoshows, sporting events, theme parks (such as water parks) and other events consumers throng to.

The typical display includes at least one vehicle for the crowds to admire, plus stacks of paper "enter to win" sweeps entries and ballots. The goal is to generate brand awareness and sales leads.

But, those handwritten sweeps and ballots are a pain to manage on the back-end. Consumers don't have perfect handwriting, and many resort to strange shorthand abbreviations for things like city-name. Also, although GM's data center had a crack team processing the paper forms, the work took awhile, so leads couldn't always be acted on while they were still hot.

By December 2004, Susan Walker GM's CRM Enterprise Data Enablement Manager was fed up with bad data, wasted time, and processing costs. She had a vision of a better world for 2005 -- paperless lead generation.

At the time practically no other consumer lead generation marketer in Canada was using electronic kiosks. The risk of handing over all event lead generation to an unknown technology for the year was stupendous.

CAMPAIGN
Walker carefully mitigated risk by first running a quick pilot test that month, putting kiosks in five dealerships. The promotion was for an end-of-year contest.

"It got us hooked. Consumers were not scared to walk up to them. So, we made a leap of faith to go wireless. We crossed our fingers."

With just three weeks left until the first big autoshow of the new year, Walker and her team, including a kiosk vendor and GM's ad agency (links to both below), scrambled to get the program up and running in time for all events in 2005. The team carefully based their tests and tactics on seven lessons learned by other kiosk users:

Lesson #1. Use alterable creative

The kiosks, which looked a bit like old fashioned videogames, were designed with interchangeable displays so the "packaging" could be changed to match the event or GM's promotional elements at the event. "We wanted the surveys to blend into the event and not look like typical GM corporate surveys."

This gave the brand marketers a chance to make an impression about GM even to consumers who didn't stop to fill out the form.
Walker decided to put GM's agency in charge of this creative element rather than the kiosk folks, because the agency were keepers of the brand.

Lesson #2. Make it light -- but bolt it down

The team shipped between eight and 20 kiosks to each event. The kiosks had to be light enough to keep down shipping costs and manageable for the booth crew on site. The final kisosk weighed about as much as larger laptop. However, "stability was a concern for us. We bolted it to the floor to make sure if it got crowded, it would not get knocked over."

This also stopped the adventurer in every crowd who thinks it would be super fun to take a kiosk home. This is the type who also walked off with or broke the pens that were attached by wires to the kiosks. (The pens were used to mark answer buttons on the screen.) So, the display team always kept a bag of spares on hand and routinely patrolled for pen losses and breakages.

Lesson #3. Wireless data downloads

It's critical to have the ability to download entries from each kiosk easily and remotely on a routine (at least daily) basis. As Walker notes, you don't want to risk keeping info in the kiosk itself in case it's damaged, or simply 'switched off' at the end of the day.

Also, remote wireless control lets the home-team control the kiosk data rather than relying entirely on the efforts of the events team who may be busy managing a heck of a lot else.

"We did online reports too posted to our intranet," notes Walker. "I could go in and instantly see how many people entered the day before. I could slice and dice the data."

Lesson #4. Optimize your form

With that sort of data available on a daily basis, the team were able to tweak their entry form on the kiosk itself. Their goal, to maximize the number of survey completes while measuring lead quality.

To that end, they optimized the kiosk screen just as you normally would optimize a Web landing page. Tests included number of questions in total, number of questions per screen-page, size of questions on the screen, and where offer reminders "You'll be entered to win a …" would appear during the survey to encourage completion.

Plus, they also optimized the final "thank you" page to direct kiosk users to the next step at GM's booth based on their answers. For example, you might instruct people who are ready to buy to check out easy credit options at the financing station on site.

Lesson #5. Rent (don't buy)

"I'm glad we didn't buy last year's kiosks. There are new and improved kiosks out this year. We also didn't want the insurance liability. We wanted someone else to worry about storage, breakage, and all of that. Renting might be a little more expensive, but I don't want to buy technology that has a one-year lifespan. Rent from an expert and let them run it."

Other advantages to renting, "We had back-up kiosks in every city and support from the vendor for replacements within 24 hours."

Lesson #6. Test alternative technology (tablets, swiping)

While lines can be a good thing, causing other consumers to wonder what the excitement is about, Walker worried about losing potential leads if kiosk lines got too long at some events.

So she tested adding a 'swipe your driver's license' to some kiosks (newer Canadian licenses can be swiped) to add in contact info on the forms and save typing time. She also tested handing portable laptop-style screens to booth staff and having them walk out into the crowd to collect entries.

Lesson #7. Follow-up with an email

The automotive industry has been studying the effects of lead response time for years. Walker knew it was critical for all leads generated from each event to receive a new "thank you" touch from GM within a matter of a day or two. So, she set up an email program that automatically sent a follow-up message to leads. (Link to email samples below.)

RESULTS
"We're a big fan of kiosks," says Walker after her first 13 months of kiosk use. However, she's got one reservation -- "as long as the event is indoors." Turns out outdoor events, in particular at water parks, weren't suited to electronic kiosks.

Overall GM captured 24% more leads at events year over year when they made the switch from paper to kiosk. Plus, the number of leads spoiled by incomplete or illegible data was down by almost 10%. And, data entry costs were down enough to help cover the cost of the program.

Form optimization tests showed that it was best to remind consumers about the sweeps offer on the screen where they entered their contact information. This was the most-likely bail page before. "You must reinforce the contest on the greeting page as well."

The team also learned forms should never take an average consumer longer than a minute to fill out. Walker's first forms were almost two minutes long and she shaved them considerably.

One other lesson: Don't have staff walk around with portable entry tablets at an auto show. We've heard this tactic can work for other types of brands at events (example: CareerBuilder.com) but consumers are too wary of automotive sales people to appreciate being approached by anyone from an automotive brand.

The follow-up thank-you emails worked well, with 16% of recipients clicking on a link in the email to get more information about GM. These emails were very soft educational offers for 2005. For 2006 the team is testing slightly harder special offers to see how they do.

The other big change for 2006 -- Walker switched from the pens to allowing people to enter their information using a fingertip. Results are already better, and the event staffers are relieved of their pen patrols.

Useful links related to this article:

Creative samples from GM Canada
http://www.marketingsherpa.com/cs/gmcanada/study.html

In-Touch Survey Systems – the company that supplied the kiosks and programming:
http://www.intouchsurvey.com

MacLaren McCann Canada - GM Canada's ad agency who handled all creative and many of the logistics around the Kiosk campaign
http://www.maclaren.com/

General Motors Canada
http://www.gmcanada.com

MarketingSherpa.com : Practical News & Case Studies on Internet Advertising, Marketing & PR

KIosk Market Research Report Released

VDC Releases new report on the kiosk industry at recent tradeshow.

Source for article

Thursday, November 17, 2005
By Rick Redding

Optimism Abounds in New Report

Industry Growth Predicted to Approach 20 Percent Through 2007

It�s been seven years since Venture Development Corporation published research on the Interactive Kiosk market. Needless to say, a lot has changed since then.

With its newest kiosk research coming out this month, the 30-year-old Massachusetts-based firm sees investment in self-service and interactive kiosks at its highest level, with more to come.

Among the research company�s initial findings, released at the KioskCom.com Fall Summit in Miami Nov. 9, is that the search is still on for the next great application.

�The search for a killer application is on the forefront of everyone�s mind,� said Bennett Mason, one of VDC�s research analysts. �People are looking for the next one. Industry growth is driven by key indicators.�

The history of electronic self-service, of course, starts with the ATM and continues with airline ticketing kiosks. Self-checkout, photo kiosks and bill payment have helped fuel industry growth in the recent past. Mason mentioned two areas that could significantly contribute to a predicted annual growth rate of 18.8 percent during the next two years.

�I think quick-service restaurants and music downloads are getting a lot of interest,� he said. �With QSRs, there�s a lot of questions about how you sell, how to get to the ownership. For a killer app, you need the perfect storm of user interest and industry interest, like what we experienced with the airlines.�

The interim findings suggest that revenue and unit shipments place North America slightly ahead of Europe in 2005. In an estimated $680 miilion market, with more than 265,000 units, North America represents 50 percent to 55 percent of shipments. Mason said the final numbers may be adjusted.

�The markets are really different. There are a lot of smaller players in Europe, while in the U.S. you have a number of large deployers,� Mason said.

The report acknowledges that the European market has more product innovation, functionality and advanced payment options.

Mason said European projects are more likely to be customized from the ground up, and have more smaller deployments. He added that the rest of the world makes up a small percentage of kiosk shipments.

Another significant finding is VDC�s projected growth by vertical market. VDC has divided the kiosk landscape into four verticals: Retail, Hospitality, Health Care and Government. Not surprisingly, it cites Retail as the largest sector, estimating 46 percent of the overall combined revenue shipments in North America and Europe. The annual growth rate in retail is also highest at 20.4 percent. Still, VDC considers government and health care as "greener field" opportunities, especially in supplying informational kiosks. Health care and Government are much smaller verticals (each below $55 million), but Mason said there are plenty of emerging applications in those markets.

VDC's preliminary results predict annual growth rates of 20.4 percent of Retail, 18.2 percent for Hospitality, 14.0 percent for Health Care and 16.2 percent for Government.

The report�s news for the kiosk industry is significant and encouraging. It predicts increased technology innovation and investment in all facets of the industry.

The full report will be available Nov. 30. For more information on the study, go to www.vdc-corp.com or contact Marc Regberg (msr@vdc-corp.com).

Forbes points to kiosks as signs of 'changing marketplace'

The Exponent: Steve Forbes, editor-in-chief of Forbes Magazine and former presidential candidate, was the keynote speaker at the fifth annual Krannert School of Management Leadership Speakers Series, held Oct. 13. Forbes started his speech by mentioning the changing face of the economy. He cited the growing number of kiosks as a sign of our economy's changing environment, naming airport and McDonald's kiosks as examples of the simplification and innovation that results from a changing marketplace. originating news site with full article link

Research: Six Simple Rules For Successful Self-Service

CIO Article on the successful steps to integrate self-service. In the article she iterates/references many points from Francie Mendelsohn of Summit Research (longtime consultancy on kiosks)

Six Simple Rules For Successful Self-Service
You can save money, increase revenues and generate loyalty when you let customers help themselves. But only if you do it right.
BY ALICE DRAGOON

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Chances are it's been about 20 years since you've stood in line at your bank to get cash from a teller. ATMs offer such convenience�and are so much more efficient for banks�that no one can fathom going back to the old days. Ever since then, companies have been eager to tap into the free labor pool of customers who can be convinced to help themselves. Through self-service, organizations have been able to reduce labor costs, increase revenue from orders of out-of-stock items or increase the loyalty of customers who appreciate speedier service.

But as surely as you love using ATMs, you've walked away from a kiosk that's confusing or abandoned an unscannable item at the self-checkout line�and some company lost a sale. The reality is that although some self-service projects pay off handsomely, the ROI from such projects can be elusive. Francie Mendelsohn, president of Summit Research Associates, estimates that 15 percent to 20 percent of all self-service kiosk projects ultimately fail. Success with kiosks and self-checkout systems is often tricky to achieve because so many things can go wrong. Such systems won't work if customers have no incentive to use them. If kiosks are too complex, customers get confused and give up in frustration. Sometimes, self-service fails for the simple reason that customers don't know it's an option or are wary of trying it on their own.

American Greetings once spent millions on kiosks that enabled people to design their own cards, only to find that customers weren't willing to pay a premium for their own creativity. Grocery chain Hannaford Bros. fared better, but its first attempt at self-service fizzled. In the late '90s, Hannaford piloted handheld self-checkout scanners in its Scarborough, Maine, store. The few customers who used the scanners loved them, says Hannaford CIO Bill Homa, and tended to spend more. But no more than 11 percent of customers used the tool, so Homa couldn't justify a full rollout. Homa suspected that customers, who were required to sign out a scanner but still had to pay a cashier, found the scanners too much of a bother. So Hannaford turned to the more convenient self-checkout lanes. Today, as much as 28 percent of customers use the service and the ROI is slightly ahead of breakeven.

Companies such as Hannaford that have done well with self-service succeed by following six simple rules, which they derived from their own and others' mistakes. Learn from them, and you can fix what ails your own self-service systems�or even get them right the first time.
Rule #1 Provide a Benefit to Customers

Self-service has to make something faster, cheaper or better for customers, says Sam Israelit, a Bain & Co. partner and retail IT strategy expert. "If it doesn't do one of those three," he says, "you're wasting your money."

For instance, kiosks that the Mayo Clinic once installed in Target stores in Arizona offered consumers little to no value. The kiosks were intended to sell books, newsletters and a CD for kids about anatomy. Yet instead of setting up the kiosk to demonstrate the CD or let consumers swipe their cards to order one, Mayo just displayed the CDs and books on a rack. Meanwhile, the clinic squandered the kiosk screen: Set up to provide health information to customers, it spewed out too much data. The "coughs and colds" entry, for instance, included a 12-page, single-spaced list of over-the-counter and prescription medications. After four months, Mayo Clinic pulled the plug.

On the other hand, airline passengers are willing to use kiosks to avoid long lines. Although a check-in agent will beat a kiosk user in a time trial, kiosks make it possible for multiple simultaneous check-ins, which make for shorter lines. "The time the customer has invested from the time they arrive at the counter to the time they go to the gate is shorter, even though individual transactions can be longer," says Rocky Wiggins, CIO of AirTran Airways. In some cases, even the perception that self-service technology saves time is enough to get customers happily using it. Homa says that customers think Hannaford's self-checkout is speedier, even though cashiers generally scan more than four times as many items a minute as the average customer. "Customers are busy scanning and not waiting," he says, "so it just seems faster."
Rule #2 Make Transactions Intuitive

The simpler the transaction, the easier it's translated into an intuitive self-service process. "The secret of self-service is four words: Don't make me think," Mendelsohn says. "If the interface is confusing, people are not going to stand there and figure it out. They're just gone."

Under pressure to reduce costs, airlines have succeeded at shifting a large chunk of their routine check-in transactions to kiosks. After all, if a passenger just needs a boarding pass, having an agent confirm the flight information and print it adds cost but no value (the average cost of printing boarding passes drops from $3.68 to just 16 cents when customers do it themselves). When US Airways introduced self check-in kiosks in 1999, the goal was to make them so intuitive that they'd be "dead simple," even for people who were not technically savvy, says Mark Kuhns, managing director of marketing and e-commerce. After extensive testing in focus groups, the airline created a process that is still largely in use: Passengers swipe a credit card or loyalty card to identify themselves, confirm their flight information, then choose a seat or confirm a previous seat assignment. Then they're asked if they have any bags to check; if yes, they enter how many. A final screen offers them the option of printing an itinerary. The kiosk then prints a boarding pass and an itinerary. The airline claims that customers without bags to check can complete the entire process in as little as 30 seconds.
Customer-Friendly Kiosks
A well-designed kiosk is easy to use. Francie Mendelsohn, president of Summit Research Associates, has seen enough kiosks to know which features are essential to usability. Here's her list:
� Big buttons. Small touch-screen buttons will foil large fingers.
� Feedback. When you touch a button onscreen, it should "depress" and change color.
� Readability. Dark text on a light background is the most legible.
� Consistency. Give every touch screen the same look and feel. Even slight deviations can confuse users.
� Speed. Have enough bandwidth so that users don't have to wait for transactions to be processed.
� Cleanliness. Choose dark-colored kiosk cabinets to hide finger smudges, or use enclosures made of fingerprint-resistant materials.
� Short screens. Customers prefer not to scroll.
� Clear directions and unambiguous choices. Remember that people are standing up. If it's confusing, they'll walk away.
� Minimal animation. Fancy flashing lights and movement will slow down transactions and annoy customers.
� No annoying sounds. Employees will pull the plug.

To further simplify the process for passengers who don't carry loyalty cards�or who just don't want to pull out their wallets�the airline added a cardless access feature in early 2004. Once customers were allowed to identify themselves by entering their name or flight number on the touch screen, kiosk usage went up 25 percent. Today, kiosks handle 50 percent to 55 percent of all check-ins at US Airways, in line with the industry average.

When companies add complexity to their transactions, they run the risk of confusing�or worse, losing�customers. Complexity increases the time customers need to spend at the kiosk, as well as the likelihood that they'll get stuck and need to ask for help. At AirTran, check-in kiosks from Kinetics are programmed to refer nonroutine transactions to agents. For instance, if two passengers with the same last name and first initial are leaving from the same airport, the kiosk will ask for the destination city. If that tiebreaker doesn't identify the person, the kiosk will prompt for the travel confirmation number. But if the passenger doesn't have it, she will be instructed to see an agent, who can determine her identity more quickly and free up the kiosk for the next customer.

"We don't try to handle all the minute, complex scenarios that may come about," says Wiggins. "If [your] target is to handle 100 percent of them, you will be in development forever and will overcomplicate the process for most of your customers."

Hilton had unsuccessfully piloted a self check-in kiosk in its hotels in 1997. Before trying again in 2004, Robert Machen, vice president of corporate and brand solutions, and Chuck Scoggins, vice president of OnQ Customer Solutions (OnQ is Hilton's integrated technology platform), made simplicity their guiding principle. "The fewer things on the screen, the better," says Machen. Hilton's kiosk replicates the steps of the familiar hotel check-in process so that the self-service version seems logical to guests.

The new kiosks have proven to be effective line-busters. One day in March 2004, the 1,544-room Chicago Hilton & Towers was expecting 1,100 arrivals. Although that many arrivals would normally lead to significant lines at peak check-in times, says Machen, the kiosks processed 33 percent of the day's check-ins, and there was no line at the front desk all day. He adds that kiosks have also prevented lines in similar situations at Hilton's other large hotels.
Rule #3 Show Customers What to Do

Ideally kiosks should be so intuitive that customers can figure out how to use them on their own. But just because you're offering self-service doesn't mean you should leave customers to fend entirely for themselves, especially when you launch a new system. Machen and Scoggins say that one of the main reasons Hilton's first kiosksdidn't take off was that the hotelier didn't do enough to educate guests or help them when they ran into trouble. "Our original approach with kiosks in 1997 was, 'This is self-service. It should be like an ATM, where you set it out and it works 100 percent of the time,'" recalls Machen.

This time around, Hilton is going with an assisted self-service model, making sure there's always a service agent available to teach guests how to use the kiosks and help if they run into problems. Some agents are equipped with handheld devices that give them full access to front-desk systems. If they can't resolve an issue, they'll make sure the guest gets expedited service there. In addition, the agents also serve as greeters and are accessible to guests who need directions or have questions.

Stores using self-checkouts typically have one person manning four self-service lanes. At the Pittsburgh-based Giant Eagle grocery chain, a paystation attendant monitors the self-checkout, helps customers with problems and watches for fraud. In some cases, a bagger is also assigned, according to CIO Russ Ross. With such assistance, as much as 25 percent of customers use self-checkouts, accounting for 20 percent of sales. Even when staff are available to assist customers with self-checkout, the savings on checkout labor can still run from 40 percent to 60 percent, says Israelit.

Because employees play such a critical role in training customers to use self-service technology, it's essential to get their buy-in up front. "If they see it as a threat, the kiosk is going to fail," says Mendelsohn. Instead, they need to see self-service as a way to help them do their jobs more effectively. At AirTran, Wiggins says, the airline convinced employees to get behind the technology by giving them self-service targets to shoot for.

At the same time, don't force self-service on customers. Self-service can shortchange�and alienate�those who genuinely need personal attention. Israelit advises that high-value clients and customers with complex problems should never be foisted off onto a kiosk. "Self-checkout at Tiffany's is not going to work."

Rule #4 Choose the Right Locations

The location of a kiosk can have a lot to do with its success. Hilton has found that from 20 percent to 30 percent of guests use self check-in at hotels near airports compared with 10 to 12 percent of guests overall. The company concludes that people who fly are accustomed to using kiosks and like to have that option at their hotel.

Following this logic, Hilton has installed a kiosk in the Honolulu airport so that guests can check themselves in while they wait for their baggage. Hilton's IT department monitors and supports that kiosk remotely over the Web, as it would any other kiosk. (Remote monitoring software that pings kiosks to make sure they're up and running is essential, notes Israelit: You can't count on someone like the cashier in a convenience store to tell you your kiosk is broken.) Someone from Hilton also makes sure the Honolulu airport kiosk is stocked with paper and room key cards.

Where a kiosk is located inside a hotel, airport or shop also matters. You have to put kiosks where people are most likely to want to use them. "If you've got 400 people in a conference room," says Machen, "you know they all need to check out and head to the airport, so you can put a kiosk right in front of the conference area." But because customer needs or business needs may change, kiosks must be easy to move. Hilton's 1997 kiosks were so large and cumbersome that once installed, they couldn't be moved, and this fact may have contributed to their poor usage.

Kiosks are more streamlined now, but it's still expensive to pull cables for a new location. So this time, Hilton went wireless. Likewise, AirTran's Wiggins prefers secure, wireless kiosks because they are cheaper and provide greater flexibility. "Airports are notorious for saying, 'Move from this ticket counter location to that one,'" he says. Sometimes AirTran doesn't even have to move a wireless access point to set up kiosks at the new location. And if volume justifies installing extra kiosks, it's just a matter of getting them delivered and assembled.

Wherever you locate a kiosk, make sure customers can find it easily. When the U.S. Postal Service rolled out its Automated Postal Center (APC) kiosks last year, it needed to inform customers that they could use it to buy stamps and post packages. The USPS drew attention to the kiosks with bright yellow footprints on the floor, as well as large yellow circles with red arrows that point to the APCs and say things like, "New. Buy Stamps. Automated Postal Center."
Rule #5 Beware of Legacy Systems

Investing in self-service technology can be a bad idea if your technology is outdated or if the data needed for self-service transactions isn't integrated. "If you work largely off legacy systems, [integration] can be a significant challenge," says Israelit. "It may require you to upgrade overall systems, and if so, the economics may not make sense."

Hilton's first attempt to introduce kiosks failed in part because of integration problems. The kiosks were connected to Hilton's proprietary property management system, which stores information on reservations and occupancy, through what Machen calls "archaic" serial interfaces. As a result, the kiosks sometimes had trouble communicating with the property system and had limited ability to resolve reservation or room selection issues. Because of this, more than 30 percent of the time customers were forced back to the check-in line. Hilton shut down the pilot within a year. Since then, Scoggins and his team have deployed a Web services layer on top of the property system, making it possible to create a reliable interface to the kiosks using Web-based transactions. They also upgraded the property system to separate business rules from the user interface so that kiosks can access the business rules from the property system and IT is spared the work of recreating them.

To make integration easier, Israelit advises, also use the same content management, logistics or product information systems you use for conventional transactions rather than create extra systems to manage kiosk content.
Rule #6 Take a Test-Drive

U.S. Postal Service (USPS) CTO Robert Otto recalls when customers first began using the postal service's APC kiosks, and it was possible for them to get their fingers caught in the heavy door to the package drop. This problem was identified during the pilot phase and the USPS modified the door before rolling out to its first 2,500 locations.

Having pilots in several locations also gave the USPS a chance to test its processes for supporting the system. Staff learned, for instance, that they needed to rethink the process of pushing virus protection to the kiosks. Because the kiosks are located in post office lobbies that are open around the clock, Otto's team could potentially cause delays for users whenever they installed patches or updates. Piloting allowed the team to figure out the best way to manage that process in order to minimize its impact on customers. The pilots also helped the USPS fine-tune the services the APCs offered. "Initially we let customers buy one stamp," says George Wright, manager of finance and administration systems. "But we found out that the cost of the transaction was greater than the cost of the stamp." Today, APCs sell stamps only in multiples.

The time spent fine-tuning the kiosks paid off. A month after the first ones were deployed, a survey found that 98 percent of customers who used them felt that the APC was easy to use, 100 percent said they'd use it again and 98 percent indicated they'd use it after normal office hours. To date, the USPS has generated more than $200 million in revenue from the APCs and has reduced staffing at post office counters enough to save $12 million during FY04.

Ultimately, success with self-service comes down to understanding your customers and designing systems that meet their needs as well as yours. If they value such benefits as shorter lines or more control over their transactions, letting customers serve themselves could benefit your company as well.

Analysis: PRN Sale to Thomson and Digital Signage Market

From: Dynamic Digital Signage and Interactive Kiosks Journal -- in case you haven't heard by now, digital signage behemoth PRN (the firm responsible for the Wal-Mart in-store television network) is being acquired by media conglomerate Thomson Worldwide to the tune of around $285M.

Throw that in with Mercury Online's recent sale to 3M and the successful IPO of Focus Media, and I think July 2005 may have been the most eventful month ever for the dynamic digital signage industry, at least in terms of M&A and the capital markets. But even more interesting than the news of the acquisition itself are the insights that we can gain by looking at the two companies and the possible drivers behind the deal.

First off, $285 million is a lot of money. On first glance, it might not seem like that much for a company that's doing $100M in sales, which PRN is. And it's not really that much for a rapidly growing company, which PRN is. And it's not particularly much for the largest profitable company in a burgeoning industry, which again, PRN is. So what's the story? Where did the Thomson execs come up with this number, and what made PRN say yes?

Well, part of the story is that while PRN's revenues have been big, their margins (historically) weren't. In fact, if you look back at my May 2004 analysis of PRN's S-1 filings, they only made about 8% net margins on their $112M of revenue in 2003, which translates to around $10M in net income. So at roughly 29x earnings, the $285M number seems pretty respectable (for reference, stocks in the S&P 500 historically trade at around 13-14x earnings, though in the last fifteen years or so that number has averaged closer to 22-23x).

Another thing to note is that while PRN has run perhaps the most highly visible experiment in digital retailing, it isn't really a technology company. It's a content creation and marketing company. In fact, PRN uses a combination of off-the-shelf and custom applications to run its digital sign network, and has switched technologies at least once (that I know of) during the course of its deployments. They spend the most money and employ the most people in their ad sales and content production departments, which have to re-sell space and re-create content month after month. In light of that, it's pretty amazing that they were able to get as much as they were for the company, since firms who derive a significant portion of revenues from creative services and other consulting activitiestypically don't fetch large earnings multiples.

Next, note this paragraph taken from their 2004 S-1:

We are highly dependent on our relationship with Wal-Mart Stores, Inc., our largest retailer relationship, and we expect our reliance on this relationship to continue for the foreseeable future. Our dependence on Wal-Mart consists of two principal elements: (1) revenues earned under contracts entered into directly with Wal-Mart for media management services, advertising airtime and creative services and (2) revenues earned under contracts with third-party advertisers purchasing airtime or creative services for the PRN Network in Wal-Mart stores. Revenues from contracts entered into directly with Wal-Mart accounted for 35% of our total revenues for the year ended December 31, 2003 and 37% of our total revenues for the three months ended March 31, 2004. Revenues from contracts entered into with third-party advertisers purchasing airtime or creative services for the PRN Network in Wal-Mart stores accounted for an additional 54% of our total revenues for the year ended December 31, 2003 and 50% of our total revenues for the three months ended March 31, 2004.

So in 2003, 89% of PRN's revenue came from Wal-Mart related activities, with that number probably reduced slightly in 2004. I know that PRN has signed deals with a number of supermarket chains in the past 12 months, but in reality, the Wal-Mart deal will continue to represent a very sizable chunk of PRN's revenues for the foreseeable future. Again, in light of that, it's amazing that they were able to sell for as much cash as they did.

Now, as for why they would want to sell right now, that's perhaps the most interesting question. I'd like to posit one theory myself, and I'd love to hear any thoughts that you might have. My theory goes something like this: we know that PRN has been looking to retrofit the Wal-Mart network with new technologies, like plasma screens with content targeted to each area within the store (rather than the current one-channel-fits-all approach). Let's assume that they can purchase plasma or LCD screens for $1,000 (and let's be honest: if you're purchasing 60,000 of them, you're going to find some economies of scale). Additionally, let's conservatively estimate that installing the screens, retrofitting the cabling to handle VGA signals, and installing new head-end equipment to play the higher definition content and/or additional channels also works out to $1,000 per screen. Now let's assume that they install 20 plasmas or LCDs per store, and there are around 3,000 Wal-Marts. That comes out to $40,000 per store, or a total of $120,000,000. That is a lot of cash to lay out for network upgrades that will provide unknown benefits and uncertain incremental revenue. But if Wal-Mart demands it, and they still drive somewhere in the range of 75-80% of PRN's revenues, then PRN is suddenly very motivated to find a way to deliver. I doubt very much that a bank would lend PRN that much money for what can only be described as a risky business maneuver, so now PRN needs to look for more creative sources of funding. In comes Thomson with a large amount of cash, and the rest, as they say, is history.

Read Rest of Story on Dynamic Digital Signage and Interactive Kiosks Journal

Financial Services to Grocers and C-Stores

Convenience and grocery stores are in trouble. Long-standing revenue streams like cigarettes are disappearing in a puff of smoke. Intense pricing pressure from Wal-Mart has flattened margins for the foreseeable future.

An aging store asset portfolio drains available working capital. And the channels have blurred � with Starbucks coffee at Safeway and gasoline at Wal-Mart.

story link

Convenience and grocery executives are desperately looking for new growth drivers. And smartly, they�re looking beyond physical products � you can only stock the shelves with so much stuff � and they�re finding success with services.

The success convenience and grocery chains are having with prepaid wireless has led them to look for other services beyond prepaid and to evaluate the consumers who are purchasing prepaid phones and refill. These chains are finding a plethora of deliverable services which, like prepaid wireless, are targeted toward the unbanked market � people who through choice or necessity manage their finances outside of the traditional banking system. Some call this activity �fringe banking.�

The unbanked population, estimated at over 40 million strong, or over 30 percent of the U.S. population, is made up primarily of teens and young adults, minorities and the working poor. They�re already shopping in convenience and grocery locations, yet these locations have not offered the services they need in order to manage and access their money, forcing them to make special trips to outlets outside of their daily routine.

Services expand
Convenience and grocery stores will now become �banks� for the unbanked. They�ll seek to offer point-of-sale or kiosk-driven services, which will allow unbanked customers to manage their money, pay their bills, purchase and consume products and services, and make their lives a bit simpler.

Prepaid wireless is one service already offered at many of these stores. This market has exploded from $4.5 billion in 2000 to over $23 billion in 2004 � driven by youth, minorities and unbanked customers. Another service, prepaid debit cards, is currently a $600 million market. The Pelorus Group expects it to grow to over $5 billion by 2007. Next Estate Communications reports that 65 percent of prepaid debit users are under the age of 35 years.

Payroll check cashing can also be offered. The Financial Service Centers of America (FiSCA) reports that this $60 billion industry processes over 180 million checks a year, growing 10 percent annually. Walk-up bill payment would be another convenience for the unbanked. Checkfree, the online bill-payment service, reports that 20 percent of American households regularly pay their bills in person.

Offering money transfer service can be lucrative for convenience and grocery stores. Celent expects the global money transfer market to surpass $170 billion in 2006. InterAmerican Bank reports that over 60 percent of foreign-born U.S. Latino adults send money back home regularly.

Retailers look for partners
Overburdened convenience and grocery merchants will look to one-stop full-service distributors to carry the load � bringing in the offers, enabling the transactions and developing the signage and display. For these distributors, banking services would allow them to establish deep relationships with the merchant from a product portfolio and technology perspective and would enable them to cash in for years to come.

Distributors of prepaid telecom have been playing a key role in the U.S. prepaid supply chain � securing the locations, deploying the delivery technology, communicating the offer and enabling the transaction. But margins are getting squeezed; many of the best locations have been secured, competition is fierce and consolidation is rife. The addition of new revenue-driving products and services to the portfolio is crucial.

Offerings that appeal to the same consumer base as prepaid telecom, utilizing the same point-of-sale or kiosk-based delivery technology, make fringe banking, or banks for the unbanked, a natural for distributors to take on and for retailers to migrate toward.

To be successful in this space, distributors will need to:
� develop the relationships with the necessary product and service providers to form the comprehensive bank for the unbanked offering
� educate their retail partners as to the opportunity and the requirements
� create the point-of-sale and/or kiosk delivery network necessary to successfully deliver the offering
� design clear, concise and relevant marketing communications inside and outside the store to drive adoption and demand
� develop a deep and continual understanding of the unbanked consumer, including who they are, what they need, how they want it delivered and how to reach them

Achieving critical mass
This year promises to be the year fringe banking breaks out. Circle K and 7-Eleven are rolling out check-cashing services to all stores. Stored value gift and debit cards are all the rage. Prepaid wireless continues to explode. Kiosks and multiapplication point-of-sale devices make product delivery possible. All of this is happening while the nation sees a continued explosion in Hispanic population, an increase in population living below the poverty level and a reduction in the number of traditional banking outlets.

Retailers, distributors, processors and product and service providers are all taking note, and many will develop a sense of urgency in 2005 to win in this space, to prosper and to survive. Will you?

The author is president of Tefisto Partners, a consultancy focused on the stored value and fringe banking space. He can be contacted at (602) 750-8055 or visit the company website at www.tefistopartners.com.

Self-service Scorecard

The Allen Bonde Group announces their awards for self-service portals such as Broadvision, KANA, Siebel and others. The consulting group does quote some kiosk statistics for check-in and for photo kiosks and even defines self-service in the general sense. It still seems a bit overstated though for that sector to say it is all of self-service though. Historically the call-in software people have always done that though.

site link

(PRWEB) - Framingham, MA (PRWEB) May 17, 2005 -- Allen Bonde Group (ABG), Inc., a strategic advisory firm recognized as the leading authority on self-service applications and market trends, has released its latest annual rankings of the top self service software providers. The 2005 ABG Self Service Vendor Scorecard evaluates and ranks vendors in four categories and nearly 20 dimensions including "Brand," "Partners," "Technology," and "Delivery." In addition, for 2005 "momentum" and "attractor" ratings have been computed to identify specific vendors to watch over the next 12 months.
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Based on ABG's ongoing coverage of over 150 vendors in several key market sectors, studies of industry-specific technology adoption and requirements, and proprietary scoring models, ABG's Vendor Scorecards are invaluable to organizations performing vendor selection, vendors looking to understand competitive points of differentiation, and investors looking for trends and breakout opportunities. Highlights from this analysis have been presented at the recent SSPA Best Practices Conference and will be included in upcoming sessions at the premiere of DCI's Self Service Conference in Boston in early June.

New Rankings
For 2005, ABG will announce the top 20 self service vendors on a new site, SelfServiceScorecard.com, which has been developed as a one-stop resource for those evaluating self service solutions. Vendors are ranked by total score, and grouped into "Leaders," "Top 10 Key Players," and "Specialists" categories. In addition, vendors with the top Brand, Partners, Technology, Delivery, momentum, and attractor scores have been identified.

Results from the 2005 ABG Self Service Vendor Scorecard include:
- Two vendors have emerged from the pack to achieve greater than 16.0 out of a total possible score of 20.0: RightNow Technologies (Brand = 4.5; Partners = 4.0; Technology = 3.5; Delivery = 5.0) and Knova Software (Brand = 4.0; Partners = 4.0; Technology = 4.5; Delivery = 4.0). These two have been identified as the current Leaders in this marketplace.

- In addition to these two vendors, eight vendors score higher than 14.0 out of 20.0, and make up the remainder of ABG's Top 10 Key Players (in alphabetical order): ATG, BroadVision, InQuira, iPhrase, Kaidara, KANA, SafeHarbor and Siebel's Self Service division (formerly edocs).

- The "momentum" rating is a measure of a company's performance relative to its reputation. A score greater than 1.00 indicates a vendor who is performing well but may be "a hidden jewel." SafeHarbor has the top momentum rating among Top 10 Players, while RightAnswers has the top momentum rating among Specialists.

- The "attractor" rating is a measure of a company's functional breadth and depth compared to its existing channel and ecosystem. A score greater than 1.00 indicates significant upside for growth or a vendor who has built out significant technological capabilities and may be attractive as a partner. Kaidara has the top attractor rating among Top 10 Players, while Jive Software and noHold have the top attractor ratings among Specialists.

The Launch of SelfServiceScorecard.com
Coinciding with the release of ABG's 2005 rankings, the company has launched a new Web site with the full scorecard rankings, as well as short vendor profiles, links to articles, case studies and a collection of market trends and data points regarding self service adoption and spending. The free site is located at http://www.SelfServiceScorecard.com. Over time, the site will be expanded to include new features like forums and vendor directories. "The self service market is growing and becoming more defined, yet remains highly dynamic, and even confusing at times," stated Rudy Minar, managing director at ABG, Inc. "2005 will continue to be a year when the leaders separate themselves from the rest of the pack. With our scorecard we aim to provide a unique, multidisciplinary perspective on the top players and predict who will emerge in the next 12 months. At the same time, releasing our study online ensures that unlike a printed report, anyone planning to implement self service solutions has access to current and relevant vendor and market data."

Acquisitions in Self-Service Kiosk

NCR Corporation (NYSE: NCR) today announced that it has acquired InfoAmerica, a privately held company and leading provider of self-service solutions for the quick-service restaurant industry.
link to press release

In the year 2014, along comes Googlezon

Interesting 8 minute movie on the future of information. EPIC, or the evolving personalized information construct, is unleashed by Googlezon. Robin Sloan looks into the future of digital media and participatory

click here to view movie

7-Eleven Transforming Technology

7-Eleven is transforming itself into the JetBlue of the convenience store industry. With an imaginative assortment of fresh foods and a cache of financial and tech-savvy services that belie its low prices, 7-Eleven is emerging as the industry�s cheap-chic hybrid -- somewhere between the local quick mart and Starbucks.

Just as JetBlue made it fun to fly on a shoestring, 7-Eleven is using its size, scalability and national buying clout to redefine convenience with panache and panini sandwiches. Over the last few years, the ubiquitous convenience retailer has extended its image beyond Slurpees and six-packs to appeal to a broader demographic, including businesspeople and women. And, with Vcom kiosks installed in more than 1,000 units, the once-dowdy corner store now represents a distribution opportunity for an ever-growing array of services and digital products.

This ambitious makeover is powered by technology systems that, analysts say, rival those of Wal-Mart. Last year alone, the Dallas-based chain invested $93 million in technology, with a majority of the spend tied to enhancing its proprietary retail information system. Though not all stores have been aesthetically overhauled, the business model has been transformed and the tech underpinnings are in place chainwide.

What�s the payoff?
Today, store managers at each of 7-Eleven�s 5,800 units in the United States and Canada can re-order fresh foods in the morning and replenish their shelves that night. Using the company�s sophisticated systems, store managers have a window into what�s selling, item-by-item and hour-by-hour. They can monitor customers� buying patterns, react to changing weather forecasts and capitalize on neighborhood happenings.

Backed by a 24-hour supply chain distribution model, it�s now entirely possible for a store manager who finds out on Thursday about the local high school�s �big game� to have enough soda and hot dogs to satisfy the revelers by kick-off on Friday night.
And that�s just one example of the role information systems play in advancing 7-Eleven�s �convenience through technology� strategy. The company uses technology to strengthen its relationships with suppliers and help them predict demand for their products nationwide.

Merchandising gurus mine the piles of data amassed in its enterprise warehouse hoping to spot emerging trends and spark ideas for new product launches. And 7-Eleven is in a league of its own when it comes to local computer-based training of managers and franchisees on operations, ordering, forecasting and merchandising techniques.

�They have a culture of innovation,� says Jim Crawford, vice president at Columbus, Ohio-based Retail Forward. �If something works they roll it out; if it doesn�t they move on. No one comes close when it comes to exploring the notion of convenience and service through technology.�

With a zealous devotion to research and a keen sense of the value of entrepreneurial sagacity, 7-Eleven is rushing headlong toward the Holy Grail of retailing, precisely wedding customer demand with supply and weeding out slow-moving items in favor of fast-moving sku�s. And industry watchers -- from Wall Street analysts to competitive convenience wannabe�s -- are paying attention.

7-Eleven rising
Having just completed its 34th consecutive quarter of same-store sales increases, 7-Eleven executives believe they�re on a roll. Though the company still has some debt from a 1987 leveraged buyout (and a pre-packaged Chapter 11 bankruptcy three years later), executives say the overall balance sheet is healthy and stable -- showing improvements in cash flow and earnings along with steady advances in gross profit margin. Last year the stores rang up revenues of $12.1 billion, a 12 percent gain over 2003.

Executives at 7-Eleven are upbeat about the prospects for future growth based on adding fresh foods and delivering enhanced digital services. And they keep on adding locations.

The company recently opened its 28,000th 7-Eleven store worldwide. Some 1,700 new stores opened around the globe last year alone. With the U.S. arm of the company now implementing best practices from stores operating in Japan, Taiwan and Thailand and restructuring its business model to take advantage of that learning, CEO Jim Keyes is convinced that his team is well on the way to transforming 7-Eleven from a good business to a great one.

�Technology has allowed us to take back our destiny,� Keyes was quoted as saying earlier this year. Indeed, technology has enabled 7-Eleven to transform its business, and the company is no doubt staking its future on technology. Still, executives are vigilant about costs and spending and underscore the �tech for business sake� imperative.

Steering the tech transformation is Keith Morrow, CIO and vice president of information systems for 7-Eleven. Morrow has made significant progress since joining the company in January 2001, positioning 7-Eleven to leapfrog industry leaders on the tech front and winning the admiration of some of the industry�s largest suppliers.

Morrow recalled the meeting he had with Keyes on his first day with the company and the three goals that were set for IT: automate and simplify the stores through technology; leverage technology both in and out of the stores to improve customer service and the customer experience; and deliver quality information at the moment of truth across the different areas of the business to enable fact-based decision-making.

7-Eleven�s Retail Information System collects data from POS terminals and transmits it in real time to an Oracle data warehouse. Using analytics, the data is mined for evidence about customer preference, pricing and new product launches. It also provides store managers with daily, weekly and monthly sales tallies upon which to base their orders.

While employing item-by-item inventory management goes a long way toward improving in-stock positions on basics and monitoring high-potential items, it also allows entrepreneurial-minded operators to tailor assortments in an effort to maximize sales.

�It�s about giving those in the stores the ability to make decisions rather than having decisions made for them by someone off in an ivory tower,� Morrow says. �They�re the ones listening and interacting with the customer. Our goal is to provide the information they need at the time they need it to make decisions store by store and item by item.�

Efforts to leverage technology inside 7-Eleven stores and within the enterprise have been manifested in improved payment technologies, including signature capture, as well as efforts made to speed up transactions. Last year the company overhauled its back-office server architecture and most of the infrastructure in the stores with the ultimate goal of speeding up various processes and giving store operators the opportunity to spend more time interacting with customers.

Tom Madigan, Oracle�s vice president of the retail industry, has been working with 7-Eleven for nearly seven years. He describes the company�s business and IT transformation as �exponential. They have been able to simplify, standardize and globalize business processes and best practices across the organization, and they�ve done it without ever compromising their focus on the customer, the brand and the product.�

Model market program
A key program created by 7-Eleven is called the model market. Intended to assure that store managers understand how to use the data that�s now at their fingertips and are comfortable making it part of their daily routine, the program consists of extensive training in store operations, ordering, forecasting and merchandising techniques.

�They go right to the back office, sign on and take the training needed for a new task,� Morrow says. �Afterward, they are ready to get back on the job.� Morrow reports that sales, gross profit, and inventory management have improved at stores where the model market program has been implemented.

David Gruehn, Microsoft�s industry manager for retail and hospitality, has high praise for Morrow and 7-Eleven. �They want to take convenience to the next level and they have a keen understanding of both the customer and retail technology,� he says. �Morrow gets what�s coming next. We don�t have to convince him that things are changing; if it�s right for 7-Eleven he�ll go after it.� In particular, Gruehn cites Morrow�s responsiveness to electronic payment solutions, vendor collaboration and hand-held inventory management devices.

Another project that has commanded a sizable share of Morrow�s attention is the growth of the services category, including pre-paid cards, lottery sales, ATM services and money orders. Guided by the light of convenience, 7-Eleven�s Vcom self-service financial kiosks, designed and built by NCR, provide consumers check-cashing, money orders, funds transfer and bill payment capabilities, as well as the ability to purchase and reload 7-Eleven�s E-CASH pre-paid MasterCard.

Deploying digital delivery
Earlier this year, the company developed a co-marketing relationship with H&R Block that allows customers to cash their refund-anticipation loan checks at Vcom kiosks.
Exciting as this is, it�s what lies ahead that has the potential to delight shoppers and shareholders alike. With this network in place, the opportunity to explore the digital delivery of other products could expand exponentially. Executives are toying with digital music downloads � the likes of which could rival the nation�s largest electronics retailers.

�Keith is the type of CEO who�s always challenging vendors to bring meaningful solutions to business issues and customer needs, rather than tech for tech�s sake,� says Nelson Gomez, NCR�s vice president of sales for food, drug and convenience stores. �He does a great job of driving quantifiable ROI to every project he touches.�

Rest of Story

Interview with VISA

Contactless News does nice interview with Visa.

Main questions: (1) Can contactless technology transcend the early hype and establish itself as a viable payment tool? And (2) Where the heck is Visa?

story link

Digitizing Home Depot

Interview on CIO Today with Bob DeRodes of Home Depot on digitizing Home Depot... "There are other human use issues for us to consider as well. For example, one of our biggest challenges is where to put kiosks and other customer-oriented technology in the store where it won't get smashed by a customer with a big cart or an associate with a fork-lift.."
full story on CIO Today

Kiosk Statistics

Self-service and self-checkout is growing in multiple markets, with Frost & Sullivan noting sales of interactive kiosks to have totaled USD 492 million globally in 2004, up 6 per cent on 2003 totals. Kiosk sales are predicted to see an 8.1 per cent CAGR from 2003 to 2010, with IDC estimating IT spending in vertical industries by corporations worldwide to grow from USD 965 billion in 2004, to USD 1.24 trillion by 2008.

Noted on Kiosknews.org

Global Kiosk Sales Totaled USD 492 Bn In 2004
Investors.com

Apr 26 2005 : Self-service and self-checkout is growing in multiple markets, with Frost & Sullivan noting sales of interactive kiosks to have totaled USD 492 million globally in 2004, up 6 per cent on 2003 totals. Kiosk sales are predicted to see an 8.1 per cent CAGR from 2003 to 2010, with IDC estimating IT spending in vertical industries by corporations worldwide to grow from USD 965 billion in 2004, to USD 1.24 trillion by 2008. This 6 per cent CAGR growth will be driven by retail systems including self-checkout and photo kiosks, which accounted for 25 per cent of global kiosk sales in 2004.

Tourism, transportation and entertainment was the next-biggest sales category for kiosks in 2004, when the US, the biggest market for self-checkouts, accounted for 66 per cent of sales, Europe for 21 per cent and Asia-Pacific for 9 per cent, according to Frost & Sullivan. US retail chain Wal-Mart has self-checkouts at 1,325 of its 3,159 stores, while Home Depot uses DIY checkout at over 1,000 of its 1,900 stores. Up to half of Home Depot�s sales are handled by self-checkouts and the retailer believes its floor staff have 40 additional hours per week for customer assistance.

Banking and finance, government, retail and restaurants are the main vertical markets in which interactive kiosks are deployed, with banking representing 11.9 per cent of the total, according to IDC. ATMs and kiosks are the most obvious self-service channel for banks to deploy, with value-added services such as prepaid recharge and event ticketing becoming a standard feature. For restaurants, payment card-enabled touch-screen kiosks now enable customers to make orders that are accessible in a restaurant�s centralized orders, inventory and revenue-tracking program.

ePaynews.com - the payment news and resource Center

Airport Internet Kiosks by ZD Net

Airport kiosks not showing Windows� best hand by ZDNet's David Berlind -- Of the many character roles played by Windows, the one that probably gets the least coverage is its use in public as the underlying technology behind embedded applications such as kiosks and information panels. Earlier this year, I interviewed a designer of embedded systems who, until then had been unwavering in using Windows as his [...]

Airport kiosks not showing Windows� best hand by ZDNet's David Berlind

4/25/2005
Airport kiosks not showing Windows� best hand
-Posted by David Berlind @ 2:07 pm

Of the many character roles played by Windows, the one that probably gets the least coverage is its use in public as the underlying technology behind embedded applications such as kiosks and information panels. Earlier this year, I interviewed a designer of embedded systems who, until then had been unwavering in using Windows as his choice for embedded operating systems. But, after years of dedication to Windows, he was considering alternatives. Until that interview, almost all of my exposure to embedded Windows, or something like it, was through public Web terminals and headless display. If you travel like me, you know what I�m talking about. With many such applications, it�s sometimes difficult if not impossible to tell what the underlying OS is because users typically have no access to the OS (as well it should be with embedded OSes). But occasionally, you�d see one of three tell-tale signs that Windows was in use under the hood.

The first of these are the signature window-boxes, title-bars, and controls that are fairly unique to Winapps. Many embedded applications hide these "Windows identifiers" (and rightfully so). But sometimes, they�re unavoidable as is the case in the second tell-tale sign: a Windows error message. In public places, I see these so often. Every time I see one, I wish I had a digital camera with me. It�s not that the error is always the fault of Windows (it�s not). It�s that any Windows-based kiosk that�s disabled as a result of a bug is more than just a bad advertisement for the kiosk provider. It looks bad for the establishment that allowed that provider on premises (usually as the exclusive kiosk provider) as well as for Microsoft. It makes me wonder why such systems (at least the ones I keep seeing) aren�t more self-aware of their state and capable on some level of self-repair (or at least an automatic reboot). Or, why isn�t someone monitoring a console from somewhere afar where they can detect malfunctioning systems and either manually do an over-the-wire reboot, an over-the-wire app/os reprovisioning of the system (surely, the blade people keep telling us how easy this is to do), or simply disable the system temporarily instead of advertising that the system is screwed and it�s just going to be left there for all passers-by to observe. Even in the case of terminals with a keyboard and pointing device or kiosks (like an Internet terminal), it probably couldn�t hurt to have a big red publicly accessible reboot button in case something goes wrong (with instructions like "PRESS HERE IN CASE SYSTEM STOPS WORKING").

Last week, while vacationing to Mexico, I happen to have my camera with me. The first time I noticed a problem, my family and I were making a flight connection in Houston on the way to our final destination in Mexico. The error dialog appeared over some sort of digital information panel that was on display in multiple locations throughout the airport. Everywhere I looked, I saw the same error message, obstructing the view of the information behind it. That was over a week ago. But we were in such a hurry, that I didn�t have time to get out the digital camera and take the shot. Suprisingly however, eight days later, on the way back, a bug (I�m not sure if it was the same one) was on prominent display on the same information panels throughout the airport (see photo below). In this case, the dialog, which is hard to see clearly in my photo, is a "The program is not responding" dialog and the offending program according to the dialog�s title bar is HtmlDve-Multi.e. Google turned up nothing on this.
houstonairport.jpg

The tell tale signs that it was Windows weren�t just the familiar Windows accoutrements, but also the instructions "To return to Windows and check the status of the program, click Cancel." This of course is a pretty silly message to display on an information panel that has no way for users to perform a click � a sign to me that, whether it�s the fault of Microsoft, the application provider, or the application deployer, somewhere, someone is doing a really bad job of adapting a desktop or server-based operating environment to a more public environment. At this point, open source advocates will probably chime in to remind everybody that open source operating systems like Linux are more well-suited to the task because of how such error dialogs can be more easily customized through the sort of software re-engineering that open source licensing permits.

I caught a similar situation in the airport at Ixtapa, Mexico where, as you can see by the photo below, I was standing in front of a credit-card operated Windows-based Internet access terminal that is based on Windows 2000 (you can see the credit card slot off to the right). The problem? The system seemed to have hung while Windows was starting up. There was no big red button. Just a display that showed the system sitting there having advanced about half-way through it�s startup sequence. Had it been working, I would have used it to get my first update on what was going on in the real world after having been incommunicado for a week. Unfortunately, that Internet Access Provider would not be ringing the cash register with me.
winkioskbug.jpg

Another tell-tale sign that Windows is under the hood � one that I don�t see as much of anymore � is the infamous Window Blue Screen of Death (BSOD). I guess that�s a good sign that the BSOD isn�t as common as it once was. Lest I single Windows out as a common denominator to all the problems I�ve seen, it�s not. Last fall, while dropping my son off at Logan Airport for a trip to Florida, I spotted a string of terminals that were obviously having problems, in their pre-OS load mode, contacting a remote boot server. What struck me as being odd was the plethora of diagnostic information that appeared on the screen including the MAC (physical layer) addresses of terminals as well as enough information to determine what local IP subnet they were on. While I�m not an expert in airport security (feel free to comment below if you can expound), this just seemed to me to be the sort of information about an airport�s digital infrastructure that the airport would rather not have on public display.

To be fair, more of these terminals and kiosks are probably in good working condition than not. In many cases, because of the way the underlying OS is so nicely concealed, the users will never know with some of them that Windows is under the hood providing the reliable service. Also, Linux is undoubtedly the driving force behind many "public applications" as well and has probably had its fair share of failures in public environments. It�s just that I�ve never had the privilege of seeing such an occurance.

Editors Note: the kiosks pictured at the top of the story are powered by Linux and are made by KIS.

Self-service trends

Self-service kiosks and self-checkout are among the hottest products in the integrated systems industry group. The sector includes companies making specialized computer systems for a host of vertical markets, such as banking and finance, government, broadcasting, retail and restaurants.

New Technology Checks Out
Fri Apr 22, 7:00 PM ET

Patrick Seitz

The self-service revolution that started with automated teller machines and pay-at-the-pump gas stations has spread to the retail, travel and hospitality industries.

Grocery stores, hotels and restaurants increasingly are installing self-service stations. And that's ringing up sales for integrated systems vendors like NCR (NYSE:NCR - News) and Radiant Systems (NasdaqNM:RADS - News).

Self-service kiosks and self-checkout are among the hottest products in the integrated systems industry group. The sector includes companies making specialized computer systems for a host of vertical markets, such as banking and finance, government, broadcasting, retail and restaurants.

Shoppers like the new self-service options because they speed the checkout process and put them in control. Businesses like them because they improve efficiency and customer satisfaction.

Consumers have embraced such self-service technologies as airline kiosks for printing boarding passes and choosing seats. Now grocery stores are getting in the act with self-checkout lanes. And hotels are adding kiosks for check-in and checkout.

"It's a self-everything world," said Michael Webster. "Consumers overwhelmingly are voting in preference for using self-service because it gives them greater convenience. It expedites, whether they're trying to finish a shopping trip or get the boarding pass to get through security. Self-service is just a much more efficient process."

Sales of interactive kiosks totaled $492 million worldwide in 2004, a 6% increase over the prior year, according to researcher Frost & Sullivan. Sales are expected to grow at a compound annual rate of 8.1% between 2003 and 2010.

It's just one healthy niche in the overall market for information technology in vertical industries.

Corporations worldwide spent $965 billion on IT last year, says researcher International Data Corp. The largest vertical market was banking, which represented 11.9% of the total. Discrete manufacturing was second, with 11.8%, and government, with 11.3%.

A common theme linking these companies is they sell systems that do more than record transactions and other tasks. They provide useful data for companies to gain insight into their operations and their customers.

Name Of The Game: Businesses and government agencies are looking for new computer systems that can improve efficiency and give them data to make better decisions.

Sales of integrated systems can be hurt by a slowing economy. But some areas, such as self-service technologies, are seen by customers as a necessary expense.

Other products -- like ATMs -- are going through a replacement cycle. Banks are looking to upgrade old ATMs with systems that provide advanced services and meet new regulatory requirements.

Self-service technologies can ease the perpetual shortage of sales clerks, says Rufus Connell, an analyst with Frost & Sullivan. Self-service terminals let one employee do more, such as manage four checkout lanes instead of one.

Retailers also can deploy sales clerks to other areas of the store for better customer service.

"Businesses have a choice," Connell said. "They can either improve their customer service or take advantage of the cost savings."

The resurgence in business travel is prompting hotels to upgrade their information systems, says Jim Yin, an analyst with Ehrenkrantz King Nussbaum. Micros is one company benefiting from the trend, he says.

"Business travel since 9-11 has continued to improve," Yin said. "And only recently have they done anything to upgrade their infrastructure. So they're doing a little catch-up in trying to rebuild their reservation systems and their checking-in and checking-out process."

Technology

Self-service technologies are expanding into new areas and offering better capabilities.

Pennsylvania-based Wawa convenience stores, for instance, use touch-screen kiosks for customers to order sandwiches and pick the toppings.

"They've had tremendous success with it, just taking a piece of the process and automating it and putting it into self-service," said Stephen Smith, an analyst with research firm Gartner.

It speeds up the ordering processing by eliminating the "um" moment when the clerk asks customers if they want mayonnaise or mustard, he says.

Companies are looking to put speech recognition, biometrics and radio frequency identification capabilities into future self-service and self-checkout systems.

Outlook

IDC expects worldwide IT spending by vertical markets to reach $1.24 trillion by 2008. That represents a compound annual growth rate of 6% between 2003 and 2008.

Some customers, such as banks and hotels, are replacing and upgrading their systems. Others, like retailers and restaurants, are adding entirely new technologies.

Retail systems, including self-checkout and photo kiosks, made up 25% of interactive kiosk sales worldwide last year. Tourism, transportation and entertainment was the second biggest category, with 9% of sales.

The U.S. is the biggest market for interactive kiosks, including self-checkout terminals. It accounted for 66% of sales last year.

Europe was second with 21% of sales, followed by the Asia Pacific region with 9%, Frost & Sullivan reports.

Upside: Integrated systems vendors are benefiting from increased spending in vertical markets for new information systems.

Their customers want systems that can improve productivity and customer service. They also want to be able to use data gathered by these systems to hone their businesses.

Risks: The rollout of self-service systems could backfire if customer service declines.

The success of such systems depends on how retailers use them, Smith says.

"If they only move on it as a way to deal with labor issues or as a way to improve their productivity, it's going to disappoint customers," he said.

POS Spending Exceeds $6.5B

The convenience store segment, along with various retail industries including grocery, QSR and supercenters, dedicated a large amount of IT dollars and time to upgrading and installing new POS equipment in 2004, according to a study done by IHL Consulting Group

And this focus is projected to continue into 2005.

"Looking ahead, our research indicates that every segment of the retail industry will increase its POS purchases in 2005 over 2004, as retailers upgrade to more reliable and easier-to-use systems," said Greg Buzek, president of IHL Consulting Group. "POS systems and self-checkout systems are where most of the IT budgets for retailers are going the next two years."

Overall, shipments of Linux-based units increased 34 percent, despite still representing only 6 percent of the overall market, and shipments of Windows 2000/XP-based terminals represented 56 percent of the overall market. Additionally, Windows 9x/CE took another 15 percent of shipments for a total of 71 percent of the market.

The C-Store Segment
POS operating systems were up 12 percent at convenience stores in 2004, according to the report, and Windows NT/2000/XP was the leader among larger chains requiring multi-tasking abilities like pay-at-the-pump, Speed Pass (RFID), car-wash facilities and other integrated terminals.

While there is no clear POS leader as far as vendors are concerned, Radiant Systems, IBM, VeriFone and NCR are all popular, the report stated. Also, the choice of operating systems has been a mixture of DOS, Windows 9x/CE, NT/2000/XP and proprietary operating systems.

The complete report by IHL, entitled "2005 North American Retail POS Terminal Study," reviews the shipments and installed base of POS terminals sold to retailers in North America, and includes market shipment and installed base figures, market value and situation analysis for 10 retail market segments. It also forecasts the market through 2009.

The report is available for purchase at www.ihlservices.com.

Read more

Demographic Research - Men and Games

Men spend more money on video games than they do on music, research group Nielsen Entertainment said on Thursday, lending credence to a growing belief that video games are displacing other forms of media for the attention of young men.

And video gaming in general is starting to attract an older audience, with nearly a quarter of all gamers over age 40, the agency also said.

The interactive unit of Nielsen Entertainment conducted a random survey of 1,500 people in January and February for its report. Nielsen Entertainment, a unit of VNU NV (VNUN.AS) of the Netherlands, is best known for its benchmark SoundScan music sales service. Its corporate sibling Nielsen Media Research is the standard for TV ratings.

For males, Nielsen said, games now rank only behind DVDs as a purchase category, ahead of CDs, digital MP3 files and other ways of buying music. Nielsen also found that African-Americans and Hispanics spend more money on games each month than Caucasians.

Advertisers are quickly embracing video games as a better way to get to young men than the more traditional medium of television. Many games now have ads inside them, such as billboards in race games, and Nielsen is working on a method to measure audience response to the in-game ads.

Nielsen found 40 percent of U.S. households have some kind of system dedicated to game play, whether a gaming PC, a console or a handheld device. Among gamers, 23 percent own all three types of systems.

Among people who own at least one of the major consoles --Sony Corp.'s (6758.T) PlayStation 2, Microsoft Corp.'s (Nasdaq:MSFT - news) Xbox and Nintendo Co. Ltd.'s (7974.OS) GameCube -- 8 percent said they owned all three.

Nielsen also examined the amount of time spent playing alone versus socially and found that 79 percent of men and 79 percent of women over the age of 45 spend most of their time playing alone. Teen-age women tended to play more socially, Nielsen said, while women 25-54 are roughly split between playing alone and with others.

Overall, the firm said, active gamers tend to spend just over 5 hours a week playing alone and 3 hours a week playing with people or online.

The U.S. video game industry has $10 billion in annual revenue, roughly the same as U.S. box office sales.

Yahoo! News - Nielsen: Men Spend More on Video Games Than Music

Self-Checkouts Growing

Self-service technology is catching on in North America and Europe, with retailers installing automated self-checkout points, and hotels, car rental firms and airlines using kiosks to simplify routine processes.

Source: ePaynews.com
02-18-2005

Self-service technology is catching on in North America and Europe, with retailers installing automated self-checkout points, and hotels, car rental firms and airlines using kiosks to simplify routine processes. While retailers will never shift entirely to self-checkouts, most will use automated tills for line busting or to speed customer throughput at their stores. In the UK, Marks & Spencer, Sainsbury and Tesco increased their self-checkout use in 2003, and in Germany the Praktiker DIY chain has become Europe�s first to deploy self-checkout technology, with further installations planned for Greece, Luxembourg and Hungary.

US-based retailers handled self-checkout transactions to the value of USD 70 billion in 2004 according to IHL Consulting, and Publix Supermarkets, the largest grocery chain in the US, is planning to deploy self-checkouts across its locations in 2005. Other US-based grocery stores such as Ahold�s Giant Food stores in Pennsylvania, are installing self-checkouts, as are smaller family-owned stores such as Sherm�s Thunderbird Markets in Oregon and Hiller�s Markets in Detroit. Grocers in Asia are also seeing the merits of self-checkouts, with Japan-based supermarket chain Okuwa, now redirecting clerks to the store floor.

Noted on

Voice Usage to Rise in Self-Service

Sevenfold Increase Seen In Voice-Based Transaction Apps

Thu Jan 20, 4:42 PM ET

Global spending on voice-enabled technology for conducting self-service commercial transactions is expected to increase sevenfold by the end of the 2008, a market research firm said Thursday.

Annual revenues from the technology are projected to rise to $377 million from $56 million today, Datamonitor said. The most popular transactional voice technologies currently in use include account management, order processing, pay-as-you-go and reservations.

In account management, corporations are mostly using the technology for bill payment provisions, which are proving popular with telephone companies and utilities, Datamonitor said. Reservation applications are finding tremendous traction in the contact center-heavy travel and tourism industry.

Pay-as-you-go is a favorite among mobile carriers, which allow subscribers to add credit to a mobile telephone by using the human voice, the research firm said. Order management has perhaps the most mass-market potential by enabling users to access corporate voice portals and to order goods and services, particularly in the retail sector.

North America and Europe, the Middle-East and Africa are expected to account for 75 percent of the global market by 2008, Datamonitor said. Growth in Asia-Pacific is also expected to be strong, due to voice-business proliferation in Japan, China, Australia and New Zealand.

Self-Service and Better Usability

Inproving Usability is key to more transactions according to Forrester.

Self-Service Requires Better Usability
Wed Jan 19, 2:26 PM ET Business - NewsFactor

Kimberly Hill, www.crm-daily.com

Up to now, companies have seemed to follow the "if you build it they will come" approach to self-service tools. But a more apt motto might be "if they can use it, they will," according to recent data collected by Forrester Research.

Nearly 100 percent of the firms surveyed by Forrester expected to increase the number of transactions their customers could complete on their own this year, said Bruce Temkin. However, the vast majority said that improving the usability of their self-service tools remained the best way to do so.

The Shift Is On

All together, 80 percent of companies surveyed indicated that improved usability for self-service tools was either very effective or somewhat effective in helping them achieve the goal of moving customers to less-expensive channels.

Media, entertainment and leisure companies ranked highest in their desire to shift customers specifically to Web self-service; over 80 percent indicated that it was critical or very important. Utilities and telecommunications ranked second, with manufacturing a close third.

Web Self-Service Wins

When identifying which self-service channels were most important to them, companies leaned somewhat -- but not overwhelmingly -- toward the Web. For example, only 38 percent of telecommunications and utilities companies reported that moving companies to phone self-service tools was a critical priority, but another 50 percent indicated that it was somewhat important.

In media, leisure and entertainment, 56 percent of companies reported that moving customers to kiosk-based service was either very or somewhat important. Retail and wholesale trade came in second at 64 percent.

Proactive Marketing a Close Second

In addition to usability, companies ranked proactive marketing high on their list of successful tactics for moving customers to self-service channels. It is a problem that Forrester has highlighted for some time -- companies must make their customers aware of self-service tools before they can expect adoption.

In the case of banks, for example, tellers or telephone representatives can tell customers about new online banking or bill payment tools, Forrester's Catherine Graeber told CRM Daily. Then, the channels must begin to offer the services that the groups using them need.

For instance, younger people are those most likely to access online bill payment and banking. While they may not be highly profitable customers as yet, they soon will be, and cross-selling services, such as financial advice, would go a long way toward making the customer service offered by banks coherent, Graeber noted.

Self-service in Real Life

Self-service Needs a Few Bradleys [Computerworld]

Opinion by Virginia Robbins

NOVEMBER 15, 2004 (COMPUTERWORLD) - On my way home from work, I stopped at the garden center in my neighborhood home-improvement store to buy a few plants for my flower boxes. For less than $20, I found four beautiful red begonias that were perfect. The standard checkout lines were long, so I decided to use the self-service kiosk.

When I scanned the first plant, the kiosk barked, "Please scan item and place in plastic bag." I thought I had just done that, so I looked at the bar code carefully. It was sprinkled with just enough black dirt to make it unreadable. Needing an alternative to the sleeve of my silk suit and not finding any paper towels, I used one of the plastic bags provided at the kiosk to clean the label. Using a plastic bag to wipe damp dirt off of a plastic label on a plastic pot doesn't work very well. You end up generating static electricity, and the dirt becomes more attracted to the label.

Without any cashiers to provide the kind of assistance I got from Bradley, an airline employee who helped me catch a plane and make it home in time for dinner (as described in my last column; see QuickLink 49979), it took longer to pay for the begonias than it did to select them.

After that column appeared, many of you wrote to tell me about similar experiences. Paul Dearling also had an adventure in a home improvement store. The 1-inch spring he and his wife wanted to buy didn't have enough mass to trigger the kiosk sensor. He was left listening to a recorded voice instructing him to "please place the item in the bag" 14 times while his wife hunted down a cashier to cancel the transaction. But Paul went on to say that although the systems aren't perfect, he appreciates the faster checkout lines and enjoys the camaraderie he finds among customers.

I agree. When kiosks work, they're fantastic. A majority of Americans -- over 70% -- think so too. During a typical week, we all stop at the ATM to get cash or fill our cars with gas at the self-service pump. These automated transactions haven't quite cut out the human element, but in the past, we would have interacted with clerks, tellers or gas station attendants. Now the people we connect with are fellow customers.

We ask the person ahead of us if the brand of weed killer he's buying works well and the person behind if she thinks the colors we've selected match. Without help from someone like Bradley or some other type of assistance, our consumer experience is highly influenced by the information we gain in line and how well the kiosk is working.

There is no doubt that self-service technologies are here to stay. Companies can save too much money not to deploy them. An article called "You're Hired" in the Sept. 16 issue of The Economist stated that a standard supermarket kiosk can handle the workload of two and a half employees and that a telecommunications company spends 10 cents on a directory service transaction when it uses an interactive voice response system but $7 with a call center. It's the classic story of technology replacing people.

As the designers and implementers of this incredible cost-reducing technology, we need to remember the human element. Create enough frustration for a customer, and you lose a sale; frustrate that consumer a second time, and you may lose him for life. Remember to factor in the cost of the Bradleys as you implement and improve these technologies.

Virginia Robbins is CIO and managing director at Chela Education Financing in San Francisco. Contact her at v_m_robbins@yahoo.com.

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Self-service kiosks in general

Post office latest to adopt self-service kiosks [Hampton Road article]

Hal and Beth Milgrim were a bit unsure when the postal clerk routed them away from the line and over to the new Automated Postal Centers at the Lynnhaven Station, but a few minutes later, the couple had mailed their package, purchased two sheets of stamps and were on their way out of the door with smiling faces.

The APCs, which began arriving in Hampton Roads in September, allow postal customers with debit and credit cards to do 80 percent of the tasks they would normally do at the counter with a clerk, including mailing and weighing packages at any class, buying insurance and delivery confirmation, and ZIP code lookup. In addition, they�re available as long as the lobby is open, which for many post offices is 24 hours a day.

Considering the Milgrims have so many family and friends in Florida and Maine, the couple expects the kiosks to be especially useful once they start mailing holiday gifts and the post office becomes a madhouse.

�I think it�s wonderful,� Hal Milgrim said. �I didn�t have to fight anyone in the line, and it was easy to use.�

Postal kiosks are among the newest in a rapidly growing field of self-service technology that reaches from movie ticket sales and utility payments to airport check-in and grocery store checkout. Self-checkout lanes, ticketing kiosks and other self-service machines in North America did nearly $128 billion in sales in 2003, an 80 percent increase over 2002, according to research by IHL Consulting Group.

The Tennessee retail technology consulting firm found that 15 to 40 percent of retail purchases are now made at self-checkout machines. And some airlines are seeing as many as 70 percent of their customers are no longer using traditional systems and are checking themselves into planes electronically.

The goal for the post office kiosks is $329 in business each day, and the local machines are already surpassing that, accounting for 2 percent of postal revenue. But there will be customer service associates assigned to each one through the end of the year to guide customers to them and offer assistance. The kiosks, which are in 11 area post offices, also send a message to the associates whenever there�s a technical problem.

�People are always nervous about using new things,� said Fran Sansone, a local customer relations coordinator with the postal service. �They�re hesitant about getting out of line and losing their place to use something they�re not sure about. It�s really easy to use, though, so it�s just a matter of becoming comfortable with it.�

Lawrence Dvorchik , chief operating officer for New York-based KioskCom.com , said that although there will always be people who aren�t interested in using the technology, many people actively seek out self-service options.

�Our society is much more comfortable with technology now,� said Dvorchik, whose New York company provides consulting services for and promotes self-service technology. �It�s a matter of being proactive in guiding the customers to those lines so they can experience it.

�Once they have a positive experience themselves, or see someone else use it with ease, they�re hooked, and they�ll continue to use them.�

Better acceptance of and decreased cost of technologies such as radio frequency identification and wireless fidelity and the development of touchscreen technology have helped propel the use of kiosks.

The future of the industry is almost limitless, experts say. The path has already been laid for hotel kiosks to be integrated with airline kiosks for quicker check-in, for biometrics to scan fingerprints and irises to identify users, for avatars, or talking electronic heads, to make the kiosk experience more human.

With new advances like these expanding the market and more companies embracing the technology, IHL estimates that self-service kiosk sales will increase by 73 percent in 2004 and 88 percent in 2005.

While many people think of the self-service technology as a low-cost replacement for hourly workers, Dvorchik said most stores use the employee time the machines save them and invest it in more needed customer service areas.

�They have more sales associates throughout the store to answer questions and help people,� said Dvorchik, who has been in the kiosk business since 1998. �That allows them to speed up the customer experience and upsell at the same time.�

At Harris Teeter, which has five locations in Hampton Roads, 31 percent of customers use the grocery chain�s U-Scan self-checkout lanes, spokeswoman Jennifer Panetta said. Home Depot has about a 30 percent usage rate as well, a fact that has exceeded the Atlanta home improvement company�s expectations, said spokesman Don Harrison.

�It�s been very well received, including by those people who don�t want to use it, because it shortens the lines at the manned checkout counters,� Harrison said. �And since 70 percent of our customers are do-it-yourselfers anyway, it�s a natural fit.�

Home Depot, which has eight local stores, rolled out its self-checkout pods two years ago, complete with a remote scan gun for those 90 pound bags of concrete and 5 gallon paint cans.

�No one likes to stand in line,� Harrison said. �Once you�ve come into the store and you�ve selected the items you want to purchase, your first priority at that point is to leave.�

Even that notorious wait at the Department of Motor Vehicles can be eliminated by logging in to the DMV�s Web site, using the self-service center during operating hours or taking advantage of the 24-hour extraTeller in the lobby. In 2003, 12,667 vehicle registrations were renewed through the extraTellers, and 1,004 people used it to renew their driver�s license, said spokeswoman Marcia Meredith.

The kiosk�s touchscreen technology allows users to scan the bar code on a renewal notice and quickly make any necessary payments with a credit or debit card. Documents are mailed out within three days, but the kiosk receipt serves as temporary proof.

�People who don�t have Internet at home can access the services through our facilities,� Meredith said. �We want to provide a plethora of options that fit the lifestyles of our customers, and provide flexibility and convenience to them.�

Reach Benita Newton at 446-2667 or benita.newton@pilotonline.com.

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Stored Value Trends

Nice article on Touchpoints on SVS systems

STORED VALUE CARDS:
A SCAN OF CURRENT TRENDS AND FUTURE OPPORTUNITIES

Executive Summary

The stored value card (SVC) market has mushroomed in the last few years in terms of
both the number of providers and the number of customers. However, most SVCs
offer relatively limited functionality and do not provide a platform for savings, asset
building, or building credit. The Center for Financial Services Innovation (CFSI) sees
opportunities to marry the functionality of stored value cards with opportunities to
save and build assets, transforming SVCs into powerful alternatives to traditional bank
accounts. This report serves to describe and highlight some of those opportunities.

�Open-loop� SVC systems offer consumers the ability to utilize their cards for
multiple purposes and at multiple points of sale. This report discusses the potential
that open-loop SVCs have to serve as cash and check alternatives for otherwise
underbanked consumers. It also provides insight into important industry innovations
and trends, including pricing, marketing, remittance features, bill payment, consumer
protections, future savings options, rewards features and credit-building components.

Key findings of the report include:

� Different types of functionality are rarely integrated into one product. This is an
important innovation for the future of SVCs.

� Products distributed by banks and credit unions are more likely than other
cards to have consumer protections, lower pricing, and more obvious transitions
into other financial products and services.

� Some SVC products incorporate credit-building features by reporting accounts
to credit bureaus. Additionally, some SVC providers are beginning to explore
savings features to go along with their cards.

� SVC providers are exploring the extension of small credit to consumers.
Additional work is necessary to move the SVC market forward. CFSI believes that the
marriage of the convenient transactional model of SVCs and the long-term process of
building assets provides an exciting opportunity for innovation and partnership.

Introduction

In the wake of dramatic technological advancements over the last decade, the financial services
industry has developed a number of inventive applications that have the potential to improve the
structure and delivery of retail products for unbanked consumers. One of the most innovative is
the stored value card (SVC), a prepaid debit card that mimics a checking account, but without
checks. They offer consumers who cannot qualify for or do not want a traditional bank account a
safe and efficient way to store funds, make purchases, pay bills � and possibly save and build
credit. The most common application of SVCs is the payroll card, which enables employers to
pay their unbanked workers via direct deposit.

At least 10 million American households�disproportionately poor, minority, lower income and
young�are unbanked. Additional households conduct most of their financial transactions
outside of banks even though they may have a savings or checking account. Yet having a
relationship with the financial services system can minimize the cost of financial transactions
and help turn income into savings, assets and wealth. SVCs could be a valuable financial tool for
these consumers for several reasons:

� SVCs generally lack the identification and credit requirements that effectively bar millions of
individuals from opening traditional bank accounts.

� SVCs can be purchased and reloaded at a growing number of locations other than bank
branches, such as check cashers and other retailers.

� SVCs can provide immediate availability of funds at a cost that is, in some cases, lower than
some other alternatives for unbanked consumers.

� SVCs are prepaid and thus nearly impossible to overdraft, reducing the likelihood of
unexpected fees.

The SVC market has mushroomed in the last few years in terms of both the number of providers
and the number of customers. However, most SVCs offer relatively limited functionality and do
not provide a platform for savings, asset building, or building credit. The Center for Financial
Services Innovation (CFSI) sees an opportunity to marry the functionality of stored value cards
with opportunities to save and build assets, transforming SVCs into powerful alternatives to
traditional bank accounts. This report serves to describe and highlight some of those
opportunities. The report has three main components. First, it gives a brief overview of SVCs,
the size of the market, and how they work. Second, the report serves as an informal survey of
stored value card products currently being offered. Third, it discusses ways in which SVCs
could be used to help consumers build assets and describes specific product offerings that have
taken a first step in that direction.

What are SVCs and How Do They Work?

Overview of Card Structure

Like traditional debit cards, stored value cards utilize magnetic stripe technology to store
information and track funds. However, SVCs differ from account-based debit cards by being
prepaid, which limits the risk of overdrafts while providing nearly immediate liquidity for
consumers. Early uses of SVCs in the United States included public transportation, public
assistance payments, and child support payments. Many unbanked consumers have been using
SVCs to access public benefits for years. For instance, in Illinois, welfare recipients have been
receiving their benefits electronically since 1996. Moreover, in 1996, the Debt Collection
Improvement Act (DCIA) was passed to require the use of electronic funds transfer (EFT) for
most Federal payments, with the exception of tax refunds, starting January 2, 1999.1 SVCs today
take several forms, including gift and phone cards, payroll cards, and prepaid debit cards. SVCs
are an increasingly popular instrument for one-time uses such as life insurance payments and
moving expenses.

SVC systems operate in two ways. One is the �closed-loop� system, which can be used only for
the issuer�s products or for limited purposes, such as prepaid gift cards through retailers like Old
Navy or many prepaid phone cards. �Open-loop� systems offer consumers the ability to utilize
their cards for multiple purposes and at multiple points of sale, such as making purchases at a
variety of stores or paying bills.

�Branded� cards have a MasterCard or Visa logo and utilize signature-based technology to allow
the consumer to transact business anywhere that those brands are accepted, as well as through
ATM and point of sale (POS) machines. �Non-branded cards� use PIN-based technology and
enable transactions only through POS or ATM networks. Non-branded cards require the use of a
PIN; signature-based transactions are not available.

Stored value cards use accounts to manage funds in real time through host computer systems.
The accounts are held in a single concentrator account with different subaccounts for each card.

Depending on how the issuing financial institution treats the accounts (some are �pooled�
accounts and some, for accounting purposes, are actual bank accounts held by the individual
consumer), SVCs may or may not carry FDIC insurance. The issue of FDIC insurance for SVCs
is a point of some controversy, and it will be discussed in greater detail below.

This report will cover examples of open-loop SVCs, which come closest to resembling
traditional bank accounts. Consumers can make deposits onto the cards and withdraw cash or
pay bills at a later date; in some cases, they can have funds directly debited on a recurring basis.

Open-loop SVCs can be grouped into three categories: payroll-only cards, which can be used
only for direct deposit of paychecks or, in some cases, other automated clearinghouse (ACH)
deposits, such as Social Security Payments; reloadable payroll cards, which serve primarily as
direct deposit cards for payroll checks but offer consumers other ways to reload the cards; and
reloadable debit cards, which consumers can reload in a variety of ways at a range of locations.

For the most part, these products are offered in a �silo� style. In other words, SVCs do not
currently function in a way that allows a single card to function across channels. Major players
in the industry, such as MasterCard, currently segregate SVCs into different lines of business.

For example, they consider �consumer-funded� (reloadable prepaid cards) and �business-toemployee�
(payroll cards) as different products. The functionality of different types of SVCs is
rarely integrated into one product. This is an important innovation for SVCs to become true
substitutes for bank accounts and broadly accepted by consumers.
Description of Important Actors

The SVC market includes hundreds of product providers, with new ones emerging frequently.
Given the various functions involved in offering SVCs�card issuance, transaction processing,
funds management, customer service, recordkeeping�sorting out roles and responsibilities can
be complicated. For instance, several banks have their own SVC programs in which they use
third-party transaction processors, but many of them also serve as issuers for other non-bank
SVC programs, which may use different transaction processors. A few SVC providers are
vertically integrated, handling nearly all of the functions internally, while others outsource
everything except sales and marketing. The majority of SVC providers outsource the transaction
processing to one of the many firms that have developed special software platforms for running
SVCs.

While numerous companies are now engaged in the provision of SVCs, some firms stand out.
Major players in the market today include:

� Bank providers/issuers: BANKFIRST, Bank of America, Citibank, and JP Morgan Chase
� Providers of reloadable prepaid debit cards: NetSpend and Next Estate
� SVC processors: Metavante, StarSystems, WildCard and Galileo
� Providers of back-end services for SVCs, including ATM and POS processing,: Pulse*
� Payroll firms: Paychex and Comdata

An increasing number of companies are attempting to compete in this market space. It is entirely
possible that, over time, those prominent today may be displaced in the future by new entrants.
Moreover, other relative unknowns are likely to emerge as the market sorts itself into better
defined mass-market and niche product markets.

The distinction between products that are distributed by financial institutions and those
distributed by non-bank firms is an important one. Products distributed by banks and credit
unions are more likely to have additional consumer protections, lower pricing (because fewer
actors are involved), and more obvious transitions into other financial products and services.

These issues will be discussed in further detail below.
* Pulse also offers its own SVC product.

Legal and Regulatory Concerns

As a new product with few comparables, SVCs raise several complex legal and regulatory
concerns. The issue of whether SVCs are considered depository accounts is a timely one that is
currently under review by the Federal Deposit Insurance Corporation (FDIC). If funds stored on
SVCs are considered deposits, FDIC insurance could then apply. If a financial institution pools
the SVC accounts and does not provide individual �sub-accounts� to cardholders, FDIC
insurance is not available on an individual customer basis. But if a financial institution offers the
SVC as an individual bank account-like product, �pass-through� FDIC insurance might apply. A
scan of the SVC universe finds that payroll cards appear to be more likely to offer FDIC
insurance than reloadable debit cards.

Banks that issue SVCs can voluntarily provide disclosures to that describe consumer
protections.2 The Office of the Comptroller of the Currency (OCC), the bank regulator for
national banks, has recently issued guidance to its member banks on proper disclosures of
consumer protections for SVCs.3 But, ultimately, it is still unclear whether SVCs are subject to
Regulation E, which covers all electronic financial transactions and requires that a record be
provided for each transaction. Consumer advocates argue that if consumers are going to use
SVCs as substitutes for bank accounts, then the cards should carry the same protections, and Reg
E should therefore apply. Some SVC providers welcome the expansion of FDIC insurance to
SVCs and are already operating as if their products are considered deposits. On the other hand,
some industry representatives argue that SVCs should not be compared to bank accounts�that
they are in fact more aptly compared to cash, and for that reason Reg E is not appropriate. They
worry that, if funds placed on these cards are in fact considered deposits by federal regulators,
additional costly infrastructure and regulatory oversight might be required. This could change the
current economic model for SVCs and make them a less attractive business opportunity.

Moreover, as concerns around terrorism and money laundering mounted following September
11, 2001, financial institutions came under pressure to keep and report accurate records proving
their customers� identities. Section 326 of the USA PATRIOT Act requires financial institutions
to be more diligent in documenting customer identification, which has had significant impact on
enrollment processes and management of SVC programs. Most SVC providers do not currently
require that customers provide Social Security Numbers if their cards are PIN-based.

Considering that some underbanked consumers cite privacy as a primary concern, the reduced
identification requirements for PIN-based SVCs may help encourage customer acceptance.� At
the same time, Visa and MasterCard require Social Security Numbers for signature-based SVCs,
an important change in the industry following the PATRIOT Act. Another emerging issue
around the PATRIOT Act is that some SVC products allow consumers to give second cards to

� ITIN stands for Individual Taxpayer Identification Number. It is a number that the IRS provides to workers who do not
have Social Security Numbers in order to enable them to pay federal and state income taxes. Many financial institutions
have begun accepting ITINs in order to open bank accounts. Though many immigrants do not have Social Security
Numbers, the PATRIOT Act allows for the acceptance of ITINs in their place.

family members in other countries as a way to transfer money, and it can be difficult to verify the
identity of individuals living outside the U.S.

Another important legal issue is specific to payroll cards and underscores the importance of
consumer protections for these cards. Many states mandate that an employer cannot demand that
workers receive their pay in a specific manner; payroll cards must be offered as an option rather
than a requirement.4 In other words, consumers in some states have their choice in payment
systems protected�they cannot be required to accept a payroll card if they do not have a bank
account. State laws differ greatly on this issue, yet many payroll card products are structured to
be offered nationwide.

Size of the Market

The SVC market has exploded in recent years, with the number of cards and providers in the
market growing at a breakneck pace. MasterCard claims to have more than 200 SVC programs
of different types with 100 issuers, and the company has seen double-digit increases in
relationships with third parties and SVC processors in the last few years.5 One research firm
relates that in the early years of SVC usage, transaction volumes grew 350% between 1993 and
1997, from $600 million to $3 billion.6 Though this volume was low in comparison to that for
other types of cards, it represented the largest increase in usage of any type of plastic payment at
the time, with a 50% increase in volume every year.7 As a point of comparison, during this same
time period, debit card volume increased by over 40% and overall plastic payment volume
doubled.8

It is difficult to ascertain the current size of the SVC market in a way that segregates closed-loop
and open-loop processes. Industry estimates�projected by some to be over $2 trillion�tend to
combine gift card volume with more functional transaction-oriented SVCs and are difficult to
verify. Estimates of the size of the payroll card market abound. According to one study, the
number of payroll cards in circulation doubled between 2002 and 2003 to over 2.2 million
cards.9 A spokesman for a major provider of stored value payroll cards estimates that about two
million U.S. employees currently use the cards. Celent Communications reports that 10% of
unbanked American workers used payroll cards in 2002, and the company estimates that the
portion of unbanked families using these cards could rise to 25% by 2006.10 Another research
firm, Financial Insights, forecasts that payroll cards will be worth $143 billion in transactions by
2007.11 Yet another industry expert estimates that payroll cards have the potential to serve 150
million consumers in the US.12

These figures may mask the loss of revenue from dormant cards and the high dropout rate of
SVC users who, in some cases, stop using the card soon after receiving it. Reasons for this trend
are unclear. Two possibilities are that some consumers find they prefer to deal with cash and
that others incur too many fees to make the cards reasonable for them. As consumers stop using
their cards, SVC providers stop receiving fee and transaction revenue but continue to incur
expenses associated with keeping the cards on the system.

It is important to note that use of payroll cards extends beyond the unbanked. Analysts estimate
that the number of payroll card users could rise to almost 7 million by 2006, with as many as
10% of these households holding bank accounts in addition to the payroll cards.13 Moreover,
employers are becoming creative with moments of opportunity for distribution. For example, UHaul,
which pays about 17% of its 17,000 employees through Bank of America�s CashPay
program, offers the card as a company benefit and recruitment tool.14

Another factor in estimating the size of the SVC market is employee turnover. As employees
switch jobs, large percentages of SVC users drop out of the market because most SVCs are not
designed to be truly portable. An accurate analysis of the size of the SVC market should combine
both the number of active cards in the market and transaction volumes.

A Survey of the SVC Landscape

In order to discern trends in the SVC arena, CFSI carried out a broad overview of the industry by
conducting interviews and studying websites, marketing materials, and research on various SVCs
and the companies that process, issue, and distribute them. This research, which took place
during the second quarter of 2004, is by no means exhaustive, as new products are literally being
announced every week. Rather, CFSI focused most heavily on trends in the industry that have
the potential to turn SVCs into the true equivalent of a bank account, in terms of both
functionality and linkages to other financial opportunities.

For the purpose of surveying the landscape, CFSI analyzed SVCs by the three categories
described above: payroll-only cards, reloadable payroll cards, and reloadable debit cards. One
challenge is sorting through the dizzying array of products. Frequently, one SVC provider will
offer multiple cards, each with different structures and pricing. For instance, some payroll card
providers may negotiate different pricing structures and card features with each employer and
offer another pricing structure to customers who sign up for the product through the Internet.

Pricing, functionality, and special features inevitably vary greatly, even when the cards are
provided by the same company. While this report highlights a few specific SVC products, it
primarily attempts to provide an overview of how most cards are structured and a description of
general trends and innovations. A list of some of the products examined is included in the
Appendix.

Pricing

SVC providers levy a variety of fees. It is important to note that, with increasing competition in
the marketplace, prices for SVCs seem to be coming down, albeit slowly. Some of the fees that
consumers might pay to sign up for and use SVCs include:

� Entrance and/or shipping fees
� Annual fees
� Monthly fees
� ATM fees
� Point of Sale (POS) fees
� Reload fees
� Remittance fees
� Inactivity fees
� Overdraft fees�

The following chart highlights the range of fees found in a scan of SVC products.
Chart 1: Pricing Structures for SVCs
Fee Type Low Fee High Fee Median Fee
Entrance Fee $0 $39.95 $19.97
Shipping Fee $0 $19.95 $9.97
Annual Fee $0 $99.95 $49.97
Monthly Fee $0 $9.95 $4.97
ATM Fee� $0.99 $3.95 $2.47
POS Fee $0 $2 $1

Chart 1 shows that monthly fees for SVCs range from $0 to $9.95. By comparison,
Bankrate.com conducted a survey of checking accounts in spring 2003 and discovered that the
average monthly fee for a non-interest bearing checking account in the country�s 25 largest
markets was about $6.15 Payroll-only cards usually do not carry monthly or annual fees for the
consumer, as the employer tends to cover those costs either by paying a fee to join the program
or as part of its larger relationship with the bank that operates its payroll accounts or its payroll
processing company. Some reloadable debit cards also have no monthly or annual fees. One
company, eViva, has proposed selling advertising space on its cards in order to waive or reduce
customer fees.

Another upfront cost of SVCs is the entrance or shipping fee. It is unclear how firms decide to
charge a shipping or entrance fee, or how the charges are differentiated. In cases where either a
shipping or entrance fee is levied, it might be a matter of definition. However, in other cases,
both charges are levied, significantly increasing the upfront cost for consumers. Typically,
companies that charge entrance fees do not charge annual fees.

Consumers pay for transactions when using SVCs. ATM transactions range from $1 to $3.95,
though some cards allow up to four free ATM transactions per month. Signature-based cards

� Though SVCs should technically not include overdraft charges since they are prepaid, it is possible to overdraft. If a consumer makes a signature-based purchase that clears before an automatic monthly fee is deducted, or if there is a lag time for direct deposit of a paycheck, an overdraft might occur. Overdraft charges for the SVCs surveyed in this scan are about $25.

� The high end of the ATM fee pricing structure represents international ATM transactions. The highest fee for domestic ATM transactions of the products surveyed was $2.50.

often levy a fee of $0.40 to $2 on point of sale (POS) transactions, while some products include
free POS transactions. BankRate.com�s 2003 survey shows that, while most banks do not charge
for ATM transactions conducted in the bank�s ATM network, the average �foreign ATM� charge
was $1.40 that year.16 Other fees that consumers might pay for SVCs include reloading fees and
overdraft charges (for signature-based cards, if transactions are processed before deposits clear).

Some cards offer consumers the option of paying higher monthly fees in order to eliminate
transaction-based fees, such as POS or ATM charges. Reloading fees vary greatly. ACH deposit
reloads are free with most cards. Reloads at Money Gram and Western Union agents, in person,
through the mail, and by wire transfer normally cost between $3 and $10.

A few companies offer consumers the option of receiving monthly statements. FDIC-insured
products are more likely to offer consumers free statements and balance inquiry options.

Consumers might also pay fees for balance inquiries, though often these are free if the inquiries
are conducted online or via phone. Customers can access answers to frequently asked questions,
submit an inquiry, or speak to a company representative to receive more information.

It is difficult to ascertain the exact costs of SVCs. Even within a specific card system, there
might be a variety of fee structures based on geography, community partners, or other factors.
Pricing also depends heavily on usage patterns. The following chart sets forth two hypothetical
pricing scenarios based on the fees included in Chart 1.

Chart 2: Comparison of Two SVC Pricing Scenarios

Scenario One-Low Fee Scenario Two-High Fee
Annual Fee $0 $29.95
Monthly Fee $0 $4.95
Entrance Fee $25 $14.95
Shipping Fee $0 $19.95
ATM Fees 3/mo. Free, then $1.50 each $1/ each
POS Fees Free $0.50/each
Reload fee $0 (ACH only) $5
Yearly total $60 $280 (first year)

In both scenarios, we assume that consumers make five ATM transactions and two POS
transactions per month. In scenario one, which is at the low end of the pricing scale at
approximately $60/year, the consumer avoids most fixed fees and is not charged for card reloads,
as the card is primarily ACH-based. At the high end, a consumer with the same transaction habits
might receive a reloadable debit card that charges a variety of fixed fees and transaction fees,
including a reload fee of $5. If this consumer loads the card once a month, he would pay
approximately $250 to use the SVC for the first year. These scenarios do not take into account
the fact that consumers might be charged twice for using ATMs�once by the SVC provider and
once by the machine owner if the consumer did not use an in-network machine.

When comparing SVCs to basic checking account costs, it is important to keep in mind the
recent increase in �free checking� programs, which do not have monthly fees but may carry
ATM, POS, and other fees, such as average $25 non-sufficient funds fees and $25 bounced
check fees. It is difficult to ascertain if SVCs are more or less expensive for consumers than
using basic bank accounts or check cashing services. The Office of the Comptroller of the
Currency (OCC) estimates that a typical consumer making basic transactions would incur costs
of $270 per year at a check casher, assuming that consumer cashed two $400 checks per month
and required five money orders to pay bills (monthly fees and ATM/POS charges would not
apply in this scenario).17 Clearly, depending on the card pricing structure and the consumer�s
usage pattern, an SVC could be a highly expensive option, perhaps even more costly than using a
check casher for basic transactions. In other cases, however, an SVC with a lower pricing
structure could be cheaper for certain consumers than using a check casher (or a bank account, if
overdraft charges or others are levied).

Marketing and Outreach

Payroll-only cards are typically distributed through participating employers and are primarily
marketed to unbanked employees, although it is not uncommon for employees with existing bank
accounts to sign up for a payroll card. A few payroll-only providers also offer their product
directly to consumers, who sign up on their own to receive their payroll via the card.

Reloadable payroll cards primarily handle payroll or ACH deposits and are often distributed
through participating employers, but they offer consumers the extra functionality of reloading the
cards with additional deposits. Many of these cards are reloadable via money order, wire
transfers, Western Union Quick Collect, and mailed deposits, with fees of $3 to $10 per reload.

Some card providers are piloting reload capabilities through local retail stores, which would
dramatically increase the functionality of SVCs.

Reloadable prepaid debit cards are not directly marketed and distributed through employers.
Reload capabilities mirror the reloadable payroll cards in many cases. Reloads might also be
available via phone, Internet, or check cashing outlets.

Several SVCs are designed to appeal to immigrants, often Latinos. For example, the La Raza
97.9 Personal Advantage Media MasterCard, which is currently being distributed through the
Internet, will soon be marketed over the radio by Spanish Broadcasting System and Direct Card
Services** with incentives such as free credit reports, vouchers for air travel, and discounts on
prescriptions. Two other new cards, the MagicCash and Rush cards, are being marketed directly
to consumers �primarily African-Americans�via mass media. Issued by Bank of America,
MagicCash cards will use the well-known persona of Earvin �Magic� Johnson in addition to a
large advertising budget to get the word out to urban, unbanked customers. Though the cards

** Direct Card Services offers merchant banking services and is a partially-owned subsidiary of Direct Response Financial
Services, Inc., which provides payment and technology options for companies looking to increase their credit card business
transactions.

have received significant press coverage, at the time of this writing the cards were not available;
the company expected to begin issuing cards in summer of 2004. Rush Cards employ the highprofile
hip-hop personality Russell Simmons as spokesperson to market the product. UniRush
Financial LLC, the company that distributes the Rush Card, is a joint venture between Rush
Communications and Cincinnati-based Unifund Corporation. The cards are marketed to
consumers with troubled credit histories and past histories of unpaid debt. Issued by M&T Bank,
the Rush Card is reloadable at Money Gram locations and via money orders and wire transfers.
Offering SVCs at the point when a customer receives a tax refund is also a relatively new option.

In these cases, the cardholder provides the account number and routing number associated with
the SVC on the tax return in order to directly deposit refunds onto the card. Both Jackson Hewitt
and H&R Block experimented with new SVC offerings during the 2004 tax season. Jackson
Hewitt partnered with Russell Simmons to private-label the Rush Card and make it available at
all of its 4,500 locations. The card allows customers who opt for loan programs or other quick
refund options the ability to receive their refunds on a prepaid debit card. H&R Block partnered
with Bank of America to provide a private-label Visa-branded SVC on a pilot basis in
Washington, D.C., El Paso, TX, and Fresno, CA. The cards were marketed to customers who
wanted quick access to their refunds and who had no bank accounts. The cards, which allow
customers to access their refunds as soon as they are available from the IRS, (usually within 8-15
days) remain open and are available for deposit of next year�s tax refund. Tax preparation fees
are deducted from the refund amount on the prepaid card. H&R Block is considering making the
cards reloadable for non-refund transactions.

Remittance Features

Several companies are beginning to tie their SVC products to remittance products that enable
consumers to send money to friends and family in other countries. Like SVCs, the remittance
market is growing and changing rapidly. According to the Inter-American Development Bank,
remittances are the largest source of foreign investment in Latin America. Latinos living outside
of their home countries sent $38 billion home in 2003, including $13 billion to Mexico alone.18
Until recently, the remittance market has been dominated by wire transfer companies such as
Western Union and MoneyGram. However, banks, credit unions, and others have started to offer
remittance products, expanding competition and reducing costs for consumers.

A significant number of SVCs offer remittances. This feature allows U.S. cardholders to transfer
funds to authorized family members in Mexico, China, or other countries. SVC-based remittance
features are structured in at least two ways. Sometimes, dual cards are issued to customers, and
one of the cards is sent to family in another country to access funds from the sender�s �account�
via ATMs. Some cards allow cardholders to designate �subaccount� holders in other countries
for the purposes of transferring money. In these cases, the subaccount holder has access only to
the money that the primary account holder designates to share.

According to Western Union�s website, the charge to send $500 from California to family
members in Mexico is $14.99 for delivery within minutes using a U.S.-based credit or debit card,
and $36 to send funds from a personal checking account for receipt in five days. SVCs that offer
remittance features also charge fees, though the fee structure might be less obvious than in a wire
transfer situation. In general, family members receiving money from U.S. residents will incur an
ATM fee. There are exceptions to this rule, particularly among the few U.S. financial institutions
that have formal relationships with banks overseas. If remittance features are set up in the dualcard
format, where a consumer receives two cards and sends one to family overseas, an
international ATM charge of up to $3.95 might be deducted from the cardholder�s balance when
the family member withdraws cash. In some cases, these card-to-card transfers are free, and in
other cases they might cost up to $10. In addition, wire transfer exchange rates are often high,
while ATMs normally incorporate the interbank exchange rates, which are significantly lower.

But ATMs might be much less ubiquitous in other countries than Western Union or MoneyGram
offices.

Credit-Building Component

In its scan of the SVC universe, CFSI found three products that offer consumers the ability to
build a credit history.
� indiGOcard (reports to Experian)
� Eufora Credit Builder (reports to TransUnion)
� NetSpend All Access MasterCard (reports to one of the three credit bureaus)

These products utilize the credit-building component as a marketing and recruitment tool for the
cards and prominently advertise this feature in their literature and websites. Because the cards
are marketed primarily to unbanked customers, they set themselves apart as offering an
additional benefit that could help consumers ultimately buy a house or car or rent an apartment.

These SVC issuers report accounts in good standing to one of the credit bureaus. In the case of
the indiGOcard, which is an FDIC-insured account, the consumer receives credit for having a
deposit account. In other cases, monthly fees paid by the customer are reported to the bureaus
and treated similarly to utility payments. Consumers cannot generate negative credit by misusing
the card, as nonpayment results in closure of the account. It is unclear whether these programs
will, in actuality, improve a customer�s credit score, and if so, by how much. These programs
normally require a Social Security Number. However, Experian has recently begun accepting
Individual Tax Identification Numbers (ITINs) as substitutes for Social Security Numbers to
provide immigrants with credit-building opportunities. This new development in the SVC
industry is a promising trend.

Overdraft Protection or Payday Advance Alternatives

SVC providers are beginning to mimic another trend in the financial services industry: providing
extensions of small amounts of credit to consumers. Unbanked and underbanked consumers can
find themselves in situations where they need a small personal loan or sum of money to tide
them over until the next paycheck. Most financial institutions do not provide loans as small as
$100 or $300, and many consumers use payday loans or find other ways to access cash in an
emergency. Payday loan stores might charge between $15 and $30 per $100 borrowed. If we
assume a finance charge of $20 per $100, a $300 loan costs $60 at a payday lender.

A few companies are attempting to provide a payday advance or overdraft protection feature tied
to an SVC. One issued a press release describing a program, currently in the planning stages,
which would allow consumers to borrow up to $500 against the next direct deposit of their
paycheck. The fee for this service was not disclosed.19 Another firm that CFSI interviewed is
piloting what it calls an �overdraft protection� feature. In this case, consumers pay a $15 fee to
receive a $100 advance from their next direct deposit. Typically, overdraft protection is thought
of as a feature that protects consumers when checks they have written do not clear. Given that
SVCs do not utilize checks, this overdraft protection looks and feels more like a payday advance
or small line of credit.

The provision of overdraft protection or payday advances raises several related concerns. It is
unclear whether these services should be considered extensions of credit from a regulatory
perspective and therefore subject to corresponding disclosures and regulations. Member agencies
of the Federal Financial Institutions Examination Council (FFIEC) have requested comments on
this issue. These products can make it difficult to differentiate between available funds and those
the financial institution will advance for a fee. Finally, the ultimate benefit to the consumer is
disputed, particularly given the costs. Some argue that low-income consumers should be able to
access small credit and that the costs are reasonable; others argue that the costs are prohibitive.

Additional Features of Interest

1. Consumer protections: Some of the cards examined for this report include FDIC insurance
that is passed through to the consumer. These include Power eCards, DirectoCards, Stratus
ATM cards, and indiGOcards. It is difficult to tell which cards are covered by Regulation E,
as many of the cards do not mention this outright in their marketing materials. Exceptions
exist in the DirectoCards and Power eCards, which specifically tout coverage by Regulation
E. Also, branded cards can offer consumers the protection of Zero Liability programs, which
limit consumer liability for fraudulent signature-based purchases.��

2. Bill payment: Many SVCs offer some sort of bill pay option, especially branded cards that
enable signature-based transactions. Because many SVC users are unbanked, the
�� For more information on how these programs work, see
http://www.usa.visa.com/personal/secure_with_visa/zero_liability.html?it=h2_/index.html

functionality of paying bills without using checking accounts or money orders is important.
Often, consumers can use an SVC to pay any bill that can be funded through direct debit. A
few cards are offering free bill pay, while most charge a nominal fee, between $0.50 and $3.

Further research and innovation could be valuable in this area, as most bill pay options for
SVC users are online or in-person. Additional options, such as self-service bill pay at kiosks
in retail locations, could provide additional functionality for unbanked consumers.20

3. Rewards: Credit cards have long offered reward programs to consumers, with debit cards
beginning to follow suit. Now, SVCs have begun to explore the possibility of providing
loyal customers with rewards or �points� for using the cards. The Starbucks� Duetto Card,
while not reloadable, is an example of an SVC reward program. The card, issued by Bank
One, combines retail incentives for Starbucks customers with general credit card usage.
Consumers use the credit card for general purposes and accumulate points. These points are
then translated into dollar amounts and added to the SVC portion of the card, which allows
customers to buy Starbucks products at its retail locations. The Duetto Card is the first such
�dual-track� card on the market.

In addition, the Wired Plastic card offers reward points for every MasterCard purchase for
use towards products such as prepaid wireless and Internet and long distance calling cards
that are offered on Wired Plastic�s website. Finally, at least one company interviewed for this
report was exploring the possibility of offering customers a rebate or bonus for maintaining a
higher balance on the SVC.

4. Saving: One feature that is lacking in most SVCs is the ability for cardholders to save and
build assets. In the past, Directo offered a savings component as part of the bundled services
offered with its card program, but the company suspended it in part because few customers
were using the feature. Particularly in a low interest-rate environment, consumers would pay
more in fees to transfer funds to savings than they would earn in interest. Linkages with
savings accounts, tax refunds (such as the SVC programs offered by Jackson Hewitt and
H&R Block), IDAs, or other savings vehicles through an issuing financial institution,
coupled with financial education programs, are possibilities that deserve further exploration.

Conclusion

Stored value cards are emerging as potentially powerful tools for consumers to engage in a
variety of financial transactions with greater ease. SVC providers are coming to recognize that
no �one-size-fits-all� approach exists for reaching underserved markets. The SVC industry is
evolving very rapidly; new players are entering the market frequently, and technology continues
to improve functionality for SVC users. There is great potential for SVCs to be a significant step
for unbanked and underbanked consumers who need a platform on which to manage their
money. However, the addition of an asset or credit-building component is a vital area that the
SVC market has yet to explore in great depth. New opportunities in this area would be beneficial
for the consumer and the provider alike, as the consumer could gain access to longer-term
financial opportunities, and the provider could engender customer loyalty, cross-selling
opportunities, and ultimately greater profits. In the end, CFSI believes that the marriage of the
convenient transactional model of SVCs and the long-term process of building assets provides an
exciting opportunity for innovation and partnership.

Authored by: Katy Jacob

1 See http://fms.treas.gov/eft/regulations.html for more information. Subsequent implementing regulations included waiver provisions that establish the circumstances under which waivers to the DCIA are available.
2 Frumkin, S., Reeves, R. and Wides, B. October 2003. �Payroll Cards: An Innovative Product for Reaching the Unbanked
and Underbanked,� Office of the Comptroller of the Currency Community Development Newsletter.
3 Office of the Comptroller of the Currency Advisory Letter AL 2004-6. Payroll Card Systems. May 6, 2004.
4 Wiley, E. �Evolution of Payroll; Debit Card System Offers a Checkless Option,� The Daily Oklahoman. March 30, 2004.
5 Martin, Z. �New Markets for Stored Value Cards,� American Banker. April 2, 2004.
6 Packaged Facts. 1998. The U.S. Market for Plastic Payment Cards. pp. 74, 76. (This represents all SVCs, including
prepaid phone cards.)
7 Packaged Facts. 1998. p. 113.
8 Packaged Facts 1998 p.7.
9 All, A. �The Channel Shuffle,� ATM Marketplace.com. April 7, 2004.
10 Smith, E. �New Pay System in the Cards for Some Companies,� Akron Beacon Journal. March 3, 2004.
11 McPherson, A. 2003. Synopsis of Payroll Cards and Benefit Cards: An Opportunity for Banks. Financial Insights.
12 Chen 2004.
13 Lewis 2004.
14 Smith 2004.
15 Bankrate.com. 2003. Checking Study Spring 2003.
16 Ibid.
17 Frumkin et al 2003.
18 Glaister, D. �Emigrants Provide Lifeline to Latin America.� The Guardian. March 31, 2004.
19 Dalrada, Inc. Press Release. Dalrada Financial Corporation Launches �Payday Advance� Program Benefit Added to
Debit Cards. April 27, 2004.
20 Intelecard News Online. 2004. �PDS Files Patent.� www.intelecard.com.

Appendix
Following is a list of several of the most interesting cards that CFSI studied for this report. Notable card
features are discussed here. Most cards offer signature-based functionality (MasterCard or Visa). CFSI
looked into numerous other SVCs, but we chose cards with interesting functionality to mention in this
appendix.

Reloadable Debit Cards
Card Name Notable Feature
Eufora�s Credit Builder: � Credit-builder program allows consumers to build credit by having
monthly fees reported to credit bureaus. POS transactions free.
e-Viva card: � Remittance feature offered. Reloadable via phone and other
venues, including, in the future, Coinstar kiosks. Solicits
advertisers to offset card costs.
H&R Block Tax Refund Card: � Provides tax refund recipients with SVCs for access to their
refunds. POS transactions free.
Jackson Hewitt Cash Card: � Provides tax refund recipients with SVCs for access to their
refunds.

La Raza�s 97.9 Personal
Advantage Media MasterCard:
� Offers incentives to unbanked listeners of this popular Latino
radio station in California.
MagicCash Card: � Will be marketed via mass media, using Magic Johnson as
spokesperson.

NetSpend�s All Access
MasterCard:
� Program allows customers to build a credit history by reporting
monthly payments to credit bureaus. Remittance feature provided.
Next Estate�s My MasterCard � (Next Estate Communications Truth MasterCard). Customers can
buy and reload cards at retail locations, such as grocery stores,
discount stores and pharmacies.
Pronto Banco Card: � Remittance feature offered. Reloadable at retail and grocery store
locations. PIN-only platform.
Rush Card: � Marketed via mass media, utilizing Russell Simmons as
spokesperson. Offers 2 free paper checks per month.

Payroll-only Cards
Card Name Notable Feature
CashPay Card � Remittance feature through SafeSend product (Bank of
America).
DirectoCash and DirectoPlus: � FDIC-insured, Reg E applies. Remittance feature available. This
is a PIN-only platform that is moving to a Visa platform.
Power eCard: � FDIC insured, Reg E applies.
Reloadable Payroll Cards
Card Name Notable Feature
indiGOcard: � FDIC insured. POS transactions free.
Stratus ATM Card: � 4 free ATM transactions/mo. FDIC insured. PIN-only platform.
Wired Plastic Card: � Loadable at IPP retail and other locations.

All About Wal-Mart

Nice report on all things Wal-Mart

Wal-Mart: Its place in the retail world (Part I)
	Wal-Mart has emerged from the battle of discount retailers as the undisputed leader of the retail industry, taking the top spot on STORES Magazine's most recent list of Top 100 retailers. The company brought in net sales of $256.3 billion in fiscal 2004, according to its annual report, and is frequently cited as the world's largest private employer. Wal-Mart's growth has not come without controversy, particularly over its economic impact and labor policies. Regardless, Wal-Mart continues to forge new territory in retail practices and technology, is a guiding force in the U.S. economy, can affect the fortunes of countless suppliers and is often a microcosm for issues facing the entire industry. The first part of this two-part NRF Special Report focuses on Wal-Mart's business strategies, its impact on the retail landscape, issues concerning its suppliers, and recent company performance. Part II of this Special Report will run on Thursday, Sept. 23 and will address public opinion, labor and legal issues, competition and international trends.

At A Glance
	Business Strategy Wal-Mart's Supercenter strategy continues to evolve: Although there has been backlash against big-box stores in many urban areas, Wal-Mart's Supercenters are being welcomed by smaller communities where shopping choices are limited and jobs are scarce. The smaller towns are eager to benefit from the extra tax revenue the stores will generate. Los Angeles Times (Abstract text) (9/10)
	Perception and Impact Wal-Mart CEO confronts image issues: Facing resistance to new stores in several communities, as well as highly-publicized labor lawsuits, Wal-Mart CEO H. Lee Scott Jr. recently spoke about improving the chain's reputation by promoting the positive changes that have been made under his leadership.   USA TODAY/Reuters (9/8)
		Audio interview: The BBC talks with Wal-Mart CEO H. Lee Scott Jr. about the company's growth, criticisms and effect on the U.S. job market. (Audio player required.)   BBC (9/2)
	Supplier Relations With its unprecedented size, Wal-Mart has a great deal of control on its suppliers prices and technology. Inc.com provides an in-depth, step-by-step guide on how to become a Wal-Mart supplier.   Inc.com (11/1)
	Company Performance Wal-Mart recently posted a downward revision of its sales forecast, but separately, Wal-Mart CEO H. Lee Scott Jr. has said the company should rebound in time for the holiday season. National Public Radio discusses how this sales revision could impact the presidential election.   National Public Radio (RealPlayer required) (9/9)
	The News Access an extensive collection of articles about Wal-Mart from SmartBrief's news archive. To register for this free service, simply type in the e-mail address at which you receive SmartBrief and create a password. Sign up now.
From our Sponsor       Buxton is the industry leader in customer analysis for the retail industry. We incorporate the most comprehensive market research information available to identify your existing and potential customers for site selection and target marketing. With proprietary methodologies, like our drive-time trade area modeling, we have served over 1,000 clients from various concepts, including Pier 1 Imports, Bass Pro Shops, The Container Store, FedEx Kinko's, Dollar Tree Stores, Ben & Jerry's, GameStop and California Pizza Kitchen. Best of all, our management staff represents over 500 years of hands-on executive retail experience. We know retail. Find out more about us at www.buxtonco.com.

Business Strategy
	Real Estate Wal-Mart has faced both opposition and support for its store expansion plans, depending on the locale, political climate and economic impact. As a result, it has had to adapt its approach to changing circumstances.
		Wal-Mart redevelops existing urban sites as resistance to new building remains: With a growing wave of bans on new big-box developments around the country, Wal-Mart is turning to an alternative strategy of redeveloping existing retail sites that have been abandoned by other developers, experts say. In the Atlanta area, the retail giant is working to develop three urban stores, each about 225,000 square feet, at sites once occupied by other businesses.   GlobeSt.com (9/2)
		Dayton area could be fertile ground for Wal-Mart grocery business: Despite resistance to Wal-Mart Supercenters in Los Angeles and Chicago neighborhoods, among others, the company is said to be planning to add three of the multipurpose stores to the existing seven in the Dayton, Ohio, area. With the national expansion of these Supercenters, Wal-Mart has become the world's largest grocery store chain.   American City Business Journals/Dayton, Ohio (free registration) (8/29)
		Wal-Mart could reconsider Chicago store if ordinance adopted: A so-called "big-box" ordinance being considered by the Chicago City Council to guarantee wage levels and certain benefits for employees of large-format retailers has caused Wal-Mart executives to put on hold plans to pursue a second Chicago store, and possibly reconsider city-approved plans for the first one on the West Side. ''We want to be part of this [West Side] community,'' spokeswomen Mia Masten said. ''But if an owners 'big-box' ordinance is passed we will have to reconsider that proposal as well.''   The Decatur Daily (Ala.)/Associated Press (9/1),   ABC7 (Chicago) (8/31)
	Technology Given its sheer size, when Wal-Mart adopts a technology -- like RFID -- it has a significant effect on the entire supply chain.
		Suppliers prepare for RFID deadline: Wal-Mart has set a deadline of January 2005 for its top suppliers to begin using RFID tags with their products. One consulting group says suppliers may feel the need to rush together a plan to meet the deadline, but ultimately they will be able realize ROI.   BPM Today/NewsFactor Network (9/8)
		Profile: Wal-Mart's CIO driving retail industry tech changes: BusinessWeek reports that Wal-Mart CIO Linda Dillman is setting the stage for retail technology. She is said to be partly responsible for this year's jump in retail industry spending on technology, as she implements such cost-saving systems as UCCnet -- technical standards that already have cut Wal-Mart's new-product data-entry time from two weeks to about two days.   BusinessWeek (5/12)
		Wal-Mart tests store delivery of online purchases: The test program offers online customers the opportunity to have certain products shipped to a nearby Wal-Mart location, where the customer can then pick them up.   The Dallas Morning News (free registration) (8/18)
	Merchandising From music to fruits and vegetables, Wal-Mart can push the revenue dial for entire industry sectors with how it merchandises its products and the policies it sets for their display. Nevertheless, Wal-Mart faces its own set of challenges in introducing new product lines to its customers.
		PBS series: Wal-Mart's impact on entertainment choices: PBS' Online NewsHour explores Wal-Mart's role as a gatekeeper of family values. Since the retailer sells vast quantities of music and movies, musicians and movie companies sometimes offer special censored versions of controversial work to sell exclusively at Wal-Mart. Without these versions, entertainers may lose up to 10% of their sales.   PBS (8/20)
		Wal-Mart TV Network steps up in-store advertising: Wal-Mart TV Network is expanding its in-store presence by adding monitors to stores, upgrading to plasma and liquid-crystal display sets and placing them at eye level in areas where shoppers tend to linger. The TV network, which was launched in 1999, is already seen by about 133 million viewers in a four-week period, which rivals the four major broadcast networks in audience reach, according to Nielsen Media Research.   The Wall Street Journal (subscription required) (9/22)
		Time rolls out women's magazine exclusively at Wal-Mart: Time Inc. introduced its All You magazine, targeted at value-oriented shoppers and covering topics from home improvement to relationships, with free issues at Wal-Mart. Wal-Mart accounts for 15% of all U.S. newsstand space and has 100 million shoppers weekly.   New York Daily News (8/13),   USA TODAY (3/29),   Financial Times (London) (subscription required) (3/29)
		Wal-Mart rethinks clothing strategy: The retailer's fashion line, known as George, has not been a big hit, according to analysts and observers who say that has more to do with how it's being presented to shoppers than the actual product. Wal-Mart contends sales are ahead of plan this year, but the company is working on new apparel displays and has hired a consultant to address its lagging fashion issues.   The Sun (Baltimore)/The Wall Street Journal (free registration) (7/19)
		Looking ahead to the 2004 toy season: Last year's holiday shopping season saw Wal-Mart using toys as a loss leader, followed by Chapter 11 filings by FAO and K-B Toys. STORES Magazine says the lack of a must-have toy and a legal battle between Toys "R" Us and Amazon.com could damage the 2004 toy season.   STORES Magazine (8/2004)

Perception and Impact
	Analysis: Examining Wal-Mart's economic impact There are a host of differing opinions about Wal-Mart's impact on the the U.S. economy. While some call its low-price policy "the greatest thing that ever happened to low-income Americans," others question its economic impact and resulting symbolism, saying the company's low-wage entry-level jobs may offer little chance of advancement into the middle class. One industry observer says Wal-Mart could easily reach $500 billion in revenues in the next four to five years, as it moves into urban and global markets.   Knowledge@Wharton (free registration) (4/8)
	Analysis: Can Wal-Mart reconcile its dual image? BusinessWeek writer Amy Tsao notes that Wal-Mart evokes two different reactions from consumers -- that of "the big and friendly" retailer helping the "little-guy consumer," and that of an "unfeeling giant putting the squeeze on its little-guy employees." Tsao says Wal-Mart could learn a lot from Nike, which saw sales decline after allegations that the company used overseas sweatshop labor, only to recover by spending money on repairing its image and setting up a corporate responsibility department.   BusinessWeek (1/28)
	Wal-Mart launches California ad campaign Seeking to improve its reputation in the state that has resisted its expansion, Wal-Mart published an open letter in 15 newspapers to "set the record straight." The ads address the company's average wages and expansion plans for the state. Wal-Mart has said it plans to open 40 Supercenters in the state.   FOXNews.com (9/24),   Los Angeles Times (free registration) (9/24)

Supplier Relations
	Suppliers go the extra mile for Wal-Mart Financial Times discusses how suppliers such as Rubbermaid, Gillette and Mattel have gone to extraordinary lengths to maintain a good relationship with Wal-Mart, even opening satellite offices by the retailer's Bentonville, Ark., headquarters.   Financial Times (London) (subscription required) (7/6)
	As power shifts from supplier to retailer, Levi's learns to adjust At its height, Levi Strauss could choose its own styles of jeans and where it would sell them. But retailers have gained more clout in recent years, so when Levi wanted to sell to Wal-Mart, it brought in a sales executive with experience selling to the retailer and had to overhaul its operations system. While some department stores expressed concern the company's decision to sell to Wal-Mart would take away their own customer base, Levi convinced them the Wal-Mart deal would lead to better overall service.   The Wall Street Journal (subscription required) (6/17)
	PBS series: Inside a Wal-Mart distribution center PBS' Online NewsHour speaks with Wal-Mart Executive Vice President for Logistics Rollin Ford about the technology the company uses to keep its warehouses and selling floors stocked with inventory. Click here to watch the segment on Real Player.   PBS (8/20)

Company Performance
	September sales appear to be on track After a slow start for back-to-school sales, Wal-Mart has maintained its September sales forecast. The company said a late Labor Day holiday postponed many people's shopping.   Yahoo!/Reuters (9/18)
	Study: Wal-Mart, Target rank high in customer service Ease of locating products, lighting, store layout and clearly marked prices contribute to a satisfying shopping experience, BIGresearch found. "Obviously price is key to determining where people choose to shop. But after that, it's customer service," says BIGresearch's Phil Rist. Poor service may cause shoppers to switch to another store.   CNNmoney (9/7)
	STORES announces Top 100 specialty retailers The retail trade magazine notes that its list of leading specialty shops, which range from books to music to apparel, all count Wal-Mart as a top competitor. Best Buy leads the list, followed by Gap, Staples, Office Depot and Toys "R" Us.   STORES Magazine (8/2004)

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Wal-Mart: Challenges facing growth (Part II)
	As Wal-Mart looks to retain its hold on the top spot in retailing, the company is facing a variety of challenges -- resistance in certain new markets, major labor lawsuits and a sentiment among critics that Wal-Mart may do as much harm as good for the U.S. and global economies. The second part of this two-part NRF Special Report focuses on public opinion, labor and legal issues, competition and international trends. Part I of this Special Report, which focused on Wal-Mart's influence on the retail landscape, ran on Tuesday, Sept. 28.

At A Glance
	Perspectives Benefits and risks: One major criticism of Wal-Mart is that it threatens existing small businesses and chains when it opens in a new area. There are vastly differing views on the benefits and risks Wal-Mart brings to a new community. Washington Post business columnist Steven Pearlstein writes he's "uncomfortable with the idea that this productivity revolution requires squeezing full-time workers," but adds that the burden is on traditional grocery chains, for example, to be innovative and find new ways to stand out, rather than compete with Wal-Mart on price. What's inescapable, writes Nelson Lichtenstein, who directs the University of California-Santa Barbara's Center for the Study of Work, Labor and Democracy, is that people in cities and towns will find themselves asking the same question: "How will Wal-Mart alter life in our community?" Good for the industry?: Mass Market Retailers writes Wal-Mart's benefits are significant. "Wal-Mart has transformed the performance and prospects of American suppliers by challenging them to improve beyond their perceived capacity to improve." Wal-Mart is atop Fortune's list of the most admired companies for the second year in a row.
	Labor and legal issues A class-action sexual discrimination lawsuit and a federal investigation into the use of illegal aliens as cleaning contractors are two of the more highly publicized cases of Wal-Mart's labor practices coming under intense scrutiny. Some of the retailer's critics say an even more basic issue is the company's opposition to unions which they claim keeps wages low and working conditions difficult. Wal-Mart has countered that its labor practices are fair and lawful and that workers operate best when in a position to negotiate directly with management. Joseph Hansen, international president of the United Food & Commercial Workers union, spoke with the Detroit Free Press and discussed the union's attempt to organize Wal-Mart employees. Hansen concedes Wal-Mart offers low prices, but he worries about the effects the retailer has on the economy, including lowering wages and providing minimal health care coverage. "The UFCW sees Wal-Mart as not just a problem for the UFCW. We see it as a problem for all the workers in America."   Detroit Free Press (5/20)
	Competition Studies from Mississippi and Iowa suggest independent businesses do suffer when competing with Wal-Mart, but the Grand Forks Herald notes there is still hope when the "900-pound gorilla of the retail world" comes to town. One economics professor offers tips on retail survival in the Wal-Mart world. Food retailers can offer a specialized butcher, while other businesses rely on one-day sales and improved customer service to retain customers.   Grand Forks Herald (N.D.) (9/5)
	International With its acquisitions of Asda in Britain and Seiyu in Japan, Wal-Mart's reach is truly global. Also, the company has been focusing on Asian growth as well. A recent Chinese rule that required foreign retailers to partner with local firms has been scrapped as part of China's commitment to liberalization required by its entry into the World Trade Organization. The move will make it easier for foreign companies such as Wal-Mart, but analysts say the government will still look for ways to help domestic and state-owned companies keep market share.   FoodNavigator (3/19)
	The News Access an extensive collection of articles about Wal-Mart from SmartBrief's news archive. To register for this free service, simply type in the e-mail address at which you receive SmartBrief and create a password. Sign up now.
From our Sponsor       Buxton is the industry leader in customer analysis for the retail industry. We incorporate the most comprehensive market research information available to identify your existing and potential customers for site selection and target marketing. With proprietary methodologies, like our drive-time trade area modeling, we have served over 1,000 clients from various concepts, including Pier 1 Imports, Bass Pro Shops, The Container Store, FedEx Kinko's, Dollar Tree Stores, Ben & Jerry's, GameStop and California Pizza Kitchen. Best of all, our management staff represents over 500 years of hands-on executive retail experience. We know retail. Find out more about us at www.buxtonco.com.

Perspectives
	Commentary: Will its move to urban areas change Wal-Mart? Washington Post business columnist Steven Pearlstein writes Wal-Mart reached its current position by providing inexpensive goods in rural areas where costs are lower. But as the company looks to open in more urban markets, it is facing more pressure from unions, costs are increasing and quality may be as important as price. Even some suppliers have noticed the difference, Pearlstein writes, and have had success resisting Wal-Mart's demands for lower prices.   Pittsburgh Post-Gazette (9/12)
	Analysis: Does Wal-Mart deserve its "punching bag" status? Wal-Mart is so big and successful that many groups, such as labor unions blame the company for manufacturers moving jobs overseas, where the labor is cheaper. But some believe this "punching bag" status is misplaced. "It is not the purpose of Wal-Mart to provide 'public goods' like clean air and clean water, and make sure that everyone has a well-paying job," says a Bernard Sands analyst.   The Christian Science Monitor (2/23)
	Opinion: "Would you work at Wal-Mart?" Daniel Weintraub spoke to applicants at a Wal-Mart in Northern California, wondering why so many people wanted jobs at the controversial retailer. He found many of the applicants had been recommended by friends or family members who worked for Wal-Mart, and many of them also seemed content with the company's wages, benefits and opportunities for advancement.   Alameda Times-Star (Calif.) (9/23)
	Opinion: Wal-Mart will emerge from legal troubles even stronger Michael Bergdahl, a former Wal-Mart corporate employee and author of "What I Learned From Sam Walton: How to Compete and Thrive in a Wal-Mart World," writes the recent allegations against the retailer of discrimination indicate the company has a large legal target on its back. Bergdahl writes the Wal-Mart he worked at valued diversity in management, but initiatives can be lost in execution. Still, Bergdahl concludes Wal-Mart will emerge from its recent legal troubles more focused and stronger.   Retail Merchandiser (9/1)
	Big-box development One issue that has galvanized opposition in some communities to Wal-Mart is its plans to build Supercenters.
		Opinion: Big boxes fuel American worker productivity: A social sciences professor points out that European workers were more productive than their American counterparts until the mid-1990s, when American productivity rose a shocking 5.7%. He says that most of the rise in productivity is attributed to new stores such as Wal-Mart and Best Buy, "big boxes" sprouting up off highways and in suburbs.   Financial Times (London) (subscription required) (8/19)
		Radio Roundtable: Wal-Mart goes to the polls: A group of business writers discuss the pros and cons of Wal-Mart in the communities it serves, as well as ballot-box measures aimed at halting the retailer's growth. Click here to listen to the discussion (Audio player required).   National Public Radio (RealPlayer required) (4/14)
		Analysis: Los Angeles wants big-box stores to provide cost/benefit reports: The city is looking to pass an ordinance that would require big-box stores to assess the economic impact of their existence in a community, including potential business displacement, job creation or loss, open-space effects and impact on city revenue. Opponents contend that the measure is designed to impede growth of stores such as Wal-Mart and Costco.   The Christian Science Monitor (8/12)

Labor and Legal Issues
	Judge grants class-action status to Wal-Mart sex discrimination case A San Francisco federal judge granted class-action status to a sexual discrimination case against Wal-Mart that could now involve up to 1.6 million female current and former employees. Wal-Mart denied it favored men over women in its employment practices and said it would appeal the judge's ruling, which it added "has absolutely nothing to do with the merits of the case." The appeal could mean it will be at least a year before any trial begins. Click here to watch a video from NBC on the judge's ruling.   MSNBC (6/23),   The Washington Post (free registration) (6/23),   The Wall Street Journal (subscription required) (6/23)
		Update: Appeals court mulls class certification in Wal-Mart suit: A federal judge has suspended the discovery phase of a discrimination suit against Wal-Mart to give an appeals court time to decide whether the suit can continue as a class action. Wal-Mart says the size of the class is "unprecedented, unmanageable and unconstitutional."   The New York Times/Bloomberg (free registration) (9/28),   The Wall Street Journal (subscription required) (9/28)
	Cleaning crew case may be settled Wal-Mart said earlier this month it is in talks with the government over settling an investigation about the alleged use of illegal workers as cleaning crews. Last October, federal agents raided 61 Wal-Marts as well as corporate headquarters in search of evidence of illegal workers, which could bring a $10,000 fine per worker. No details of the potential settlement were revealed.   The Washington Post (free registration) (9/4)
	Fortune goes behind the effort to unionize Wal-Mart Fortune magazine spends 10 days with United Commercial Food Workers union organizers trying to bring unions to Wal-Mart. Their tactics range from staking out parking lots, knocking on doors and even entering the stores undercover. Wal-Mart maintains it is "pro-associate, not anti-union," and did not comment on the individual matters discussed in the Fortune story. Despite not having a single unionized store after five years of trying, the union says it will keep trying for the sake of organized labor's survival.   Fortune (5/17)
	Analysis: Wal-Mart to introduce new wage system According to a BusinessWeek report citing Wal-Mart employees and analysts, the retail giant is preparing to roll out changes to its pay system. The system would establish different pay classes and set annual raises at flat rates, not percentages. Analyst Robert Buchanan speculates the company, which declined to discuss the new plan, may be using the new pay scale to address labor concerns, but Stan Fortune, a UFCW organizer, worries the plan hurts veteran employees.   BusinessWeek (6/3)
	Wal-Mart institutes background checks Wal-Mart now requires a criminal background check on all potential new hires to Wal-Mart and Sam's Club stores. Company officials say the move adds another "level of security" to its hiring process.   ABCNEWS/Associated Press (8/12),   The Wall Street Journal (subscription required) (8/12)

Competitor Watch
	The man who stands up to Wal-Mart Wal-Mart may be all the rage of the retail world, but Costco president James D. Sinegal isn't willing to concede anything just yet. Costco has grown to a Fortune 50 company during Sinegal's 20 years on the job, and is lauded for its low markups, high employee wages and generous merchandise exchange policy.   Fortune (subscription required) (11/10)
	Analysis: Sears banking on its "Grand" plan Sears, Roebuck and Co. plans to operate 15 of its Sears Grand stores by the end of next year, which CBS MarketWatch describes as "Bed Bath & Beyond meets 7-Eleven and Pep Boys, with a lot of other stuff thrown in." Sears CEO Alan Lacy says the format's food offering is bringing customers in, and the company is using in-store customer kiosks to help differentiate its service from competitors Wal-Mart and Target.   CBS MarketWatch (free registration) (8/23)
	NPR report: The town that survived Wal-Mart National Public Radio looks at the downtown business district in Viroqua, Wisc., which has managed to coexist and thrive, even with the competition of Wal-Mart. Click here to listen to the report. (Audio player required.)   National Public Radio (RealPlayer required) (6/4)
	Kroger Marketplace concept set to take on big discounters To further compete against big-box discount chains, Kroger, the largest grocery chain in the U.S., recently announced it will soon open Kroger Marketplace stores and will include such non-grocery items as linens, lawn chairs and cooking pans, along with traditional grocery items. "One-stop shopping is an attractive concept to a lot of consumers, and the lines of retail are blurring," one industry representative said. "There is no such thing as an average customer or an average supermarket today."   The Kansas City Star (Mo.) (free registration) (7/12)
	Save-A-Lot looks to expand using Wal-Mart model Despite having a fraction of the sales Wal-Mart has, Supervalu is drawing attention for its fast growth, discount prices and combined food and general merchandise. One difference between Save-A-Lot and Wal-Mart, maintains the company's CEO, is smaller, "easier to shop" stores.   Star Tribune (Minneapolis-St. Paul) (free registration) (4/16)

International
	Is Wal-Mart eyeing Russia? Wal-Mart said it did send a team to check out expansion opportunities in Russia, but would not comment on speculation that it plans to open a supermarket in St. Petersburg next year.   Reuters (9/16)
	Mexican Wal-Mart helps rural residents, but draws protest Wal-Mart has become Mexico's biggest retailer by acquiring several other chains, but some Mexicans are protesting its latest plans for a Bodega Aurrera store in Teotihuacan because of its proximity to ancient pyramids. Wal-Mart says the store will be inconspicuous and the company will respect "Mexican culture and traditions."   The New York Times (free registration) (9/28),   The Miami Herald (free registration) (9/6)
	Report: Wal-Mart, Goldman Sachs may team to snap up Japanese retailer Wal-Mart has expressed interest in acquiring Daiei to expand its presence in the Japanese market, and the retailer may get some help from Goldman Sachs Group, according to industry sources. Reports indicate the investment bank may invest in some of Daiei's businesses if Wal-Mart buys the general merchandising stores. Investors of debt-ridden Daiei reportedly want help from a corporate turnaround agency to figure out how to handle the retailer's assets.   The Wall Street Journal (subscription required) (9/10)
	Wal-Mart unit takes top clothing retailer spot in Britain Buoyed by its George clothing brand, Asda, a supermarket unit of Wal-Mart, now holds a 9.4% share of the retail clothing market in Britain, which passes former top slot holder Marks & Spencer. Asda's George clothing is sold in 240 of the supermarket's 266 British stores and in five stand-alone outlets.   The New York Times/Agence France-Presse (free registration) (8/22)
	Wal-Mart eyes expansion throughout Europe Wal-Mart CEO Lee Scott says the retailer wants to open stores across Europe, calling every country there a potential market. Wal-Mart purchased British supermarket chain Asda nearly five years ago, and some expansion stores could carry that brand, Scott said, but new acquisitions could also be part of the company's Europe strategy.   Financial Times (London) (subscription required) (5/25)
	Analysis: Why is Wal-Mart successful in Britain, but not in Germany? Wal-Mart has lost money in Germany each year since 1997, while in Britain, the retailer's sales have grown 10% annually. The difference in performance is due to a tough German retail market where prices are regulated, labor laws are not flexible and local discounters, such as Aldi and Lidl, are well-established.   BusinessWeek (10/6)

Payphones to Music Stations

BT Putting Music On the Streets

Times Online - Newspaper Edition

BT’s latest gig is payphones that masquerade as jukeboxes. Under plans now being drawn up, BT will offer a facility at payphones that allows users to download songs while on the move.

The plan, aimed at curbing rapidly falling revenues in the group’s payphone division, would see BT link up with Apple’s iTunes or another content provider to transform phone boxes across Britain into music kiosks.

Consumers out shopping or on their way to work could pay to tap into a database of songs for iPods or other portable music players they could download and play on the go. The revenue would be split between the content provider and BT. Nice.

The group confirmed to The Times that it was in talks with �various parties�, although it refused to disclose which ones. Cool.

The proposal comes after fears in BT that Ofcom, the regulator, will not agree to relax the historic agreement under which the company is forced to pay for the upkeep and maintenance of Britain�s payphones.With the boom in mobile phones, the former telecoms monopoly is facing mounting losses in providing payphones. Sixty per cent of Britain�s street phone boxes are loss-making and the number of calls made from them has fallen by half.

BT has admitted that it is reviewing whether it can disconnect 8,000 unprofitable street phones from its 100,000 strong portfolio.

In its submission to Ofcom, which is reviewing the sector, BT has lobbied for a relaxation of the rules and demanded that mobile operators should pay towards the upkeep of the boxes.

If Ofcom refuses to agree to that plan when it reports back next month, BT will have to find new ways of generating cash from phone boxes.

One idea that has already proved a success is providing internet access in the boxes. In some areas BT has also linked with local authorities to enable them to provide electronic access to their services in phone boxes.

A spokesman for BT said: �There are discussions going on at the moment (about the music kiosks) and there is something in the pipeline.�

Meanwhile, the group has announced that it is set to launch trials on a new Google TV �video on demand� service to enable domestic broadband customers to click into a huge archive of film and television programmes.

And that rocks, dude.

KNO - KioskNews.Org: BT putting music on the streets

Dell and Plasma

Dell entered the plasma television market Wednesday market, trying to break into a fiercely competitive market with a price that one analyst called disruptive.

Although Dell executives previously indicated their intention of entering the flat-panel television business, the company disclosed their first models and pricing plans at a press conference Wednesday morning at the DigitalLife show here in New York. Dell also unveiled an LCD TV, a pair of photo printers, and the "Dell DJ", a small hard-drive-based MP3 player that resembles the Apple iPod Mini.

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For Dell, however, the key might be the $3,499 price the company intends to charge for its new 42-inch plasma display, the W4200HD.

"It's a great price, it's a disruptive price," said Stephen Baker, director of industry analysis for retail analyst firm NPD Techworld, in an interview following the Dell launch. "As you know, Gateway did this when they entered the market, and Dell's evidently trying to do this on a product selling below $5,000", the most popular price range for these products, he said.

As the self-proclaimed leader in the flat-panel monitor business, Dell commands the volume pricing leverage that is allowing the company to offer these prices, said Mike George, general manager for the consumer business for Dell. "The price points are unbelievable; so is the quality," he said. "I believe that if you take any of our products and stack them against any other product, we'll come out ahead."

For now, the key will be how Dell lets consumers know that it is a television vendor. To do this, Dell is adding more and more kiosks, which highlight the "Dell experience" in malls and kiosks. Dell has put in place 80 of the new kiosks, with four � in Philadelphia, Los Angeles, Houston and Chicago � being converted over to highlight the new "digital home" products, George said.

Although the digital-television marketplace is crowded, NPD's Baker said the time is ripe to enter. HDTV has previously been the market for a few high-end suppliers. In some sense, Baker said, Dell's presence is like a high-end Honda Accord: it offers all the benefits of a luxury Jaguar or Mercedes without the high price tag. "It's brand value without the brand costs," Baker said.

Dell's new plasma displays will be available in November. However, for "reasons that I don't want to get into, according to George, the displays will only be shipped to customers in the continental U.S., not Hawaii or Alaska. Plans to offer the displays and to customers outside the country are in the works, George said.

Dell will also offer approximately six installation offers, including a $169 basic set-up option as well as higher-priced, more full-featured plans.

Dell's new products include:

The 42-inch W4200HD. The television supports 1024x768 resolution and includes dual integrated analog tuners and a dual analog/digital tuner.

The 42-inch W4200ED is a standard-definition plasma display capable of 852 x 480 resolution. Priced at $2,299, the display also includes dual tuners and can serve as a PC monitor. Both the W4200ED and the W4200HD ship with detachable 20-watt speakers.

The W1900 19-inch LCD TV, priced at $899. The display provides 1280 x 768 resolutions (a 15:9 aspect ratio) and a full suite of PC and LCD connectors.

The Dell Photo Printer 540. The small $189 printer (3.2-inches by 7.8 inches by 5.3 inches) is designed to be portable and contains a 2.5-inch LCD, USB port, 5-in-1 card reader and PictBridge port.

The Dell Photo All-In-One 942 printer, priced at $149. Initially, the printer will be limited to sales in the United States. It can print, copy, fax, and print 19 pages a minute in black and white and 14 ppm in color. The available print resolution was not available.

Dell Breaks Into Plasma TV Market

Google Search

Google launched their new desktop technology. I have installed it and it is very good and has helped already. desktop.google.com

More

America Online is rumored to be developing a desktop search application. So are Yahoo and Ask Jeeves. And Google has beaten them all to market. The company this morning uncrated Google Desktop Search, a thin-client app that allows Windows users (C'mon guys, how bout a little love for OS X?) to search e-mail in Microsoft Outlook and Outlook Express (not Gmail??), chat threads in AOL Instant Messenger, and Microsoft Office documents, all via a Web browser. It's a slick little application -- one that clearly shows Google marshalling its forces to challenge Microsoft's ownership of the computer desktop.

Microsoft too is working on improving its search utility. The company's perpetually-delayed Longhorn version of Windows will someday offer a better PC file search. Someday. "Microsoft has to be worried,'' said Jupiter Research senior analyst Joe Wilcox. "If Microsoft can do the research and catch up, then anything can happen. ... Microsoft can improve search in two years. But if people are already using Google, it will be hard to get them to change."

Danny Sullivan, a search industry pundit and editor of SearchEngineWatch.com, agreed noting that Google's got a bit more than first-mover advantage going for it. "They've not only beat their rivals to the punch, they've also changed the rules," Sullivan told News.com. "They're saying, 'We're not making search part of the operating system, we're making the desktop part of Google."

Useful Resources

AME Info is the "ultimate" Middle East business resource. Good mix on technology.
http://www.ameinfo.com

Self-service Lessons

The verdict is in. Managing information in a paperless environment has proven to streamline transactions, reduce waste, and improve service levels. Yet as organizations adopt self-service processes for everything from finance to human resources (HR), they're learning some interesting lessons about how to ensure a successful adoption�and the unforeseen benefits that can occur along the way.

The verdict is in. Managing information in a paperless environment has proven to streamline transactions, reduce waste, and improve service levels. Yet as organizations adopt self-service processes for everything from finance to human resources (HR), they're learning some interesting lessons about how to ensure a successful adoption�and the unforeseen benefits that can occur along the way.

Self-service: Helping businesses help themselves - AME Info FN

Embedded OS for Verticals

The Redmond software vendor says it will ship by mid-2005 what could be the first of a number of vertically-focused versions of Windows Embedded.

Just as it is doing with its Windows client software, Microsoft is developing customized variants of its Windows Embedded operating system for specific markets.

The first of what could be a full line of Windows Embedded variants will be Windows Embedded for Point of Service, company officials said Monday. Microsoft is currently testing the new flavor of its Windows Embedded product in conjunction with more than 30 device makers and application vendors.

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Microsoft plans to ship Windows Embedded for Point of Service by mid-2005. The company is expected to show off the latest build of the system at its private retail and hospitality developers conference in Redmond this week. The Windows Embedded for Point of Service product is part of Microsoft's grand "Smarter Retailing Initiative" strategy, which it unveiled earlier this year.

Microsoft offers two different embedded Windows flavors: Windows XP and Windows CE. Windows XP Embedded, a subset of Windows XP, is typically integrated into retail point-of-sale terminals, thin clients and advanced set-top boxes. Windows CE is a real-time embedded operating system typically used in small-footprint devices.

Windows Embedded for Point of Service is designed to make retail peripherals � scanners, receipt printers, cash drawers and magnetic-stripe readers � to "plug and play" seamlessly with Windows Embedded.

"Point of sale isn't just about cash registers," said Scott Horn, a senior director with Microsoft's mobile and embedded devices division. "It's also about self-service kiosks, self-service check-out systems and ATMs.

"This (Windows Embedded for Point of Service) product was driven by the cost of integrating peripherals," Horn continued. "If and when plug-and-play needs emerge in other vertical markets, we could see other (similar) Windows Embedded versions."

Embedded XP, CE Updates Expected Next Week
Microsoft to Provide Mid-Size Customers With RFID Support
Microsoft Targets Second RFID Pilot at SMBs (eWEEK)
IBM, Microsoft and Oracle Tailor Middleware to RFID (eWEEK)
RFID's Vertical Buildup Reflects Industry Challenges (eWEEK)

Windows Embedded for Point of Service will be built on top of the Windows XP Embedded with Service Pack 2 (SP2) code. Microsoft has been beta testing XP Embedded SP2 since earlier this summer. On Monday, Microsoft made a technical preview release of this code available to beta testers. Company officials said to expect the final version of XP Embedded SP2 to ship before the end of calendar 2004.

Among the partners with whom Microsoft is testing Windows Embedded for Point of Service are Altiris, APG Cash Drawer, BSquare Corp., Fujitsu Transaction Solutions; Micros Systems, Seiko Epson, Tatung and Ultimate Technology.

Microsoft to Offer New Windows Flavor for Retail Market

KIosks & CRM

Will Frustrated Store Managers Revolt Against Corporate CRM?

Will Frustrated Store Managers Revolt Against Corporate CRM?

September 28, 2004
By Evan Schuman

Frustrated by what some see as IT executives hoarding CRM information, retail store managers are starting to do an end run around corporate with their own customer-information-gathering systems.

One result of this retail technology revolt are smart store kiosks, which today do a lot more than display electronic brochures. As the technology has become much more portable, these stand-alone machines�loaded with tons of hard-disk space and RAM and no Internet connection in sight�are allowing store management to gather much of their own information, which they may never get around to sharing with corporate IT.

This is a trend that seemed to get its start in the car-dealer segment, with its tradition of dealers switching to another carmaker and therefore making corporate hesitant to share too much information. But it now seems to be creeping into more traditional retail segments, and consultants watching the trend see it as the logical result of store manager frustration.

Why is corporate IT hoarding CRM data? Read Evan Schuman's view.

What's the nature of this frustration? The store managers have been asked to support and administer quite a few corporate-dictated CRM (customer relationship management) programs. And yet, they complain, they see little usable information delivered back to the stores, and what does come back is often little, late and not addressing the questions the store managers�as opposed to IT executives at headquarters�want answered.

Store managers "are being asked to do a lot of things at the store level, such as signing customers up for loyalty programs and performing updates to keep the data clean," said Catharine Harding, vice president of retail at sales optimization software firm Blue Martini Software. "They are feeling a lot of frustration that they don't get to see the benefits."

Tom Byrnes, director for marketing for interactive retail at kiosk-maker Planar Systems, agreed. "It is getting very difficult for people in the front lines [store management] to be able to access the kind of data they need to improve the customer experience," he said.

To read more about why some retail CIOs are more hesitant than prudence requires, click here.

Harding said a small part of the blame can be directed at the very origins of the typical CRM system, which was never designed to be used in the way many retail operations are now using them. They were designed to analyze things like how a quarter of a million ad mailings are doing and whether the campaign response rate could be improved somehow. Store managers, on the other hand, are more focused on things like identifying their store's top customers and their preferences.

A larger chunk of the blame for this disconnect can be given to IT procedures and methodologies, although not necessarily to the senior IT executives themselves, Harding said. "I recently talked with two store managers, who told me what they have to go through to get reports" that are store-relevant, she said. "It was an arcane system to request and to join certain kinds of data."

Next page: Don't blame IT yet. If you want to blame corporate managers for the frustration, Harding said, don't look at IT: Look at marketing. "The central marketing department. That's where they feel, 'God forbid, the store sent out their own campaign and it wasn't corporate branding.'" Marketers also often fear that store managers might saturate customers with direct mail and contacts "because we're not controlling the store e-mails."

Another market observer is Margo Zenk, technical director and senior partner for Matrix Consultants, a marketing firm that specializes in kiosks. One of her clients is $21 billion car/motorcycle vendor Suzuki. Suzuki's store managers didn't want to share information with the area's other store managers, let alone corporate IT or marketing. "They're not into sharing any information," she said.

To read about how 7-Eleven discovered the essential nature of sharing information with store managers, click here.

In those environments, today's kiosks are a good fit. Unlike an in-store PC with a Web connection, the kiosks have hard disks and memory sufficient to seamlessly run very high-end animations, the kind of multimedia that would either be too cumbersome for download or streaming. The devices can also be placed anywhere, including parking lots, and can show elaborate product demonstrations.

Most importantly, many kiosks today are two-way, which can turn them into information-gathering and sometimes even CRM units.

Consider $11 billion Nike, which bills itself as the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories. But Nike is also becoming a significant retailer, with 15 Niketowns, more than 80 Nike Factory Stores and two stores intended to attract active woman called NIKEgoddess Boutiques.

At Niketowns, customers are encouraged to design their own footwear on the kiosk. The sneaker is then created and delivered to that customer. Hence, it gathers a ton of customer preference information and can connect to a specific customer, who willingly provides full contact information. Is it a true retail CRM system? Well, if the shoe fits �

"Kiosks are not necessarily just Web on a stick," said Planar's Byrnes, whose company makes those kiosks for Nike. "The new kiosks are much more single-purposed, much more product-specific."

Kiosks aren't the only non-traditional retail tools today. To read more about retailers using consumer cell phones and PDAs for checkout, click here.

Byrnes spoke of the kiosk trend as a natural result of two other trends: Products are becoming much more complicated and sometimes sophisticated; and retail sales reps are becoming younger, less experienced and less sophisticated.

"American retail, by and large, is run by teenagers," Byrnes said, adding that teenagers contribute greatly to retail's very high employee turnover rate. Those factors force store management to reduce product differentiation points to whatever can be squeezed into a few bullet points on an index card, Byrnes argues, while increasingly complicated products demand the opposite.

"It remains a fact of retailing that almost 75 percent of all purchase decisions are made at the point of purchase in a bricks and mortar environment," so any sales assistance needs to happen on-site, and Byrnes concludes that that means kiosks.

Another trend is consumer acceptance with self-service, whether it's in the form of retail self-checkout, electronic ticket machines at airports or the ever-present ATM. "The marketplace is already headed in one direction. Customer frustration is very high. Americans are quite content to be in a largely self-service environment," Byrnes said.

Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.

Will Frustrated Store Managers Revolt Against Corporate CRM?

Plastic versus Cash

Experts say the use of debit, credit and prepaid cards has eclipsed cash for the first time in history, and they expect the trend to continue. Americans are using their plastic for big ticket items as well as small purchases like gas or a cup of coffee.

Plastic takes charge over cash
"With cards, we no longer have to worry about lost, stolen, counterfeit, returned ... or fraudulent checks."
By Dan Thanh Dang
Sun Staff
Originally published September 29, 2004
Janice Simmons hates cash.

The 45-year-old Elkridge mother of two teenage sons rarely carries money in her purse anymore - cash is too easy to lose, get stolen and last, but not least, spend.

"Cash has legs," Simmons says. "It just wants to go everywhere but in your pocket. I just don't like to have it on me."

In fact, Simmons, who also forgoes writing checks by paying her bills online, could go entirely paperless if not for those few remaining souls who don't take plastic: "There are times when you do need cash - like when my boys ask me for $5."

Thanks to consumers like Simmons, plastic recently outpaced paper as the preferred mode of payment at the nation's checkout lines for the first time ever, and experts say it will soon be commonplace to pay for nearly everything from Big Macs to mortgages with a card rather than cash or checks.

Paper steadily has been losing out to the various forms of plastic - credit, debit or prepaid cards - and last year, the balance tipped: Cards were used for 53 percent of store purchases, while cash or checks were handed over for 47 percent of them, according to the most recent Study of Consumer Payment Preferences.

It used to be that consumers had only three payment options: cash, check or credit card. But these days, companies are heavily promoting the use of the newer debit and prepaid cards, which look like credit cards but act like cash in that users don't incur debt or interest charges.

Television ads have long featured comedian Jerry Seinfeld demonstrating the benefits of using his American Express at gas stations and supermarkets, but lately he's been joined by George Steinbrenner, allegedly preserving his sore check-writing hand by instead using a Visa check card to pay the stadium utility bill and players' salaries.

Card companies are aggressively soliciting industries that have traditionally accepted only cash or checks - such as parking garages, insurance companies and fast food restaurants - to start taking their cards.

Different uses

As a result, consumers, who once reserved their cards for big ticket items like kitchen appliances and summer vacation trips, now use them for things big, small and in-between.

Planning to see the new martial arts epic Hero? Go online and purchase advance tickets with your bank card. Time to pay your monthly rent? Forget the mail and bill it to your credit card. Need a quick fix of caffeine? Just whip out your prepaid Starbucks card.

Simmons uses her Visa debit card to pay for gas at the Exxon station and the occasional lunch at Panera Bread. Just recently, she used the card at Giant to buy seafood and salad fixings for dinner and at McDonald's to buy her sons a quick meal.

"It's so much easier," she says.

Card companies love people like Simmons. They're hoping she and others like her will lead the way toward a cashless society someday. While that's still far in the future, the average American household owns from 7 to 13 payment cards, including credit, debit and store cards.

By 2007, the majority of payments - not just for in-store goods and services, but also bills like mortgages, medical fees and car payments - will be made with a card rather than cash or checks, speculates The Nilson Report, the leading publication covering consumer payments systems worldwide.

Consumers increasingly are comfortable using cards, and the companies that issue them have been working with businesses and government agencies to create new ways of transferring money via plastic rather than paper.

Use at schools

For example, students at the University of San Diego and Northwestern University who used to hit up their parents for a check can now use their student identification badges to tap into an account set up to pay for books, snacks and other incidentals. Tax filers, instead of waiting for a check, can receive their refunds on prepaid cards.

Businesses like U-Haul and Stanley Steemer have converted employee paychecks into electronic cards that can be re-loaded each pay date. Government agencies similarly have transferred child support and unemployment payments to cards. Maryland began using reloadable electronic cards for child support payments about two years ago.

The cards help save businesses and government hundreds of thousands of dollars in postage and check costs.

Each year, 4 million paychecks are damaged, lost or stolen each year and reissuing them costs U.S. businesses $48 million, according to the American Payroll Association.

Avoiding those costs has lured many companies and states toward using electronic payment cards.

"Electronic delivery is much more reliable," says Craig R. Goellner, director of Colorado's child support enforcement agency, which began offering electronic cards to clients three years ago. "There's a lot of overhead costs associated with checks. With cards, we no longer have to worry about lost, stolen, counterfeit, returned, undeliverable or fraudulent checks."

The cards also help offer new options for people, who don't have a bank to turn to.

Maria Smith of Taneytown can attest to that.

Every time her daughter's father makes a child support payment, the money is automatically loaded onto Smith's CashPay card, which she can use much like a credit or debit card. Smith does not have a bank account.

CashPay Visa to shop

Smith uses her CashPay Visa card to shop at the local Wal-Mart, order dinner, buy groceries or purchase gas. Recently, she used the card as collateral to rent a car during a family trip in Tennessee.

"It's my only card so I wouldn't have been able to rent a car without it," says Smith, who works at a medical center in Frederick. "Not having a bank account was really difficult. I had to pay a fee to cash my checks. ... This card has made my life so much easier. I can use it anywhere."

The CashPay program also allows clients like Smith to load their own paychecks and tax refunds onto card as well, says the cash-averse Simmons, who manages the program.

Industry experts are predicting that most local, state and federal agencies will eventually convert to electronic payment cards over the next few years. And retailers are increasingly happy to accept them.

The powerhouse McDonald's joined the movement recently when it started encouraging customers in television ads to use their cards in its stores.

Other fast food restaurantsare accepting cards these days, as well as many utilities, some insurance companies and even vending machines.

Businesses that start accepting cards quickly learn something that studies have shown: "When people use credit, they spend more than they do when they use checks or cash," says Paul M. Dottle, senior vice president of retail and emerging industries at American Express.

And that is exactly what worries some consumer credit watchdogs - those who spend beyond their means now will find it easier to do so. Consumer debt topped $2 trillion this year, according to the Federal Reserve Board.

Credit card 'worry'

"Debit cards don't concern us as much because you're spending money like cash," says Howell Edwards, vice president of InCharge Institute of America, a national nonprofit organization devoted to personal finance education and credit counseling. "It's the credit cards that we worry about. Charging used to be restricted to big ticket items.

"Now you see people in the line at McDonald's, and they're buying $4 worth of food, and they're charging it," Edwards says. "When you start using credit for everything, it can be very easy for things to go out of control."

The problem, he says, is that $4 worth of food could end up costing you $8 in the long run.

If you use your card without paying it off every month, the debt you carry can easily snowball.

For example, if you have an outstanding balance of $2,000, with an 18.5 percent interest rate and you make low minimum monthly payments, it would take over 11 years to pay off the debt. It will also cost you an additional $1,934 for interest, almost doubling the cost of your original purchase.

Still, credit card companies continue to sweeten the deal by offering rewards - a rebate point for every dollar charged, frequent flier miles - to encourage heavy usage.

The key, says one consumer, is card discipline.

Racking up rewards

Eren Koont, a Silver Spring resident, has earned cookware, DVDs and gift certificates from Amazon.com, The Gap and Crate & Barrel for using his credit cards. But he makes sure those gifts are really free by paying off his monthly bills to avoid interest and late fees.

"I'd say, 80 percent of the time, I use a card," says Koont, a product manager for Texas Instruments and part-time graduate student at University of Maryland. "I use my Amazon card to pay for groceries, eating out and my tuition. That's about $7,500 a semester."

Consumers like Koont delight in finding new ways to rack up rewards with their credit cards. A favorite: to charge your rent, as upscale apartment buildings like the Munsey and the Standard in downtown Baltimore allow.

But don't count out the greenbacks just yet. There are some things that paper money will always buy.

"People like anonymity," says David Robertson, publisher of the Nilson Report. "You can get that with a cash transaction when you're settling a wager between friends, taking part in the office pool, or it could be for something unsavory.

"There will always be a need for currency."
--------------------------------------------------------------------------------
The way of plastic

When did plastic become so complicated? The old charge card has mutated into several variants. Although they look identical, they work quite differently. Here's how:

Credit cards: With these, purchases and cash advances are made against a line of credit, for which you are billed at the end of a monthly cycle. If you don't pay off the balance, you're charged interest on outstanding debt and a late fee if you don't pay off the monthly minimum.

Debit cards: Often called ATM or check cards, these allow you to withdraw money from your bank account as cash from the automated teller machine or to pay for store purchases.

Prepaid cards: These are loaded with a specific amount of money that you draw from with each purchase or cash withdrawal until you hit zero.

baltimoresun.com - Plastic takes charge over cash

In-Store Advertising

Wall Street Journal -- Wal-Mart TV Network steps up in-store advertising: Wal-Mart TV Network is expanding its in-store presence by adding monitors to stores, upgrading to plasma and liquid-crystal display sets and placing them at eye level in areas where shoppers tend to linger. The TV network, which was launched in 1999, is already seen by about 133 million viewers in a four-week period, which rivals the four major broadcast networks in audience reach, according to Nielsen Media Research.

Starbuck Strategies

Starbucks is also set to put CD burners in 45 stores later this year, allowing customers to sample online music and make their own albums.

Grande Plans

Yes, it can seem like there's a Starbucks on every corner, but Howard Schultz says his company is just warming up. A look at how he's rewriting the rules of retailing

Photo Illustration by James Porto for Newsweek
Caffeine nation: America's new Main Street?
By Brad Stone
NewsweekOct. 4 issue - You can't go near the City Centre mall in downtown Seattle without seeing the coquettish mermaid logo of a certain international coffee company. There's a Starbucks kiosk just inside the mall entrance. Not a hundred yards away, another Starbucks is perched near the elevators to the 44-floor office tower. Up a short escalator, there's a third Starbucks. Why does a midsize shopping center need a trio of identical coffee shops? "If we only had one, customers would have to wait, or they would walk away," says Chris Hougland, who manages two of the cafes.

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The satirical online newspaper The Onion was more prophetic than it realized with a 1998 headline: NEW STARBUCKS OPENS IN REST ROOM OF EXISTING STARBUCKS. Back then the coffee chain had 1,778 stores and seemed to be nearing almost comic ubiquity in some parts of the country. Today the company that weaned us away from the free mud in the office kitchen and hooked us on $3 tall double caramel macchiatos (with nonfat milk, please) has 5,945 stores in the United States and 2,392 more overseas and in Canada. While it may seem that there's already a Starbucks on every corner, chairman Howard Schultz says the company is just getting started. His previous goal of 10,000 stores in the United States, set in 2002, now appears "light," he says, and the company plans to double the current number of domestic stores to nearly 12,000. To meet that target, Starbucks will speed up its rollout of drive-throughs and kiosks at airports and supermarkets. And it will continue challenging one of the prime tenets of retail: don't locate your new stores close to your old ones. Don't be fooled: the key to its success is not the taste of its coffee. "The two things that made them great are real estate and making sure that no one has a bad experience in their stores," says CIBC World Markets analyst John Glass.

Starbucks' unconventional approach to real estate goes back to an impulse decision by Schultz more than 15 years ago. In 1988 he visited the company's first international store, in downtown Vancouver, B.C., and saw what every retailer dreams about: a busy store. But he also saw customers twitching in long lines as they waited for their coffee. He startled his real-estate broker by suggesting they expand to the vacant lot directly across the intersection. "It wasn't a different neighborhood but it had a different vibe," Schultz recalls. He sensed that each side of the street had its own traffic pattern, and that customers are reluctant to alter their routines or delay their day for a cup o' joe they consider a luxury.

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Starbucks' real-estate team has developed Schultz's instincts into profitable science. The company's furious addition of new stores fuels its booming bottom line and caffeinated stock price, up 1,500 percent in the past decade. Company execs say there's still plenty of room for expansion, even in seemingly saturated metropolitan areas like Seattle, where there's a cafe for every 12,000 people. (In Boston, they repeatedly point out, there is one Dunkin' Donuts franchise for every 8,000.) They're also looking to cities like Baltimore and St. Louis, with few gourmet coffee outlets, and to the long stretches of highway where travelers seek familiar respites. "I think there are very few places we are not going to be able to go," says Schultz.

Starbucks execs are guarded about how they decide exactly where to locate a new store. But real-estate brokers who follow the company's moves say it goes beyond just looking at traffic patterns, demographics and what other coffee shops are nearby. Patrick Duffy, the president of Florida retail-real-estate firm Colliers Arnold, says Starbucks brokers take to an extreme an old McDonald's maxim: "You want to put your sugar along the trail of ants. And you never want to make the trail turn." Schultz says that every year for the past five years, one third of all existing stores were "cannibalized" by new stores built in close proximity, a sign of its eagerness to make its $2-per-cup-of-coffee lifestyle as accessible as possible. Profits typically rose in the region afterward, no doubt because more people get hooked on its blend of beans. More stores also accommodates today's version of the hallowed coffee break, reduced to a quick dash out of the office by the modern obsession with worker productivity.

Another way it intends to keep fueling its growth is to move customers through its lines more quickly. While Starbucks execs love to talk about their stores' gentle environs as a "third place" besides home and work, it turns out that only 30 percent of customers actually use the tables and couches (many to write their novels, no doubt). Everyone else grabs their java to go. So one third of new stores will now offer drive-throughs. But the company wants to avoid what it calls "fast-food signals." In a month-old Starbucks drive-through prototype on Mercer Island, a Seattle suburb, wooden canopies cover a faux-brick driveway lined on both sides by flower gardens. You won't find that at McDonald's.

When it's not furiously opening new locations or trying speed up lines, the company is brewing new ideas to get customers to dig deeper into their wallets. On each floor of Starbucks headquarters in an old Sears & Roebuck warehouse south of downtown Seattle, highly caffeinated employees tout new plans for food (ovens for hot sandwiches will enter 90 stores later this year) and new drinks such as coffee liqueurs and this year's holiday offering: pumpkin spice lattes.

The most unorthodox plan caters not to taste buds but to eardrums. This month the company's HearMusic subsidiary, which it acquired in 1999, had the No. 2 record in the country with the Ray Charles duet CD "Genius Loves Company," whose release coincided with the musician's death. Schultz says the best-seller showed that Starbucks reaches a music-loving adult audience which feels intimidated by retail outlets and ignored by radio. He plans to release more CDs with other legendary artists and even some new, undiscovered singers in the coming months. Starbucks is also set to put CD burners in 45 stores later this year, allowing customers to sample online music and make their own albums.

Analysts and even most rivals sit in awe of Starbucks, offering only a few criticisms and concerns. As the company lets supermarkets, bookstores and airports run more of its stores, it risks losing control of the customer experience. Then there's the possibility, perhaps remote, that Americans will one day adopt an Atkins-style aversion to caffeine. Of course, these aren't possibilities that keep Schultz and his colleagues up at night. Only a double, nonfat, extra-foam latte after dinner could do that.

MSNBC - Grande Plans

digital audio players

Sales of portable digital audio players like Apple Computer Inc.'s trendy iPod are booming and are expected to generate $58 billion in revenue worldwide by 2008, according to a research report released Tuesday.

Sales of portable digital audio players like Apple Computer Inc.'s trendy iPod are booming and are expected to generate $58 billion in revenue worldwide by 2008, according to a research report released Tuesday.

The report, from research firm IDC of Framingham, Mass., is another indication of how portable MP3 players -- introduced in late 1998 -- have evolved from a niche technology gadget into a mainstream consumer device, said Susan Kevorkian, an IDC senior analyst.

Apple Computer has captured more than 50 percent of the digital player market with its iPods. These use small internal hard drives to store thousands of songs. But the Cupertino computer-maker may have to adjust its focus because prices for digital audio players that use flash-memory cards are falling, Kevorkian said.

"Although Apple will continue to have a leading position in the portable jukebox market, they may eventually offer a flash-based iPod branded player as well,'' she said.

The report said revenue from digital audio players is expected to reach $7 billion by the end of 2004, up from $4.4 billion in 2003. The category also includes portable CD players that are designed to play CDs with songs recorded in the compressed MP3 audio format.

By the end of June, Apple Computer had sold more than 3.7 million iPod and iPod Mini players since they were introduced in 2001.

Apple has been most successful in North America, where it has tied marketing of the iPod to its online iTunes Music Store.

However, Kevorkian said, smaller-capacity flash-based MP3 players remain more popular overseas, particularly in regions of Asia where "they are used more as a fashion accessory.'' More 22 million flash players are expected to be sold worldwide by the end of 2004, compared with a projected 8 million hard- drive players.

Kevorkian also said declining wholesale costs of flash-memory cards should bring average sales prices of flash-based MP3 players down from $117 in 2003 to $98 in 2008. Meanwhile, average prices of hard-drive players should decline from $304 last year to $171 in 2008.

More than 20 million combination CD-MP3 players will be sold this year, but that number is expected to rise only modestly in the next few years.

However, Kevorkian said, regular CD players won't disappear quickly because the CD remains the core distribution medium for the recording industry, "and we don't expect that to change overnight.''

http://www.sfgate.com/

Self-service Risk and Rewards

Self-service technologies, such as websites and kiosks, bring both risks and rewards -- The Economist

SO YOU want to withdraw cash from your bank account? Do it yourself. Want to install a broadband internet connection? Do it yourself. Need a boarding card issued for your flight? Do it yourself. Thanks to the proliferation of websites, kiosks and automated phone systems, you can also track packages, manage your finances, switch phone tariffs, organise your own holiday (juggling offers from different websites), and select your own theatre seats while buying tickets. These are all tasks that used to involve human interaction. But now they have been subsumed into the self-service economy (see article).

Many people complain about companies outsourcing work to low-wage economies: but how many notice that firms are increasingly outsourcing work to their own customers? In theory, companies can save money by replacing human workers with automated self-service systems, while customers gain more choice and control and get quicker service. There is even talk of self-service doing for the service sector what mass production did for manufacturing, by enabling the delivery of services cheaply and on a massive scale. Surely the expansion of self-service into more and more areas is to be welcomed?

Touch-tone torment

Not necessarily. When it is done well, self-service can benefit both companies and customers alike. But when done badly�who has not found themselves trapped in a series of endless touch-tone menus?�it can infuriate and alienate customers. In their desire to cut costs, many companies deliberately make it difficult to get through to a human operator; yet their phone or web-based self-service systems do not always allow for every eventuality.

Deus ex machinima?
Sep 16th 2004
You're hired
Sep 16th 2004

The internet

E-commerce

In areas where self-service is only just starting to take hold, this is less of a problem: fuming customers can, after all, always take their business elsewhere. But if every bank were to adopt impenetrable self-service systems, disgruntled customers would no longer be able to express their discontent by voting with their feet. Such a scenario ought to provide an opportunity for some firms to differentiate themselves: some banks, for example, already promise that their telephone-banking services always offer the option of talking to a human operator. But in return for guaranteed access to humans, many firms will simply charge more.

As a result, people who prefer not to use self-service systems (such as the elderly) will be forced to pay higher prices. This is already happening: many travel firms offer discounts to customers who book online. Buy your tickets the old-fashioned way and you must pay more. Firms are, in effect, introducing penalty charges to persuade customers to use self-service systems. Some customers might resent this.

Another objection to self-service is that while it saves companies money, it does not always save their customers time. In the best cases, it does, of course: checking yourself in at the airport or tracking your own packages on a shipping firm's website can be quicker than queueing or making a phone call. But as more and more tasks are unloaded on to customers, they may start to yearn for the (largely mythical) days of old-fashioned service. Again, this ought to provide an opportunity for specialists (such as travel agents) who can offer a convenient, one-stop-shop service.

All of this suggests that there are limits to how far self-service can be taken. Companies that go too far down the self-service route or do it ineptly are likely to find themselves being punished. Instead, a balance between self-service and conventional forms of service is required. Companies ought to offer customers a choice, and should encourage the use of self-service, for those customers that want it, through service quality, not coercion. Self-service works best when customers decide to use a well designed system of their own volition; it infuriates most when they are forced to use a bad system. Above all, self-service is no substitute for good service.

http://www.economist.com/opinion/displayStory.cfm?story_id=3196309

Research reports

Francie/Summit Issues New Retail Kiosk Report

New Kiosk Industry Sector Report � Retail Now Available!
09-13-2004 --

Kiosks are being deployed in record numbers�especially in the retail sector�so we are happy to announce the publication of the Fourth Edition of Summit Research Associates' popular Kiosk Industry Sector Report � Retail. The 100-page report contains a number of charts including: the leading reasons why retail kiosks are deployed, the most popular types of peripherals used on retail kiosks, the average cost of a retail kiosk by world region, the average length of time a customer uses these types of kiosks and the average number of users per day.

This report contains 12 Case Studies, with special emphasis on the hottest areas in retail kiosks today: digital photography, music and DVD previews, Quick-Serve Restaurant ordering, Digital Signage and Ringtone downloads. Several popular product information kiosks are also evaluated. Case Studies include Mazda�s Interactive Showroom, RedDotNet, Home Depot�s ColorSmart by BEHR� and the US Postal Service�s Automated
Postal Center. Because the trend-setting Asia-Pacific region represents an area starting to show impressive kiosk growth, we have included four kiosks tested there � one each from Singapore and Korea and two from Hong Kong.

Every Case Study is measured against Summit�s Kiosk Evaluation Checklist, which presents a quick overview of each kiosk project. It includes descriptions of the locations within the store, the enclosure, signage, attract loop, user interface, peripherals, and any special features that make this kiosk stand out. This is followed by a detailed�and honest evaluation of the retail kiosk. For the first time, each Case Study includes a photograph of the enclosure and at least two screenshots of the software interface

Table of Contents

I. Report Organization

II. Introduction, Projections and Trends

III. Survey Results

Reasons to Deploy Retail Kiosks

Number of Retail Kiosk Users per Day

Number of Retail Kiosks

Average Cost per Retail Kiosk

Average Cost per Retail Kiosk by World Region

Average Length of Time Spent at the Kiosk

Usage Patterns

Payment Types

Peripherals Used

Leading Pointing Devices

Service Providers

Consumables Replenishment

IV. Retail Kiosk Case Studies

Automated Postal Center

Broadway Circuit Cinemas

ColorSmart by BEHR

Faucet & Shower Products Kiosk

Mazda Interactive Showroom

McDonald�s My McD

Nokia Download Station

Photomoa

quickPIX

RedDotNet

Royal Farms Royal Express

Touch�N-Go

V. Conclusion

The Table of Figures features 57 charts and photographs.

The report is available as a PDF for USD $795.00. A CD-ROM version is available at no additional cost. We have also prepared an extensive two-hour PowerPoint workshop on retail kiosks featuring the projects and trends highlighted in this report along with many other examples. Available on CD-ROM, it normally sells for $495.00, but if it is purchased along with the report, the price drops to $195.00, including shipping and handling. (Once you have received the CD, we will set up a mutually agreeable time to conduct the workshop via teleconference.)

Limited and unlimited site licenses are available; contact us for details. Major credit cards (Visa, MasterCard and American Express) are accepted. Ordering is easy; simply email, fax or phone us your credit card number, expiration date and complete address for invoicing purposes. Your order will be sent promptly. Purchase orders and wire transfers may also be used for payment.

For details or to order the report and/or workshop, please contact Marta Mendelsohn, Director of Research and Marketing: marta@summit-res.com or visit our website at www.summit-res.com
Source: Summit Research Associates

KioskCom Industry News

Trends and Stats

Personal media player market to grow 700% this year

19/08/2004 by Leigh Phillips

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Following the current market trends of offering and supporting digital content, while facilitating portability, the handheld audio/video player market is poised to grow
consistently over the next five years, according to a new report from market research group In-Stat/MDR. The analysts project that this segment will experience 700 per cent growth in 2004, and an overall CAGR of 179 per cent through 2008.

The first of these devices emerged in 2003, and by the end of that year; consumers were already somewhat familiar with them. In a late 2003 survey from the same research group, nearly 30 per cent of respondents indicated they were familiar with these devices. Also known as personal media players (PMPs) or personal video players (PVPs), most of these handheld devices include audio, video and imaging functionality. Additionally, some also offer the ability to act as a portable personal video recorder (PVR), recording directly from the TV to the device. PMPs support a variety of data formats, although they offer varying levels of native codec support.

Recent devices have had high price tags and are most useful to consumers who already have a lot of their own content. One of the critical needs for success in this product segment is the availability of content. Today, consumers have some content of their own, but many in the industry feel that the real value of these products will emerge from widespread use of downloadable video content.

This year these products will primarily attract PC-savvy early-adopters. However, most companies are targeting three types of users: the commuter, the traveller, and people wanting to entertain their children. The researchers believe that, overall, this is a viable market segment, but it may take a while to develop to the scale that many electronics manufacturers desire.

Most of today's devices are using a 4.6cm or 6.6cm, 20GB drive. Capacity will increase as access to content increases and component prices decrease.

The majority of today's products are either based on Microsoft's Portable Media Centre (PMC) platform or on a Linux platform. The analysts expect that PMC devices will represent about 25 per cent of shipments this year.

Most current or upcoming products will be priced in the �300 to �500 range. The ASP is not expected to decrease very quickly over the forecasted period.

Some PMP products are PC-centric, while others do not require the use of the PC. This differentiation may sway some users in their choice of devices.

Digital Media Europe: News - Personal media player market to grow 700% this year - report

Multichannel

Best Buy Gives Customers What They Want

When told that one analyst recently dubbed his company the "poster boy" for effective multichannel selling, BestBuy.com Senior Vice President and General Manager John Thompson sounded genuinely taken aback. "Wow," he says. "Really, all we've been doing is giving our customers what they want."
Granted, with 611 stores and a brand solidified through years of slavish devotion to consumers, Best Buy boasts significantly more in the way of resources than most of its peers (the company generated $20.9 billion in sales in 2003). But, as other well-regarded bricks-and-mortar operations have learned (see under "Depot, Home"), in-store dominance does not guarantee multichannel success. And with its partnership with eBay finally made public, Best Buy seems primed to hold onto its leadership position in the space.

BestBuy.com was launched in 1999, offering little more than a store locator and basic company information. To hear Thompson tell it, the company quickly became aware that tech-savvy customers wanted more. "Selling on the site was a given. The challenge was doing it right, giving customers choices in terms of delivery and services that aren't always practiced in a big-box environment," he recalls.

Thompson freely admits that Best Buy experienced a few bumps on the way to effect a multichannel presence. The online world required a commitment to customer analytics that, despite the company's progressive approach to CRM, wasn't where it had to be. Too, there was concern about the flexibility of merchandising strategies. Separately, the company worried that fraud-wary customers would need significant assurance before committing to online purchasing.

"Most companies are very methodical about how technology is developed and deployed. But in this space, you have to find a different rhythm to test products and offers quickly," Thompson says. "It's a very responsive environment. You learn faster about your customers, and you have to apply that knowledge faster."

Best Buy soon overhauled its Web site and turned to the kiosks that had been deployed by other retailers with only sporadic success. The in-store kiosks, which allow consumers to order any item that Best Buy sells (with guaranteed fast delivery), addressed the potential disappointment of out-of-stock items. "After you look at an item in one of our stores, you can go home and talk to your partner about it before ordering online. Or you can get educated on something at home, and then go to the store and buy it," Thompson says. Indeed, recent research revealed that nearly half of the company's customers visited BestBuy.com before making an in-store purchase.

As for the partnership with eBay in March, Best Buy formally unveiled two outlets on the auction site. Through the arrangement, the company is hoping to increase sales margins on older and inventory items that previously had been handed over to liquidators. While analysts viewed the move as a response to increased sales of consumer-electronics products by mass merchants like Wal-Mart, Best Buy sees it as merely another option for consumers.

"Organizations that have catalogue or order businesses, like Staples, they just use the Internet to do what they'd always done," Thompson says. "For us, we started from scratch, so it's gratifying to be recognized for doing this well."

Best Buy Gives Customers What They Want

Retail - Specialty Store

The definitive ranking of the nation�s biggest specialty chains

Top 100 Specialty Store Retailers

The definitive ranking of the nation�s biggest specialty chains

By David P. Schulz

Things are looking good for specialty store retailers, some of which are building on positive performance in 2003, others of which are in the midst of a rebound. The nation�s economy seems to be providing a favorable climate for specialty stores to prosper.

The STORES Magazine Top 100 Specialty Store Retailers are a diverse bunch, representing more than 20 different merchandise categories and orientations, depending upon how you slice and dice the classifications and mark-on policies. However diverse they are, they have one thing in common: They all have Wal-Mart as a competitor.

Wal-Mart�s supercenters, traditional discount stores and Sam�s Club warehouses carry wares in every specialty segment represented on the Top 100 Specialty Store Retailers chart. Wal-Mart�s devastation of toy retailing has been well-documented, with chains such as Kiddie City, Zany Brainy and Noodle Kadoodle now only a memory, FAO and K-B Toys in bankruptcy, and Toys �R� Us weakened and retreating from the �toy supermarket� model Charles Lazarus crafted so painstakingly.

Fine jewelry, costume jewelry, engagement/bridal jewelry, fashion jewelry or quality watches � Wal-Mart has it all, competing with Tiffany, Zale, Berkshire Hathaway�s Borsheim�s and Ben Bridge, and Kay, Sterling and the other chains that constitute London-based Signet Group�s U.S. business.

Sam�s Club has become a behemoth among sellers of popular book titles, while records, tapes, DVD movies, computer games and every other form of recorded entertainment is on Wal-Mart�s shelves (not to mention what can be downloaded at walmart.com).

Why did Best Buy sell its Musicland group for no money? Why was Trans World Entertainment able to fish Wherehouse Entertainment and CD World out of bankruptcy court? The answer to both questions is Wal-Mart (albeit with a little help from the Internet).

Apparel. Surely the price-appealing clothing that Wal-Mart offers doesn�t draw customers away from the likes of Talbots or AnnTaylor or Retail Brand Alliance�s Brooks Brothers or Men�s Wearhouse, does it? Maybe not, but Wal-Mart�s share of the apparel market is growing faster than the overall apparel market, so that money has to be coming from somewhere.

So even if a Talbots shopper or a Brooks Brothers shopper doesn�t drop a dime in a Wal-Mart format, the apparel retailers positioned between them and Wal-Mart are losing customer dollars and they may find it easier to get high-end consumers to trade down rather than try to pry away shoppers who prefer Wal-Mart prices and one-stop-shopping convenience.

For the time being, however, retailers of all stripes are just happy that apparel sales, particularly women�s wear, have bounced back from the slow growth/no growth pattern of the last couple of years.

The STORES Top 100 Specialty Store Retailers generated an aggregate of $260.9 billion in revenues during 2003, up 9.2 percent from $239.4 billion the year before. Apparel retailers are the single largest group represented on the chart, occupying nearly a third of the positions. All types of clothing sellers are included, ranging from off-pricers like Ross Stores and niche retailers like Pacific Sunwear of California, Chico�s FAS, Urban Outfitters and Wilsons the Leather Experts, to ubiquitous chains like Limited�s divisions, Gap�s trinity and multi-channel operations such as L.L. Bean and Coldwater Creek.

On the flip side of the coin are retailers which are the sole representatives of their industry segment, such as General Nutrition Centers in the health and beauty care category, Guitar Center in musical instruments and West Marine in boat and yachting supplies and accessories.

Even with all the havoc that Wal-Mart has wreaked, there is a lot of stability in the specialty arena, particularly at the top of the Top 100 chart. This year�s top 10, reading down from No. 1, are Best Buy, Gap, Staples, Office Depot, Toys �R� Us, Circuit City, Limited, CCA Global Partners, CompUSA and Barnes & Noble. The first seven retailers hold the same positions they did last year. CompUSA, the computer and accessories specialist climbed up a notch following its acquisition of West Coast-based Good Guys. Bookseller Barnes & Noble slipped from ninth to 10th, while automotive aftermarket specialist AutoZone dropped three notches, from No. 8 last year to No. 11 on the current chart.

A rising tide, they say, lifts all boats, and retailers are anticipating a big lift from the nation�s rising economy. Economists and other forecasters are certainly out there boosting the bright prospects. In a survey of 55 economists published last month, The Wall Street Journal said the consensus was that the gross domestic product -- the broadest measure of economic activity -- is forecast to grow at a brisk 4.4 percent pace in the third quarter, followed by 4.2 percent growth in the last three months of 2004.

Consumer confidence in June reached its highest level in two years, according to the New York-based Conference Board, whose index of consumer sentiment jumped to 101.9 from 93.1 in May. �Looking ahead, consumers expect the economy to continue to grow at a healthy clip and to continue to generate additional jobs,� said Lynn Franco, director of the research center at the Conference Board.

A few days earlier, the University of Michigan�s survey of consumer sentiment also exceeded expectations, prompting Michael Niemira, an economist with the International Council of Shopping Centers, to observe, �Retail sales in 2004 are likely to have their strongest performance since the boom year of 1999.�

Consumer spending accounts for approximately two-thirds of all U.S. economic activity, and in its June beige book, the Federal Reserve reports that its 12 districts confirmed the growth trend. The Chicago, Minneapolis and San Francisco districts highlighted increases in consumer spending; the Cleveland region noted that retail sales had stabilized, and the Boston, New York, Philadelphia, Richmond and Atlanta districts all reported increases in retail sales.

Amid this rosy scenario and widespread optimism were forecasts of slowing sales increases at mass merchants such as Wal-Mart and Target, both of which cut short their near-term sales forecasts. One industry observer who sees this as possibly being a good omen for specialty stores is Richard D. Hastings, retail analyst at Bernard Sands. �The risk for Wal Mart is that consumers, if liquid enough, will go to alternative retailers.�

Among specialty store retailers, Best Buy is King of the Hill by a wide margin. The company�s nearly $25 billion in revenues is roughly 55 percent higher than runner-up Gap�s sales of $15.9 billion, and two-and-a-half times larger than its closest consumer electronics rival, No. 6 Circuit City. But Best Buy doesn�t compete only against other specialty chains. And its $25 billion volume is only one-tenth of what Wal-Mart does worldwide.

To stay in the game, Best Buy has developed a strategy that deals with the reality of a bigger rival with deeper pockets, but one that also allows Best Buy to build on its strengths. On the one hand, Best Buy is outsourcing human resources and information technology so it can reallocate assets to its core functions. In a complementary move, Best Buy has been rethinking what it sells and how it sells, so that its brand is unique in the retail arena.

�If we do nothing,� says Brad Anderson, Best Buy�s chief executive, �Wal-Mart will surpass us by the simple fact they are adding more stores than we are each year.� To illustrate the point: Best Buy plans to open a total of 73 stores in the U.S. and Canada during the current fiscal year, ending next February. These stores will add about 2.2 million sq. ft. of space. By comparison, or in contrast, Wal-Mart �recycles� 8 million sq. ft. of �excess� store space annually. And with Wal-Mart�s supply-chain driven economy of scale and lower cost structure, it makes little sense, Anderson adds, �trying to chase the customer out of Wal-Mart.�

Best Buy has long been a fast-moving performer in a retail segment that is known for its mercurial changes and new product-driven cycles. Best Buy was riding high five years ago when home computers and Internet access were hot, before slumping with the burst of the dot-com bubble. It has rebounded on the surge of flat-screen and plasma television sales, as well as that of digital products, using a knowledgeable sales force to educate consumers about the advanced technology.

As consumer demand for digital electronics has grown, Best Buy has prospered. At the same time, however, prices have dropped and mass-market retailers have expanded into digital wares. Wal-Mart, for example, has seen its share of the consumer electronics market increase from 9 percent in 2000 to 13 percent last year, according to a study by Wall Street firm Morgan Stanley.

Looking to extricate Best Buy from the cyclical pattern of its recent past, Anderson has re-oriented the company�s marketing and merchandising. A major step was the acquisition last year of the Geek Squad, specialists who make house calls to install or troubleshoot electronic goods. Geeks are also being deployed in stores for the carry-in trade.

As the prices of digital products commoditize, further drawing discounters into the field, Best Buy is moving to sell electronics by the houseful rather than one item at a time. The company has been lining up home builders and remodeling contractors to wire, or re-wire as the case may be, residences for the digital age -- be it audio, video, computer, communications or any combination thereof.

While Best Buy has been exercising its leadership role as the specialty store chart topper for four years now, there is also a lot of activity at the bottom end of the chart, where newcomers Hot Topic and Urban Outfitters have scrambled into the Top 100.

Hot Topic targets teenagers with music- and pop-culture-themed goods of the type typically found at concert venues. Urban Outfitters has come out of Philadelphia with a two-chain strategy. The eponymous unit caters to post-teen women who haven�t yet settled into careers. Anthropologie can be found in lifestyle shopping environments populated by 30- to 45-year-olds with money to spend.

Also at the bottom of the chart is May Department Stores� bridal specialty group, which includes David�s Bridal, Afterhours formal wear and Priscilla of Boston. St. Louis-based May has been aggressive in growing the operation via acquisition and the group should move up in the rankings next year. Likely to head in the opposite direction is Minneapolis-based Wilsons the Leather Experts, which is suffering from over-expansion and has closed more than a hundred stores in the last year.

Bubbling under the Top 100 and in position to gain ranking are Wet Seal, Conn�s and Mothers Work. Wet Seal would be making a re-appearance after shedding its ill-advised Zutopia acquisition and shuffling top management for much of the past 12 months. Conn�s is a newly-public company headquartered in Beaumont, Texas, that has distinguished itself in the highly competitive consumer electronics and home appliance field. Philadelphia-based Mothers Work has carved out a tri-level approach to maternity wear with its A Pea in the Pod chain at the upper end, Mimi Maternity offering mid-price points, and Motherhood Maternity aimed at a more price-sensitive clientele.

STORES - August: Top 100 Specialty Store Retailers

$128 Billion in 2003 Self-Service Transactions

Consumer Demand to near $1.3 Trillion by 2007

FRANKLIN, Tenn.--(BUSINESS WIRE)--July 27, 2004--When it comes to paying for goods and services, consumers are taking matters into their own hands. North American consumers transacted nearly $128 billion in sales using self-checkout lanes, ticketing kiosks and other self-service machines in 2003, an increase of 80 percent from the previous year, reports a new research study conducted by IHL Consulting Group.

What's more, the revenue generated by self-service transactions should continue this pace of growth in the coming years, said Greg Buzek, president of IHL Consulting Group, an analyst firm and consultancy that serves retailers and retail technology vendors.

"We expect to see expenditures made at self-service kiosks to rise by about 73 percent this year and 88 percent in 2005," Buzek said.

Demand for self-checkout systems should push the dollar value of transactions to near $1.3 trillion by 2007, Buzek said.

"Consumers have become much more savvy. Their time has also become more valuable and limited, and self-checkout is one way they can speed along their buying experience," Buzek said. "Retailers and other businesses are finding that self-service kiosks can significantly increase customer loyalty, as well as customer satisfaction."

In the market study, 2004 North American Self-Service Kiosks, IHL examined the increasing use of four types of self-service kiosks where payment is accepted: self-checkout systems, ticketing kiosks, check-in kiosks, and food ordering kiosks. Of the nearly $128 billion spent at these machines in 2003, about $61 billion was attributable to credit, debit and smart cards.

"Kiosks are fundamentally changing the way consumers do business," Buzek said. "Among retailers, we are seeing anywhere from 15 percent to 40 percent of all purchases are made at self-checkout machines. Usage is even more impressive at airports, where some airlines estimate that up to 70 percent of passengers are avoiding the traditional check-in process and instead using self-check machines."

The report covers self-service kiosks in the United States and Canada, detailing the number and type of kiosks shipped historically. It also provides forecasts for each type of kiosk, both in terms of units shipped and revenue transacted. In addition, the report highlights best practices and best-in-class machines for each class of kiosk.

IHL Consulting Group is an independent business-consulting firm headquartered in Franklin, Tenn., that provides market analysis and business consulting services for retailers and information technology companies that focus on the retail industry.

For more information, see www.ihlservices.com, call 615-591-2785 or send e-mail to ihl@ihlservices.com.

For press contacts and interviews, contact Roy Miller at (972) 716-4070 x235, or via e-mail at rmiller@transsynergy.com.

IHL Consulting Group Reports $128 Billion in 2003 Self-Service Transactions, Expects Continued Consumer Demand to near $1.3 Trillion by 2007

Signs of Recovery article

High tech kiosks show signs of recovery

07-06-2004 --

By DENISE DEVEAU

After months of false starts and languishing returns, the Canadian self-service kiosk industry seems to be making a comeback.

Following an 18-month slump, the market for high-tech kiosks showed a cautious upswing last year, according to a report from Summit Research Associates Inc., and the numbers are looking good for this year. Some players reported up to a fourfold increase in business in 2003 compared with the previous year, it said, and more than 250,000 kiosks are expected to be installed in North American stores and public areas by 2005.

Digital photography kiosks, airline check-ins and retail self-checkout are among the applications Summit credits with helping to "jump-start the kiosk industry once again." Several Canadian developers and enclosure manufacturers are leading the charge in key areas, according to Summit president Francie Mendelsohn, who says Canadian companies are "pushing the envelope."

"There are absolutely some leaders in Canada, both in terms of innovation and market share," Ms. Mendelsohn said. "The Kiosk Factory's Famous Players [system] is still one of the best there is. TouchPoint saw the need for digital photography [kiosks] early in the game. For sheer drop-dead impressive [interface development], you need look no further than St. Clair Technologies. And bill payment is turning into a very lucrative market for Info Touch."

The success of these companies lies in the ability to find a profitable business case.

Hamed Shahbazi is chairman and chief executive officer of Info Touch Technologies Corp. of Burnaby, B.C., a specialist in financial transaction software and payment services for electronic kiosks. He says in recent months, the company has focused less on new sales and more on maximizing recurring revenue by attacking an overlooked but profitable market: Convenience store chains.

Since reformulating the business plan, Info Touch has landed contracts with Circle K Corp. and Exxon Mobil Corp., as well as Alimentation Couche-Tard Inc. (which purchased Circle K in December, 2003) for deployment of its ZapLink E-Services Program for Mac's Stores in Canada. Info Touch's 2003 revenue was triple its 2002 numbers.

Kiosk Factory in Toronto, a software developer whose $5-million Famous Players project ranks as one of the largest kiosk jobs in Canadian history (not including the rollout of automated banking machines), reports it is showing a dramatic increase in revenue this year. Says company president Julian Brown: "Kiosks were dramatically oversold and estimates were inflated. Designs looked fantastic, but there was no concern for basic ergonomics. A lot forgot to address the fact, is the thing useful? Does it render a business process more efficient?"

He says despite the market saturation, kiosk ticketing has been a solid revenue generator with a strong business case. The Famous Players system, for example, accounts for $500-million a year in revenue at a cost of approximately 2 cents per transaction.

"That's about one-fifth of what it costs to have a teenager in a glass box," Mr. Brown said.

One of the longest-standing Canadian players in the kiosk biz (20 years and counting), interactive application developer St. Clair Interactive Communications Inc. of Toronto, says it recorded its highest gross margin ever in 2003, although it won't go into specifics. President Doug Peter credits the recovery to some major inroads in Europe, as well as moving "further upstream" with remote management and content management applications.

The killer app, he says, is multi-channel software that allows users to have one application driving the kiosk, as well as other customer-facing devices (handheld, display screens, price checks).

"As far as we know there are only two in the world that can do this � us and IBM," he said.

Canada is well positioned to capitalize on the improving market for kiosks from the point of view of expertise, market watchers note.

As Ms. Mendelsohn says: "I have long wondered why is there so much talent in Canada that doesn't seem to be here in the U.S. One of the strengths is back-end management and interfaces. Others [outside Canada] are now getting into the same thing � but late."
Source: www.globetechnology.com

Starbucks and Music Burn

Thinking Outside The Cup in-depth article on Starbucks..http://www.fastcompany.com/magazine/84/starbucks_1.html

Patents

Coinstar get new patents.

Coinstar Gets New Patent

Bellevue, Wash. - June 14

The U.S. Patent Office gave Bellevue, Wash.-based Coinstar a new patent governing coin-counting machines equipped with communications functions for transmitting various types of transaction information to remote locations. Under the patent, number 6,736,251, remote locations include financial institutions that receive deposits from Coinstar coin-counting machines, as well as service centers that receive notification when a machine is full or requires service.

Grocery Self-Service

Trends: Supermarket-checkout clerks are going the way of the bank teller - available if you want one, avoidable if you don't.

Thursday, June 10, 2004
More groceries check out self-service
Customers' changing shopping habits feed popularity, study says

THE ASSOCIATED PRESS

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WASHINGTON

Supermarket-checkout clerks are going the way of the bank teller - available if you want one, avoidable if you don't.

Self-checkout machines, which let customers scan, bag and pay for their own groceries, offer shoppers a chance to avoid the lines at the checkout stands.

"This is like an ATM for them. It's quicker and easier," said Jennifer Panetta, a spokeswoman for the six-state Harris Teeter chain, based in Matthews, N.C. "They are in pretty much all our stores."

About one-quarter of grocery chains are trying them now, with about 34,000 machines in use in stores in 2003, said market analyst Greg Buzek, the president of IHL Consulting Group in Franklin, Tenn.

Buzek, who wrote a report on the equipment, predicts that by 2007 there will be 244,000 self-checkout machines in stores and that almost every chain will have some of them.

"The way we shop has changed quite a bit in the last 15 years," he said. "But the checkout lane hasn't changed all that much."

For example, shoppers have been shifting from grocery carts to plastic baskets and adding short stops to the big weekly grocery purchase. More than half of supermarket customers bring fewer than 15 items to the register, and self-checkout is ideal for them, according to Buzek's report.

Express lanes were set up to speed these customers through, but self-checkout can be even faster, Buzek said. A space that could fit one or two lanes can handle four to six self-checkout machines, reducing the chance of getting stuck in a line. "There's usually nobody in line at self-checkout," Buzek said.

Customers take longer than a clerk to ring up and bag groceries, but the shoppers do not seem to notice that, the report said. Because the customer is keeping busy scanning and bagging instead of waiting while the clerk does the work, time seems to pass faster.

"I think this is faster if you know what you are doing," said Khatool Reha of Reston, Va., as she dropped a couple of cans of spaghetti into a plastic bag at a Harris Teeter store.

When she buys more, "I just go over there," said Reha, motioning toward the staffed lanes.

For retailers, the use of self-checkout can reduce staffing at the front of the store. One staffer typically is the only employee needed to assist customers at the self-checkout lanes.

Buzek said that there also is less theft at a self-checkout counter.

Wal-Mart has self-checkout in about 840 of its more than 3,000 stores and is putting the equipment into all of its new stores as they open, said Gus Whitcomb, a spokesman for the chain in Bentonville, Ark.

Whitcomb said that Wal-Mart customers have put just about everything through the scanners - even ready-to-assemble desks in "a big gigantic box." Other stores, such as The Home Depot hardware chain, also have been using self-checkout.

Not every food-store chain is leaping to the technology.

Publix Super Markets, based in Lakeland, Fla., has about 800 stores, mostly in Florida, but only about 10 have self-checkout, and seven were already in stores that the chain bought in Tennessee, said Brenda Reid, a Publix spokeswoman.

Publix stores where the manager sees a demand for self-checkout can get it, she said, but "nobody is beating down our doors."

http://www.journalnow.com

Retail

Home Depot eyes China expansion

Home improvement leader hopes to build stores in fast-growing, fragmented market, names Asia chief.
June 7, 2004: 3:15 PM EDT

ATLANTA (Reuters) - Home improvement industry leader Home Depot Inc. Monday said it would establish a business unit in China to look at building and acquiring stores in that fast-growing Asian market.

The company named Bill Patterson, who had headed its Central store division since 2002, as president of Home Depot Asia.

Patterson said Home Depot, which has more than 1,500 stores in the United States and Puerto Rico, may approach the China expansion as it did with Mexico, where it acquired a chain of stores in 2001 and later built from the ground up. The company has about 40 Mexico stores and more than 100 in Canada.

"That strategy is one that has served us very well and is applicable to how we would look at China, a combination of different ways to enter the market," Patterson said.

He said Home Depot was focusing on China's estimated $50 billion home improvement sector because it is fragmented with limited competition. Home Depot opened two purchasing offices in China in 2002 to expand sales of imported products.

Patterson said Europe, which Home Depot is also eyeing for growth, is a mature market where it was difficult to find sites to build stores.

Keith Davis, an analyst with investment management firm Farr Miller Washington, said the China operation could help convince skeptical investors that Home Depot can grow even though its stores are approaching saturation in the United States.

"It's going to take a long time to see any effects to the bottom line from an expansion into China, but in the more near term it will hopefully alleviate some concerns about opportunities for growth going forward," Davis said.

Home Depot (HD: up $0.58 to $35.91, Research, Estimates) shares gained 1.5 percent in late-afternoon trading on the New York Stock Exchange.

Home Depot eyes China growth, names Asia chief - Jun. 7, 2004

Self-Service Transactions

Self-Checkout Transactions to Surpass $330 Billion Annually in North America by 2007, Says IHL

FRANKLIN, Tenn. (June 2, 2004) - Self-checkout systems will generate transactions worth $70 billion in 2004, according to a new study from IHL Consulting Group. The �2004 North American Self-Checkout Systems Market Study� also forecasts that the value of these transactions will increase to over $330 billion by 2007 as many more systems are deployed in the next few years.

�We live in an age where self-sufficiency often reigns supreme and time is at a premium,� said Greg Buzek, president of IHL Consulting Group, an analyst firm and consultancy that serves retailers and retail technology vendors. �New self-service technologies are emerging that will revolutionize the way we shop for goods and services. From grocery stores/supercenters to home improvement stores to department stores, self-service technologies are speeding the checkout process for customers.�

Some key insights from the report include:

* In stores currently using self-checkout systems, as much as 40% of the total number of transactions now go through the self-checkout, allowing retailers to provide more customer assistance within the aisles to help customer find products.

* More and more retail segments are adopting self-checkout. The Home Depot now has more than 3,200 lanes installed.

Executive Technology

DVD Rentals

Vending Machines Grow Up -- Washington Post 27jul03

JOSHUA PARTLOW / Washington Post 27jul03

If the portobello-and-goat-cheese sandwich doesn't drop at the Redbox vending machines that McDonald's has sprinkled around the Washington area, shaking the box isn't possible, and shooting it won't help. The average machine is 18 feet wide, weighs several tons and has a bulletproof glass facade.

In fact, if there is any problem with the more-than-130-item, 24-hour automated convenience stores -- if, say, the interior temperature rises above 40 degrees, the coin dispenser runs low or the tampons sell out -- the machine will e-mail and page the McDonald's support staff operating out of an office in Bethesda, before the customer can even finish cursing.

"In the future you will not find any
more video stores."

Vending Machines Grow Up: Candy Bars And Soda Make Way For Movies, Live Bait And Even Prescription Drugs JOSHUA PARTLOW / Washington Post 27jul03

"Our central server receives updates from each machine constantly. We're always processing data, analyzing sales, transactions, credit card matters, controlling inventory. . . . These machines are live all the time," said Mark McGuire, a director of business development at McDonald's.

Automatic vending has come a long way since Thomas Adams's coin-operated Tutti-Frutti gum machines were installed in New York railroad stations in 1888. McDonald's Redbox test project, started in January of last year under the name TikTok Easy Shop, has grown to include four unmanned convenience stores and seven DVD-only dispensers. These kiosks, among the first automated convenience stores in the United States, are the latest example of vending technology's continued expansion into broader retail realms. Other companies have sprung up selling such products as clothing, prescription drugs and live bait, all without on-site employees.

"I think automated convenience stores are of great significance," said Michael L. Kasavana, a Michigan State University professor who teaches a course on vending and whose position is endowed by the National Automatic Merchandising Association. "The industry trend toward wireless and cashless operations saves labor costs and allows you to have remote oversight of unmanned points of sale. From an industry standpoint, that's a great advance." Over the past decade, nationwide vending-industry sales have risen nearly 40 percent, to $24.3 billion, according to the 2002 report by Automatic Merchandiser magazine.

Those in the convenience-store industry say these robotic kiosks could succeed by being able to avoid the lower profit margins, rising labor costs, and higher real estate prices that have plagued traditional convenience stores. In 2002, per-store profits fell by 27.9 percent to $20,400 per store, the lowest level in a decade, while operating expenses rose $13,200 per store, according to the National Association of Convenience Stores (NACS).

"Redbox looks to minimize costs and still provide the convenience," said NACS spokesman Jeff Lenard. "If you're able to make a smaller footprint by not only the size of the store but taking away the parking spaces, it can dramatically reduce costs." McDonald's would not release information about costs, but other industry professionals said savings would depend on operating a larger number of such stores because of the high cost of investing in the technology.

'So Awesome'

On a recent Tuesday night, reaction among customers crowded around the Adams Morgan Redbox ranged from wonder to skepticism. "This is definitely great. That thing's awesome. So awesome," said Dan Walbillig, 12, who was down from New York visiting his aunt, as he watched the robotic arm snatch his $1.25 Snickers bar. "In this town it makes sense -- there's nothing open at night," said his aunt, Laurie Walbillig.

First-time customer Jeff Smith, 29, succumbed to the convenience of the Redbox against his better judgment.

"Y'all watching, right, make sure I don't get ripped off," said Smith, a lawyer, as he tentatively released his $20 bill into the Redbox and hoped that a disposable camera and $7.50 in change would come back to him. "I'd never support this thing normally because it's putting people out of work, but it's my birthday and I need a camera." Smith got his camera, and change.

Despite the automatic feel, several people micromanage the Redbox behind the scenes. A small core team works out of the corporate office and about 20 people are involved in maintenance, stocking and other tasks, McGuire said. One of those people, food consultant Laurence Cartoux, 41, manages the fresh foods, which are made three days a week at Izzy's deli in Bethesda. Cartoux, who studied food science in France, developed the menu, which includes her grandmother's recipe for carrot-cumin soup, and other exotic items, including almond couscous salad. The fresh foods have been the best sellers at the Redbox so far, McGuire says.

"When you talk about vending machines, people's reactions are negative. The food is not good, they're always out of products, the products are not fresh -- those types of things," Cartoux said. "I wanted to put in the machine high-quality products. . . . We have a brie-and-turkey sandwich, grilled chicken marinated with olive oil and provencal herbs. It's excellent."

McDonald's would not release sales information but said the machines have exceeded expectations. At locations like Adams Morgan, nights and weekends are the busiest times, while a new machine at the train station at the Baltimore-Washington International Airport does steady sales during the day. Jim Peiffer, manager of commercial development for the Maryland Transit Administration, said McDonald's paid a $15,000 fee for the one-year test, and customers seem to be accepting the technology.

"It's been a little bit demystified by now. At first our passengers didn't know quite what to make of it," Peiffer said. "I think the theory's good; it makes sense for a transit location, where it's much more efficient than to pay someone to man a stand for long, long hours."

The McDonald's experiment got off to a rocky start when the first test box, on Georgia Avenue in Northwest Washington, opened in January 2002. Performance was hampered by repeated glitches in the machine, called a Shop 2000, which costs about $80,000 and was designed by Automated Distribution Technologies of Exton, Pa.

"We found very quickly that the business was there but the technology didn't work," McGuire said. "I literally had to sleep outside the machine and baby-sit it on weekend nights to make sure that anytime people wanted to use the machine it would work."

Since then McDonald's has changed the name from TikTok to Redbox, and it now uses kiosks designed by Belgium-based New Distribution Systems NV, an industry pioneer founded in 1994 that operates 170 automated convenience stores in nine European countries. Chief executive Jo Robrechts would not comment on the McDonald's contract but said the average "Shop 24" store costs $90,000. European sales have risen rapidly, Robrechts said, with average revenue in the first year of a store around $115,000 and rising to $200,000 by the fifth year. Robrechts sees great potential for sales in the United States.

"A market where you already have a convenience culture is the most suitable market to enter with this type of store," he said. "The consumer is already accustomed to demanding immediate response to his consumer needs."

Divine Origins

Vending machines have a long history of innovative applications. Greek mathematician Hero described what some consider the first vending machine in 215 B.C., a coin-operated device that dispensed holy water in Egyptian temples. A contraption with a beveled-glass front in the 1890s called the Auto Doctor sold cold tablets and cough troches. In 1902, the Horn and Hardart Baking Co. introduced the Automat, the now-fabled restaurant that dispensed such foods as lemon pie and macaroni with a few coins and the pull of a knob. The onslaught of fast-food restaurants such as McDonald's, which streamlined food preparation, hastened the demise of the Automat.

More recently, concepts like the automated convenience store have caught on more quickly outside the United States. Timothy Sanford, editor of Vending Times, a trade publication, said that vending has had a clear niche in some Western European countries, where stores traditionally close earlier than those in the United States do, and in Japan, where urban real estate prices can be high. In Japan there are more than 5 million vending machines selling products including underwear, fresh vegetables, rice, alcohol and video games.

"You've got lots of people in the United States willing to run a convenience store and stay open all night. So it's been very difficult to find a reason why to apply automation to the industry," he said. "The logic of this current movement was that we have the opportunity to make more efficient use of space in an urban environment."

Some local residents have not fully embraced the idea of 24-hour mechanical capitalism. When the McDonald's box plopped down in Adams Morgan last August, several community members criticized the machine's aesthetics and said it might hurt small businesses.

"On one hand you have immigrant entrepreneurs running convenience stores doing their best to improve their lives," said Josh Gibson, vice chairman of the Adams Morgan Advisory Neighborhood Commission, "on the other hand you have the multinational corporation with its hyper-hygienic vending machine." Gibson, who lives two blocks from the Redbox, says the machines discourage personal interaction. "It's saying 'you don't need to go into that little corner store that makes you feel uncomfortable; just put your money into this robot-shop.' "

The automated convenience world is not limited to McDonald's. After hatching the plan in 1986 and putting in $9 million, entrepreneur Mike Rivalto opened SmartMart in May, a 450-square-foot unmanned store in Memphis. Customers drive up to the converted storage container and, using a touch screen, can choose from about 1,800 items, including beer and cigarettes. SmartMart uses video surveillance to record the face and license plate of each customer, and if problems arise, customer service is available by means of videoconferencing.

"Nowadays Mom works, Dad works, the kids don't play in the yard -- they're loaded into the Suburban and hauled all over the city to band practice and soccer games. Everybody is overscheduled," Rivalto said. "If there's anything that you can do to make somebody's life a little simpler, keep the kids strapped in the car seat, and pick up eight or 10 items for dinner without leaving the car, people will love it."

Novel Applications

Other companies, like Vending Concepts Inc. of Des Moines, have taken vending fresh products to a new level. The company converted a soda machine into a live-bait dispenser. Gary Harsel, a sales rep for the company and owner of Gary's Live Bait and Tackle in Birdsboro, Pa., said there are more than 3,000 such machines operating nationwide. He owns 12 of them and sells minnows, nightcrawlers and mealworms -- among other tasty treats -- for about $2 a cup.

"I tried leeches, but we don't have much of a walleye fishery around here, so they don't sell very well," he said.

For Ken Rosenblum, a former emergency-room physician in Minneapolis, not being able to get medication for his 5-year-old son's ear infection in the middle of the night was the impetus for developing a 24-hour prescription-drug vending machine. His company, Mendota Healthcare Inc., developed InstyMeds in 2001, a free-standing unit that's being tested in four emergency rooms. Rosenblum, who hopes to roll out about 1,000 machines across the country next year, says that after a doctor prescribes medication on a handheld electronic device, the patient can get a voucher with a security code to insert into the machine. Instymeds authorizes billing and insurance information over the Internet. The idea caught on quickly at the first test site in suburban Minneapolis, Rosenblum said.

"I thought people would have needed a fair amount of time to get used to the technology, but after 12 weeks, 60 percent of patients were choosing to receive medications from the InstyMeds dispenser despite the fact that there are three pharmacies within less than a block," he said.

Back at the newest Redbox on Rockville Pike, where the machine went into operation in late June, Micha Barnea, 43, who manages the DVD machines McDonald's has in 10 locations, was stocking new releases. To rent a DVD, which costs $2.97 for three nights, one can pay only by credit card. Late fees are charged automatically. Barnea pulled the facade forward and stepped inside the guts of the movie section of the Redbox. It didn't matter which thin metal slot he placed each DVD in, because a small robotic box soon traveled up the DVD rack, scanning a bar code on each movie to identify the title and its location for later retrieval.

Barnea has visions of a vending-only world.

"I have a dream to produce a better machine than any other one. Everything is moving toward automation," Barnea said. "In the future you will not find any more video stores."

Vending Machines Grow Up: Candy Bars And Soda Make Way For Movies, Live Bait And Even Prescription Drugs JOSHUA PARTLOW / Washington Post 27jul03

Retail

Store wars: How retail ecommerce executives can win the battle for the last aisle

Store wars: How retail ecommerce executives can win the battle for the last aisle

BY Alex Richardson 02 May 2004

Editor's note: This article originally appeared in the May/June issue of Kiosk magazine.

Over the next two years, leading ecommerce executives in retail will see a growing need to implement in-store digital merchandising strategies in order to gain sustainable competitive advantages and improve profitability.

With the exception of Amazon.com, most leading banks and retailers have beaten the dot-coms at their own game. An estimated 200 consumer ecommerce sites folded in the past five years including well-known names such as ToySmart, eLuxury, Toys.Com, NetGrocer, and Webvan, just to name just a few.

Shoppers now have the ability to easily order most goods from their home computer; yet nearly half the U.S. population continues to visit a Wal-Mart or grocery store once per week.

Why? One could argue that it's difficult to order ground beef and bagels online; however, I suspect that it's a result of consumers' basic need for convenience-the immediate gratification that comes from doing business with trusted retail brands. Branded stores provide consumers a safe, "trusted" way to purchase goods.

The fact is it's becoming impossible for ecommerce executives to continue to ignore the traditional storefront--especially considering the union of numerous in-store self-service applications such as web ordering, in-store pick-up and self-service check out.

Stores within a store--60,000 SKUs in six square feet

The battle for the "last aisle" is one of the biggest challenges facing ecommerce and retail executives in the next 36 months. Previously, retail consumers have demonstrated an insatiable desire for convenience and time-savings.

I believe that the "store within a store" will grow dramatically. Banks (which typically spend about $1 million to construct a new branch) have practiced the "store within a store" approach for many years using ATMs and mini-branches inside of grocery stores.

Other successful examples include the Behr Paints kiosks, located in Home Depot stores. Using these kiosks customers instantly find the right paint color for their home. And at 7-Eleven stores, customers can use VCOM ATM kiosks to pay bills, order flowers, cash checks or buy lottery tickets.

Think merchandising

Initially, many retailers think about kiosk technology in terms of hardware first, and then, the software. They begin with "What type of kiosk or display monitor do I need?" or "How will the unit be branded?" From my experience, this type of thinking leads to a failed kiosk pilot or roll-out.

A good exercise to help you make a paradigm shift is to stop pretending that you are an IT expert. Stick with what you know best-merchandising.

The rule of thumb is to think like a consumer when launching digital applications. When merchandising, what retail aspects would you consider? Would you create a men's department"? Where would you place women's shoes? Would you place men's socks adjacent to men's shoes or create a general sock department? Where would you place the loyalty program or gift cards? How will your customers pay for their merchandise?

Create a customer showcase, not a technology showcase

Another obstacle to success is the typical urge to create complex hardware/software solutions that push "technology sizzle" as the main project goal. As with other technology industries, smart people are often attracted by the glitz of IT and focus on technological showcases that demonstrate the high levels of their intelligence.

Marketing leaders must rally together to ensure affordable and scalable solutions that clearly demonstrate ROI in a matter of months, not years. A good strategy for making sure that your kiosk project transforms from a small pilot to a large scale rollout is to first focus on "making it work" and then put on the glitz as a last step. Digital merchandising applications are intended to improve the consumer experience and promote brands. To accomplish this, it must work effectively, 24 hours per day, 365 days a year.

ROI is important

In general, the best way to improve customer service is to hire great people and train them well. And, it's no secret that within the retail industry, employee turnover is high. This in turn, costs the industry billions of dollars in recruiting, screening, and training.

ROI via labor savings, especially during a time of high employee turnover, combined with the reduced cost of ecommerce hardware and software can support your burden of proof for the investment in ecommerce.

Ecommerce 101--the four basic elements of a successful retail ecommerce application

* Attraction: This is the ability to quickly demonstrate to the consumer how the application solves problems.
* Interaction: How the application helps consumers find the answer to their problem. Interaction also involves the cross and up-selling of more profitable goods and services
* Transaction is the way the application is used to make the cash register ring. For example, leveraging the consumer e-mail addresses to send promotions or product information.
* Satisfaction: Can the retailer's application fulfill the promises? Will it be delivered in store or at the consumer's home? Is it a secure and private transaction? Does the application work?

Self-service is the best service

In our industry, as well as in other facets of life, success, or failure, can be determined by how well you help consumers solve simple problems through the basic self service model.

Ecommerce leaders who help customers solve problems and provide convenience will be the winners in 2004 and beyond.

Alex Richardson is Managing Director of Karter Capital Advisor, a new Venture Capital firm focused on helping emerging technology companies accelerate their plans for success. Alex is also Founder, Director and former CEO of Netkey, Inc.

Automation and Personal Lives

Businesses see self-service automation as a way to increase efficiency and boost profits. Self-service automation is showing up in many industries including airpost, banks and restaurants. Hear NPR's Bob Edwards and Charles Fishman of Fast Company magazine. Morning Edition Audio

Gift Registry and Multichannel

Multi-channel gift registries are emerging as strong tools for building long-term customer loyalty

Multi-channel gift registries can give a boost to loyalty

Multi-channel gift registries are emerging as strong tools for building long-term customer loyalty, says Neil Stern, senior partner with Chicago-based retail consultants McMillan/Doolittle. �This is a challenge to retailers, but it brings great customer loyalty benefits,� he tells InternetRetailer.com.

Stern notes that more retailers are looking at gift registries as a way to attract customers at an early age--whether they�re a young couple who has registered for wedding gifts or young friends or relatives who purchase through a registry--then continue to build relationships with them through continued e-mail contact and special offers. �It�s a great way to build loyalty over the long term,� he says.

Among retailers moving aggressively into using gift registries as part of loyalty strategies, he adds, are Macy�s and France-based department store chain Galeries Lafayette. "It provides us with an opportunity to establish lifelong relationships with young, new couples, as well as deepen our relationships with their extended friends and families,� says Eric Renard, CIO of Galeries Lafayette, which expects to launch a multi-channel gift registry later this year.

Stern adds that plans for a national multi-channel gift registry coincide with Federated Department Stores Inc.�s effort to build a consistent national presence. �It�s a big motivator behind Federated�s move to create Macy�s as a national brand,� he says.

Gift registries used as part of a customer loyalty strategy work best in a multi-channel environment spread across a nationwide market, so merchants can take advantage of dispersed networks of gift-buying friends and relatives and the increasing desire of consumers to shop through multiple channels, Stern says. �If a gift registry is not integrated across channels, the retailer can start to lose consumers as gift registry customers,� he says. �Customers are shopping across all channels, so retailers need to meet their customers wherever they want to experience the brand.�

A major challenge in launching a multi-channel gift registry, he adds, is deploying a system to support it across multiple channels. �Retailers are hunting for ones that work, whether they�re from outside providers or built in-house,� he says.

InternetRetailer.com - Daily News for Thursday, April 22, 2004

Hotels Fight Back

Hotels are looking to take back some of the market share that online travel sites grabbed in the lean years

By Tony Kontzer, Mary Hayes, InformationWeek
April 12, 2004
URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=18900967

Later this year, if Hilton Hotels Corp.'s plan goes as expected, travelers won't see room rates posted on travel sites such as Hotels.com or Expedia lower than what Hilton advertises on its own Web site. "You don't let the customer see a rate less than a rate you sell yourself," Hilton CIO Tim Harvey says. "At that point, you lose trust of the brand, and whoever is selling the room gains that trust."

But customer loyalty isn't the only thing hotel chains and operators stand to lose to the growth in third-party online bookings. In an era when consumers are more likely to make travel plans based on the best rates on the Internet rather than what a particular hotel brand has to offer, hotels have found their relationships with third-party sites have resulted in inflexible pricing practices and lost profits. While third-party sites helped the hotel industry through a tough economy"and continue to provide a valuable service by booking rooms that otherwise would go unoccupied"many say now is the time to establish more-favorable dynamics. "Everyone in the hotel industry is ready to get control of their inventories again," says Andrew Jordan, executive VP of sales and marketing and chief marketing officer at hotel chain Wyndham International.

When an online site beats you on price, "you lose trust of the brand," Hilton CIO Harvey says. Photo by Sacha Lecca

Online travel sites present a complicated dilemma, one hotels are addressing in two ways: by creating incentive programs and improving brand Web sites to get customers to buy direct, and by changing how they do business with the third parties. It appears the third-party sites are more than willing to cooperate. By year's end, Expedia and Hotels.com, both owned by IAC/InterActiveCorp, and Travelocity, owned by Sabre Holdings Corp., plan to implement XML-based connections to Hilton, Outrigger Hotels & Resorts, and several more hotel chains that will completely reverse how business is conducted between the parties. Those efforts stand to have a huge impact on the industry: Expedia, Hotels.com, and Travelocity make up 74% of hotel sales by third-party Web sites, according to travel-research firm PhoCusWright.

These efforts can't come soon enough for hotel companies. While the industry remained profitable even during the economic downturn"earning room profits of more than $16 billion in 2001, $14 billion in 2002, and back to $16 billion last year, according to Smith Travel Research"it has been steadily losing money to online travel sites. The hotel industry missed out on $962 million in bottom-line profits last year, about 6% of the industry's estimated profits, Smith Travel says. Those profits would have gone to the brands if they had sold the rooms directly to travelers. The biggest losers are chain-owned hotels, because franchises and smaller operators benefit from the marketing muscle of online travel sites, Smith Travel analyst Jan Freitag says.

The new XML-based connections will help make it possible to have parity in prices between what customers see at hotel brand sites and what they find at third-party sites. And while third-party sites may not be able to underprice hotel chains, they'll benefit from more-immediate access to a hotel's inventory and availability. Both parties will benefit from lower costs and improved communications regarding room bookings. "This is a huge strategic focus for us," says Spencer Rascoff, VP of lodging for Expedia and Hotels.com. "Our hotel partners are lining up at the door to get in on it." In 2002, Expedia acquired Newtrade Technologies Inc., which is building the connectivity platform based on technology standards in the travel industry.

Most hotels currently agree to provide a certain number of hotel rooms to third-party sites over a specific time frame for a set rate, such as $100 for every room sold. The deal is structured so that the rate the hotel offers at its site at the time"say, $120 per night"is the same rate the third-party site offers to its customers, allowing the online partner to retain $20 of the total room revenue. When the third-party site gets a booking, it notifies a hotel by E-mail or fax or, in some instances, via an extranet that automatically updates the hotel's inventory.

The problem is that none of these approaches allows back-and-forth communication between a third-party site and a chain's central reservation system, its revenue- or yield-management system (which uses analytics to determine the most a hotel can charge for a room), or an individual property's management system. So if rooms are filling quickly and a hotel's yield-management system indicates the rate should be increased to $140 a night for the given time period, the result is that the third-party site starts beating the branded site on price. That disparity exists until one of the parties notices the difference and acts on it.

The systems that Expedia, Hotels.com, and Travelocity are developing for later this year will let hotels use XML connections to push out pricing and inventory updates directly to third-party sites as soon as they happen. "So when changes are made to published rates, it's very easy to adjust so there's no lag between retail rates and the changing of online rates," says Josh Feuerstein, VP of hotels at Travelocity. "It does make price parity easier to chase."

Improved business-to-business connections aren't the only way hotels are fighting to take back control of bookings. Most of the major chains offer lowest-rate guarantees: If a customer finds a lower rate at a third-party site, the hotel will match that rate and, in some instances, throw in perks such as a late checkout or an additional discount of, say, 20% on top of the third-party rate. At Hilton, the company's Hilton Honors members who book rooms online earn points for discounts and perks such as frequent-flier miles only if they book at Hilton's site. Last year, Hilton deployed a $50 million hotel-management system, called OnQ, that lets any of its 2,000 hotels, which include the DoubleTree and Hampton Inn brands, view the history of a customer's relationship with the company. In the past few years, the share of online bookings Hilton records through its sites rose from 70% to 80%. "Fifteen months after we started going down this road, we feel third-party business is relatively modest, which is where we really need it to be," says Bala Subramanian, senior VP of electronic distribution for Hilton.

Hilton last month began feeding into its OnQ system information it collects about prices of its rooms on third-party sites and about competitors' prices. Previously, revenue management was determined using only internal information about future bookings. "Now we consider what's being loaded into third parties as well," CIO Harvey says.

Wyndham in recent months has worked to make booking rooms on its site easier so customers don't leave for other sites. It added servers to support more bookings and ensure fast transactions, and it changed the way it displays rates online to provide more detailed options. Wyndham also installed systems that comb third-party sites for its rates and uses that information to update its revenue-management system.

"The ability to read and react is much richer than it was a year ago," executive VP Jordan says. Members of Wyndham's ByRequest loyalty program who book at Wyndham sites get perks such as free long distance, photocopying, faxing, and Internet access. For nonmembers, Wyndham dangles free rounds of golf, free breakfasts, and airline miles. Online bookings through Wyndham sites have doubled within the past year, Jordan says.

To gain back control of rooms, hotel franchisers need to get their franchisees on board. Many franchisees have come to depend on the extra marketing prowess provided by third-party sites. But Carlson Hotels Worldwide, for example, is looking to put in place processes that will allow it to make more decisions on behalf of its franchisees, such as negotiating companywide relationships with third parties that are more favorable than what franchisees have been able to negotiate on their own.

In 2001, suffering from the dot-com bust, Carlson franchisee Radisson Hotel Fisherman's Wharf in San Francisco started a relationship with Expedia and Hotels.com. But the hotel has been shifting its focus away from third-party sites to wholesalers and group sales, which take a smaller cut than third-party sites. "We were a bit unbalanced before," says Yair Eldar, the hotel's general manager. "We were selling rooms too cheaply." But when Carlson negotiates more-favorable rates, Eldar says, its use of third-party sites may start to rise again.

In their own defense, online sites say they generate their own customer loyalty. "Customers want to see all the choices out there," says Travelocity's Feuerstein. "They want to go to one place that gives them a fantastic selection and has an objective store of information about hotels. That's one thing that will never change"people like selection."

The hotel industry's relationship with third-party sites is changing, but there's no indication it will end. "They serve a purpose," says Tim Stanley, CIO at hotel and casino chain Harrah's Entertainment Inc. "If you have excess inventory, they're a great way to sell it. But you don't want to lock up inventory [with third-party sites] that you can sell otherwise." The trick for hotels in the coming months will be to achieve the right balance between the two.

The Right Balance

Business News

Dave & Buster's getting back in the game
Earnings growth a sign that things are looking better after tough 2003

Dave & Buster's getting back in the game
Earnings growth a sign that things are looking better after tough 2003

08:55 AM CDT on Thursday, April 8, 2004

By KAREN ROBINSON-JACOBS / The Dallas Morning News

Buster Corley, half of the duo who founded the Dave & Buster's restaurant chain, has been in serious need of some good news.

It was just over a year ago that skittish investors, leery of a burdensome debt load and sagging sales at the restaurant-and-entertainment chain, had sheared nearly 40 percent off the company's share price.

The Dallas-based chain faced uprisings from two investor groups � one backing a replacement slate of board members and another that sought to force a sale of the company. Growth was halted. Jobs were cut.

"Simply put, 2003 was filled with great challenges," said Mr. Corley, 53, the chief executive of Dave & Buster's Inc. "It was the single most challenging year of my life."

On Wednesday, the company got to deliver a bullish earnings report that was "a whole lot funner" to dish out, said Dave Corriveau, 52, president of the company.

Dave & Buster's reported net income for its fiscal fourth quarter more than doubled to $7 million, or 46 cents a share, from the year-ago period, beating analysts' estimates by a nickel. For the full year, net income was $11 million, or 80 cents a share, compared with a net loss of $1.7 million, or 13 cents, in 2002.

While revenue fell for the year by 2.9 percent, to $362.8 million, the report was seen as a welcome tiding. That, and the company's plans to add branches, drove shares in Dave & Buster's up $2.11, or 14.1 percent, to close at $17.06 on the New York Stock Exchange.

"Much of the heavy lifting has been done," said Bob Labick, senior equity analyst with CJS Securities, who rates the company an "outperform" with a price target of $18. "They've gotten a lot [of the problems] behind them and now they're poised to reap the benefits of an improving economy."

Analysts attribute at least some of the company's past difficulties to the nation's fiscal woes.

The Dave & Buster's concept, launched in 1982 in Dallas, is essentially a casual-dining restaurant attached to a game room for children � and adults who want to behave like children. The complex includes pool tables, state-of the-art video games and simulators.

But entertainment-themed venues, more than family-dining or "comfort food" restaurants, depend heavily on customers having disposable income.

"Most of the challenge we faced was on the amusement side," said Mr. Corley. Amusement and game revenue dropped 5.5 percent in 2003, accounting for 47 percent of revenue, the company said.

Even allowing for the economic downturn, the company's share performance was trailing that of its peers, according to Dolphin LP, an investment group that last year held about 9 percent of the company's shares and was a top stakeholder. In advance of the company's annual meeting in June, Dolphin offered a slate of three replacement candidates for the nine-member board.

That battle heated up after Renaissance Capital Group Inc. offered, then withdrew, a shareholder proposal pushing for a sale of the company.

Investors were alarmed in part at the company's debt load, which smothered its ability to grow. The company opened only one outlet in 2002 and none in 2003, compared with four per year in 2000 and 2001.

At about 50,000 square feet each, the stores are massive and cost about $9 million to launch. On average, each store contains 150 games valued at about $2 million.

Bank debt, largely from new store openings, had grown to $68 million by the beginning of the fiscal year, the company said. As sales improved during the year, the company used cash from operations to cut that figure to $54 million, said W.C. Hammett, chief financial officer.

Trimming costs

Also, in response to investor concerns, the company enacted $11 million in cost cuts late in 2002. The cuts took effect largely in 2003 and involved trimming 60 field and corporate jobs, a first for the company, and reducing employee hours, company officials said. Dave & Buster's retains about 6,500 employees, including about 130 workers on the corporate staff.

The company also obtained $30 million in private placement funds that helped it restructure older debt and jump-start its growth program.

One new outlet � a 55,000-square-foot complex complete with a rooftop patio overlooking the San Gabriel Mountains near Los Angeles � is slated to open in the fall.

The store opening is part of the company's bid to spur sales growth. In the last fiscal year, sales at restaurants open at least 18 months � a key measure of chain health � trailed the previous year's performance, albeit by decreasing amounts. Same-store sales were off by 7.5 percent at the beginning of the year but trailed the prior year by only 2 percent in the fourth quarter.

The company said it's looking for positive trends in the second half of this year.

And in a bid to draw more hungry video-game players, the company last year switched advertising agencies and launched a new theme: "Recess is calling."

Getting the message

Although the two entrepreneurs want patrons to hear the siren song of recreation, shareholders want to make sure that Dave and Buster continue to hear investors calling.

"I think clearly the company has gotten the message delivered by a lot of shareholders," said Donald T. Netter, senior managing director of Dolphin, based in Stamford, Conn. "There's clearly been a lot of progress, and investors are watching and are hopeful that things will continue in that vein."

Mr. Corriveau is convinced that they will.

"It's not how hard you fall," he said, "but how high you bounce back. Now it's up to us to keep our equilibrium" and follow through on the plans put in place.

Mr. Corriveau said some of the company's greatest accomplishments came in the last year � responding to the trials by cutting costs, paying down debt and ultimately appeasing shareholders.

"We've been bruised, but there's no killing us," he said. "We can bounce. And we never give up."

DallasNews.com | News for Dallas, Texas | Business

VOD and NetFlix

Netflix to offer movie downloads

Company to start video on demand over the web in '05; DVD rental firm also eyes video game market.
April 5, 2004: 2:37 PM EDT

NEW YORK (CNN/Money) - DVD rental company Netflix plans to start a video on demand service over the Internet next year, according to a published report.

Netflix CEO Reed Hastings also told entertainment industry trade publication Variety that the multibillion-dollar video game market is another related field that Netflix may or may not enter in the future.

Variety reported Monday that Netflix (NFLX: Research, Estimates), which pioneered using the mail to deliver DVD rentals, is looking at video on demand as a defensive move.

"We're playing it a little defensively, because if we lose the digital download market, you'll soon be hearing about the rise and fall of Netflix," said Hastings to the publication.

Customers can now rent up to three DVDs at a time from Netflix for a set price with no late fees. Variety said the VOD offering will expand that to allow for up to three physical DVD or digital downloads at a time.

Hastings expects that Internet VOD market is still relatively small, with relatively long download times for even those with cable or DSL Internet connections. He said that the physical DVD rentals will likely stay the preferred rental choice for the foreseeable future. But he expects the growth of wireless home networking and the expansion of digital video recorders, such as TiVo would soon allow consumers to easily transfer content from a computer to a television.

Netflix to offer movie downloads and eyes video games - Apr. 5, 2004

Multichannel

The 7 Habits of Highly Effective Multichannel Retailers

by Michael Ker

Multichannel retailing is hot. Forrester Research reported in May 2003 that multichannel retailers would contribute to 75% of online sales this year, while, ironically, pure play e-tailers would contribute just 25%. Yet multichannel retailers face a unique set of challenges not encountered by traditional brick-and-mortar stores. Multichannel issues exist on the selling and supplier sides, affecting both inbound and outbound shipments, and revenue and cost.

Given that the customer�s experience with a retailer is defined by its ability to manage the process of delivering a quality order on time, regardless of order channel, an integrated strategy for multichannel retailing must be deployed to maintain consistent, superior service across Internet, catalog, and brick and mortar. The strategy should include strengthening backend processes like order fulfillment. Following the seven habits below will mean bigger profits for your multichannel retail efforts:

1. Treat e-commerce as one of many channels � not a separate business. Retailers are typically divided into direct and store channels, and each channel doesn�t know what the other is doing. This can present a host of problems, from duplicate � and costly � systems to duplicate inventory to incompatible SKUs. Retailers must make sure that the right hand knows what the left hand is doing. Remember, e-commerce should drive store business and not stand alone. And since that�s the case, e-commerce customers should get access to customer service just like store customers do.

2. Implement cross-channel pick-ups and returns. The Wall Street Journal reported last November that multichannel retailers significantly benefit from impulse buys when customers pick up merchandise from a store that they ordered online. But, according to an AMR Research alert in December, one of the biggest problems retailers face is processing in-store pickups, since store clerks have no visibility into the customer�s online order. AMR further stated that up to now retailers have under-invested in technologies required to support cross-channel pickups and returns.

3. Make special orders as simple to buy as stock items. In traditional retail operations special orders are usually handled manually � that is, an employee handles processing one customer at a time without visibility into vendor lead times or inventory, and legacy systems aren�t much help. Throw in product configuration, returns and order cancellations and the process can be a nightmare. Consolidating special orders and services through a common order management system for all channels is mandatory.

4. Implement the right infrastructure for shipping single orders. As retailers� online or direct channels grow, shipping to customers requires a different process and infrastructure. Still retailers fail to see the differences between shipping single items and shipping bulk, nor do they understand what�s involved in building the correct infrastructure. Without implementing the right infrastructure, the processing cost per order will soar and may eventually kill multichannel initiatives.

5. Leverage drop-ship vendors. Vendor drop ship is the most underutilized order fulfillment strategy even though the benefits are so clear. Retailers who establish a drop ship partnership with their suppliers can expand customer offerings without incurring higher inventory costs. For every $10 million of wholesale inventory held by vendor partners, assuming a 15% cost of capital, freed up cash flow can amount to $1.5 million.

6. Use order visibility applications to manage your network of shipping locations. Customer-responsive order fulfillment requires the flexibility to manage changes, especially for long lead-time and made-to-order items. This cannot be done using point-to-point systems that merely send POs to vendors over the Internet. Without business applications that provide real-time order visibility, the benefit of sending electronic documents over manual faxing is marginal. By monitoring order fulfillment, retailers can improve long-term customer service levels.

7. Measure the performance of every process involved in getting the order to the customer, and then automate, automate, automate! The customer fulfillment value chain includes more than taking and delivering orders. E-commerce fulfillment, for example, starts with setting up systems for product merchandising, promotions management and interactive selling rules before you even get to order taking and order management. Once systems are in place, they must be measured with business intelligence tools to make ongoing modifications for improved customer service. Orders taken in-store, from kiosks, through the call center, and via the Web storefront can and should be analyzed using a common database.

Michael Ker is CEO of Redwood Shores, Calif.-based Escalate, a provider of e-commerce and order management solutions.

Executive Technology

Plastic & Cash

Consumers Increasingly Favor Credit Over Cash

Cash could be a thing of the past as consumers increasingly prefer credit cards.

Push For Plastic
Consumers Increasingly Favor Credit Over Cash
By Ari Weinberg, Forbes.com
Special to ABCNEWS.com

March 17� What's in your wallet?
Among the 185 million card-holding U.S. consumers, the average person carries three bank-issued credit cards, four retail credit cards and one debit card, according to CardWeb.com.

That's a lot of plastic � reflecting an incredibly competitive industry that's becoming even more so.

Over the past year, the credit and debit franchises of Visa USA and MasterCard International have become increasingly threatened by consolidating banks and payment processors, multiple law suits and even themselves. The battleground is getting bigger and nastier.

Over the past few years, credit card issuers have improved rewards and cashback cards. Citibank, a unit of Citigroup, now offers a card that grants 5 percent cashback on everyday purchases at supermarkets, gas stations and retailers. That's almost 400 basis points more than a standard checking account earns in interest.

Even debit cards have joined the rewards game.

Banks are also moving very fast into pre-paid, gift and payroll cards. There are mini-cards for a keychain and wireless card acceptance terminals.

Plastic payments now account for 53 percent of consumer purchases, compared to 43 percent in 1999, according to a survey by the American Bankers Association and Dove Consulting. For the largest issuers, Citigroup, MBNA and J.P. Morgan Chase cardholders are generating tremendous amounts of purchase volume. Total plastic purchases � either credit or debit � are up 54 percent since 1999.

"Banks are looking for higher revenue out of consumer spending," says Matthew Park, an analyst covering specialty finance for A.G. Edwards.

Merchants Prefer Debit

But merchants, lead by retailers like Wal-Mart, Sears and Safeway are set on lowering transaction fees. They're pushing for more debit card transactions which, not coincidentally, cost merchants much less. Pulled directly from a buyer's bank account, such purchases accounted for 29 percent of more than $2 trillion in card activity last year compared to 17 percent of $1.3 trillion in 1999, according to The Nilson Report.

Last April, Visa USA and MasterCard International helped that process along by settling a seven-year lawsuit over their charges for debit purchases confirmed with a signature � as opposed to the ATM-style PIN entrance. They agreed to pay restitution to merchants and lower their fees.

"PIN-based debit is cheaper for the retailers," says Doug Bergeron, chairman and chief executive of VeriFone, a former Hewlett-Packard unit that dominates the U.S. market for point-of-sale terminals. "In the intermediate term, the fees could become more indistinguishable and tighten the spread," says Bergeron.

For now, that's simply pushing the banks and card associations to get more credit flowing since the fees on the credit side are bigger. Yet that volume may not come from the friendliest of places.

A pending federal antitrust verdict against Visa and MasterCard stands to open up their member banks to issue cards from competitors American Express and Discover, a unit at Morgan Stanley.

Amex Vs. Visa

In January, American Express announced that MBNA, the largest independent credit card issuer in the United States, would begin issuing American Express credit cards. (Not to be confused with AmEx charge cards, which have no spending limits but must be paid off monthly.) AmEx, which has 79 partner issuers around the world, expects many more U.S. deals to come. The difference between American Express and most other cards continues to be higher fees associated with accepting the card.

While the interchange fees charged to merchants for accepting any type of credit cards are getting more competitive, the fee for American Express processing is often higher. AmEx argues the premium is worth it, since AmEx cardholders allegedly make larger purchases.

"We have a spend-centric model," says Steve McCurdy, an executive in AmEx's third-party card business. "And it receives a premium price from the merchant."

But not all merchants agree. Some think the Amex fees aren't worth it: thus the snarky Visa ads that plug places that "don't take American Express."

Unlike publicly held Amex, Visa is ultimately an association of banks, serving as a clearinghouse to promote the brand. It collects a fee every time a transaction takes place between a card-issuing bank and the merchant's bank. Last year Visa USA crossed $650 billion in credit card transactions and $454 billion in debit transactions

Much-smaller MasterCard, with $514 billion in credit and $82 billion in debit transactions last year, is virtually a public company. Following a 2001 merger with Europay, the company registered its stock with the U.S. Securities and Exchange Commission and files quarterly and annual financial statements.

Last year, in the wake of its $1 billion settlement in the merchant case, MasterCard suffered a net loss of $385 million on $2.2 billion in revenue compared to a $116 million profit on $1.9 billion in revenue in 2002. A big test for both MasterCard and Visa will come in the pending merger between J.P. Morgan Chase, the third largest MasterCard issuer, and Bank One, the largest Visa issuer in the United States.

"They'll have to decide which association and which processor," says Gwenn Bezard, a senior analyst with Celent Communications. "Switching will involve a lot of costs."

All of this means good news for the consumer, who's come out as the big winner in the credit card wars. There's little chance the merged bank will be able to push the consolidation costs on to its customers. But wherever those costs get pushed, there's sure to be even greater pushback.

Could this be the big break for multi-use cards or smart cards?

Your wallet would surely thank them.

ABCNEWS.com

So you got a Hummer...so what...

Gizmo covered the original Smartruck two years ago and it became one of our most popular stories in 2002 � but the new version is several levels of magnitude above the original model in capabilities.

US ARMY develops SMARTRUCK III

Gizmo covered the original Smartruck two years ago and it became one of our most popular stories in 2002 � but the new version is several levels of magnitude above the original model in capabilities.

Built in partnership with International Truck and Engine Corporation, the machine showcases the latest in armour protection, highly-advanced communications and detection and deterrent capabilities, making the SMARTRUCK III a true mobile command-and-control center.

�It�s the right truck for right now,� Dennis J. Wend, Director of the National Automotive Center told editors at the Society of Automotive Engineers� (SAE) 2004 World Congress.

�Our first focus is to bring forward this mobile unit for our soldiers here and abroad, but at the same time we�ve designed a number of commercial versions which can be easily modified to address homeland security or other priorities.� Specifically, Wend said some of the multiple applications would include:

�For the Air Force, it can be a command-and-control center designed to monitor airfields and their vast surrounding areas.

�For the Border Patrol and U.S. Marshals, SMARTRUCK III will detect the movement of personnel or vehicles in remote areas.

�For Homeland Security, it is configured to monitor both bio threats and personnel movements.

�For a war zone, it brings state-of-the-art communications and detection systems while offering up-armored protection to withstand terrorist and insurgent roadside attacks.

�And there are unlimited applications for commercial uses working with our International Truck and Engine partners for business and industry. This platform does it all!�

The SmarTruck III was built for the NAC, the Army�s official link to developing collaborative technologies with commercial and academic partners, by Integrated Concepts & Research Corporation (ICRC) of Madison Heights, MI, and Heart International of Grand Blanc, MI.

The SMARTRUCK III owes its wide-appeal to its adaptable modular design and innovations in defence and occupant protection, field intelligence, communications and vehicle performance.

Defense and Occupant Protection

In military operations, SMARTRUCK III�s vehicle systems are capable of detecting and responding to personnel movement, a bio-threat in the air or an incoming missile. The vehicle armor, four-point safety belts, run flat tires and fire suppression systems enhance crew protection.

SMARTRUCK III is equipped with a weapons station module featuring a remote controlled .50-caliber machine gun that rises from the back of the vehicle and has sniper-detection directional sound capabilities.

SMARTRUCK III�s advanced perimeter defence capabilities are based on the military�s F-CLAS system, named one of the Army Material Command�s Top 10 Greatest Innovations of 2002. The system supports vehicle survivability from close-in threats like rocket-propelled grenades and antitank-guided missiles with anti-missile missiles deployed from behind SMARTRUCK III�s side flares. Also housed behind the side flares are smoke and tear gas canister launchers.

SMARTRUCK III is outfitted with Level III ballistic protection (to withstand 7.62 x 51mm rounds) and can include armor flooring designed to dissipate the energy from a ground explosion away from the vehicle.

An Automatic Fire Suppression System (AFSS) can sense an explosion or fire in the crew compartment and suppress it within milliseconds, thereby preventing harm to the occupants and reducing fire damage to the equipment. The vehicle diagnostics system will aid the crew in tracking vehicle health and/or identifying and resolving maintenance issues.

Field Intelligence

The highly-sophisticated Surveillance Module houses two primary camera systems: the periscope camera and the telemmersion system.

The periscope camera includes a night vision camera, visible light camera and laser range finder in a self-contained pan-and-tilt.

For high-resolution situation awareness, the telemmersion system can raise eight feet above the truck for capturing the 360-degree full-motion spherical scene at 100 million pixels per second. This compact system includes directional sound monitoring and contains a base unit which can hold up to four hours of recording.

The intelligence equipment includes a Bio-agent Acquisition System which can acquire particulate samples from intake air, distinguish bio-aerosols from dust and other non-biological material and capture samples for analysis.

Unmanned Aerial Vehicles (UAV�s) can be controlled from the SMARTRUCK III�s electronic interfaces. For example, ducted fan UAV, capable of vertical takeoff and landing and high speed horizontal flight, could offer a low-cost surveillance option. Depending on the mission requirements, UAV�s can carry a variety of payloads including cameras or Nuclear, Biological and Chemical (NBC) sensors for air quality sampling.

Communications

SMARTRUCK III�s communication technologies create an integrated, stand-alone Command-and-Control Center. Each of the rear seat passengers will operate a 20� touch screen (with a storable keyboard and mouse) to monitor the numerous SMARTRUCK III technologies. They also each have two 7� LCD screens to view their selected camera feeds. SMARTRUCK III incorporates high-speed satellite internet access and satellite TV.

The front and rear seat passengers will have removable wireless tablet PCs which allow users to monitor vehicle operations and control some of the peripheral devices from outside the vehicle.

Riding in captain�s chairs, the SMARTRUCK III�s four person crew operates an array of ultra-high tech equipment:

The Driver is responsible for piloting the vehicle. From a pop-up LCD display, the driver can view the forward-looking night vision camera which extends the driver�s visible range. An inverted LCD mirror allows the driver to monitor the rearward action.

The Gunner operates the weapon station control unit, including all weapon system camera feeds, weapon deployment, target acquisition and firing.

The Surveillance Operator and the Communications Operator, through their numerous electronic interfaces, will monitor UHF, VHF, military and/or police band radio traffic, track the highly-detailed GPS navigation software, monitor the real-time vehicle diagnostics, control a UAV device and payload, control and view the camera feeds, analyze NBC detection data and engage the electric-shock door handles and other countermeasure controls.

Overall crew comfort is a high priority with the SMARTRUCK III. The on-board systems have been organized for efficiency and stowed to maximize crew space. The cabin is air conditioned and includes a center-cab full-reclining sleeper seat.

Telematics

Using the latest telematics systems, the SMARTRUCK III and its commercial variations can be designed to maximize uptime for the vehicle, increase fleet productivity and reduce operating cost in several key areas.

These include: systems management using GPS for location monitoring; situational updates for tracking supplies; logistics control; full-time vehicle diagnostics; prognostics of predictive failures; embedded training for operators; and systems management for recording vehicle performance.

Vehicle Performance

The base vehicle for SMARTRUCK III is an International V-6 powered Crew Cab, 4200 series medium-duty platform. Its exterior reflects design elements of a military HMMWV and can accommodate existing shelter modules.

Fitted with an air suspension that allows adjustable ride height, reduces storage space needed during air transportation and improves off-road performance.

By recovering a portion of the energy normally wasted as heat by the vehicle brakes, the SMARTRUCK III also boasts a hydraulic launch assist (HLA) that can provide a 25 � 35 percent improvement in fuel efficiency, a 30 percent reduction in emissions while also providing high torque very quickly, even at low speeds.

The massive 37/12.50R20 Michelin XZL tires further SMARTRUCK III�s performance capabilities, offering exceptional traction and handling on varied terrains including snow, sand, mud and highway.

Providing 8.5 kW of continuous power as needed, the Aura Systems� AuraGen G8500X underhood generator system serves as the primary power source for all add-on vehicle technologies, providing high quality AC/DC/Engine-off Silent Watch power as required, whether the vehicle is mobile or parked.

�We�re living in a new world,� said Wend, �facing new kinds of threats to soldiers and civilians alike. The SMARTRUCK III is designed to take on that environment and win.�

The National Automotive Center is the Army�s official link to working with commercial and academic partners to create vehicles that will give the Army the mobility, survivability and agility it needs to operate efficiently and effectively in today�s new threat environment.

For the military, the NAC�s partnership approach makes it possible to improve vehicle performance, safety and endurance while also reducing design, manufacturing, operations and maintenance costs.

For commercial partners, the application of jointly developed technologies has similar impacts � safer cars and trucks, more advanced technology available to the consumer and lower cost because of the broader market base.

Gizmo

Hey, I went to MIT too and I like kiosks...

MIT grad wishes kiosks in cherished space fit in better...

COLUMN
Defeating Lobby 7 Kiosks
George Waksman

7-100LA, more commonly known as Lobby 7, is one of the most beautiful locations at MIT, Killian Court being its only competition. These places are beautiful not for what they have, but for what they do not have: clutter.

Understanding the beauty of these places is not difficult and does not require any great eye for aesthetics, but just some patience. Go to Killian or Lobby 7, choose a place to stand, sit, or lie, and look around. Appreciate the dome, the sky, the space or whatever you like; just appreciate the beauty of the emptiness.

I have seen the many faces of Lobby 7. I was a freshmen during the height of renovations and it was a horrible place. During renovations, Lobby 7 was a network of tight corridors between scaffolding; it was cramped and oppressive. When renovations were completed and Lobby 7 was itself again, I found myself invigorated every time that I came to campus. Enter the doors of 77 Mass. Ave. or walk out of the Infinite Corridor and suddenly everything opens up. Glance up at the dome, then left and right; the beauty sinks in for just a moment and you are off to your destination. Maybe if you have some time, you sit on one of the pedestals, have lunch, watch the people, or just relax.

But, a horrible thing has happened to Lobby 7: the information kiosks. Those cold metal prisms scattered in Lobby 7 to provide information destroy the space. Enter Lobby 7. Look left, see a kiosk directly in front of you; look right, see a kiosk directly in front of you. Your time is up and you are off to your destination without the moment of beauty that Lobby 7 would otherwise provide. The kiosks are a hideous abomination that must be defeated.

The kiosks have wheels and I thought this to be their saving grace. For the past month, almost every morning, I have diligently moved the kiosks to the sides of Lobby 7, restoring its splendor. I do not move the kiosks for myself alone. I move the kiosks for everyone that sees MIT: I move the kiosks for the students and faculty on their way to class and lab; I move the kiosks for the visitors to marvel at the splendor of MIT; and I especially move the kiosks for the children and high school students that enter Lobby 7, look around, and are given that slight hint of how wonderful all of MIT really is. Alas, I have been told not to move the kiosks because the information they contain is so important that it outweighs the destruction of aesthetic beauty.

Let it be known, that I take no quarrel with the information on the kiosks and consider their role to be important. But the implementation is flawed. Perhaps the kiosks could find a new home where they will not destroy an architectural masterpiece. Maybe we could bring back the drop-posters of pre-renovation times, which did not interfere with the space and also served to remind us that MIT is a friendly student-oriented place. Or maybe, there is another way that we can display our information and have our lobby, too.

The salvation of Lobby 7 is not something that I can accomplish on my own. If you have any say over the kiosks, please reconsider their value. If you have something to announce, don�t use the kiosks but find another way; hang a drop-poster, post somewhere else, or find a creative alternative. Or just push the kiosks out of the way as a sign that you, too, recognize their evil.

George Waksman is a member of the class of 2005.

Defeating Lobby 7 Kiosks

World of Patents

Kodak Sues Sony Over Digital Camera Patents

Tue Mar 9, 7:14 PM ET

NEW YORK (Reuters) - Eastman Kodak Co., the No. 1 maker of photographic film, on Tuesday said it had filed suit against Japan's Sony Corp (NYSE:SNE - news) (news - web sites). alleging that the consumer electronics company infringed 10 of Kodak's patents related to digital photography.

Rochester, New York-based Kodak, in a lawsuit filed Monday in federal court in New York, alleged that Sony's products use technology invented by Kodak, including an "electronic camera utilizing image compression and digital storage."

Kodak and Sony are among the leaders in sales of digital cameras, which do not use film and record images on computer chips and built-in memory cards.

The lawsuit comes at a time when Kodak is undergoing a tough transition toward digital products amid the decline of its film business.

Kodak's patents in question date from 1987 to 2003 on inventions related to a range of tasks, such as reproducing video images, printing, previewing and storing images.

Kodak spokesman Gerard Meuchner said the lawsuit follows the failure of talks between the companies that Kodak hoped would produce a licensing pact.

"We have attempted to resolve the matter with Sony for almost three years, and the discussions between us have not led to a suitable licensing agreement," he said.

In a statement, Sony said it "has not violated any Kodak patent related to digital imaging and will vigorously defend any allegation made in this regard."

The lawsuit seeks an injunction against further use of the technology and monetary damages.

Kodak already has licensing agreements with rival camera makers Olympus Corp. and Sanyo Electric Co. Ltd.

Shares of Kodak closed off 47 cents, or 1.8 percent, at $26.36 on the New York Stock Exchange (news - web sites).

U.S.-listed shares of Sony slipped 4 cents or 0.1 percent to end at $40.93 on the NYSE.

Patent News

on-demand book printing companies pay $15 million for patent infringement

On-demand printing patent

MLive.com - NewsFlash

ST. LOUIS (AP) -- A federal jury ordered the nation's leading provider of on-demand book printing to pay $15 million for patent infringement to the company that created the concept.

The verdict could mean consumers who follow certain steps when ordering such books online -- which are printed, bound and covered within minutes -- also may be infringing on the patent, said William Cunningham, a lawyer for the plaintiff, On Demand Machine Corp.

The three defendants said they would appeal the judgment. Lightning Source Inc. of La Vergne, Tenn.; its parent company, Ingram Industries, of Nashville, Tenn.; and Seattle-based Amazon.com had argued the patent wasn't valid and there was no infringement.

On Demand Machine Corp., a startup company founded by systems engineer Harvey Ross, filed the lawsuit in October 2001. Ross died three months later.

Ross was 68 in 1990 when he developed the idea that a customer could enter a bookstore kiosk, type a book title into a computer and access a synopsis, sales and other information before clicking on a command that would produce a printed, bound and covered book within minutes.

In the early 1990s, Xerox Corp. demonstrated that Ross' technology produced a book as good as an offset-printed version, which is made in large batches. But Xerox wanted $2.2 million to build a prototype.

Ross won his patent in 1995. When Xerox challenged parts of it, he returned to the U.S. Patent Office in 1997 to have its critical parts affirmed.

In 1996, Ingram Industries, whose book division is the leading wholesaler and distributor of books, refused Ross's offer of partnership.

The following year, Ingram announced Lightning Source, which began printing books on demand in January 1998 in a large production facility, rather than a bookstore setting Ross had envisioned. Its customers are publishers and retail book sellers.

Ross informed Lightning Source that it needed a license from him and that it owed him some royalties, but they refused, Cunningham said. Ross and his company sued, seeking damages they said amounted to no less than what would have been a reasonable royalty.

Wednesday's judgment is "considerably" more than the parties would have had to pay in royalties, Cunningham said. "He'd be pleased," Cunningham said of his late client. "It's vindication for 12 years of work."

Ingram spokesman Keel Hunt said "we certainly disagree with this decision." Amazon.com declined to comment.

KNO - KioskNews.Org: On-demand printing patent

Is the Music Store Over?

The big CD retail chains may have only a few more years before the downloading craze buries them. They can survive, but only by becoming like no store you've seen before.

You can forgive the chaotic, run-down atmosphere when you walk into Tower Records on Broadway and West Fourth Street in Manhattan. You don't even mind all those SpongeBob action figures and Beatles lunch boxes -- hey, the music industry's in a slump, and these guys are just trying to pay the rent. But when you pick up The Essential Bruce Springsteen, your temperature starts to rise. You should be ecstatic at the discovery of 12 new releases by the Boss, but instead you're furious: You can't buy them unless you shell out $25.99 for the entire three-CD set that includes 30 "career-spanning classics" that you already own from his other hit records. Why should you have to pay for all those songs twice?

Business 2.0 - Magazine Article - Is the Music Store Over?

Customer Surveys

Touch Screen Technology Invites Sun Country Passengers to Start Talking, and the Airline is Listening to Its Survey Results

TALKINGPOINT INC., a consumer research, registration, and relationship development company, is interacting and analyzing feedback from hundreds of Sun Country passengers everyday

MENDOTA HEIGHTS, Minn., Feb 27, 2004 (BUSINESS WIRE) -- Sun Country Airlines is literally in "touch" with its customers now, more than perhaps ever before. Earlier this month, Sun Country Airlines launched an innovative data collection campaign with TALKINGPOINT INC., a Minneapolis based customer Research Company. Sun Country passengers that choose to participate in a sixty second, touch screen survey on a computer screen at the gate are asked a variety of questions about their travel preferences, and or travel concerns. In exchange for their time and information, passengers are eligible for a drawing at the end of the month to win a pair of airline tickets anywhere Sun Country Airlines flies.

This traveler friendly interaction is proving to be a fast and easy way to initiate instant dialog between consumers and their airline through e-marketing campaigns. Sun Country President T. Jay Salmen says the immediate feedback is already proving a valuable consumer resource for Sun Country. "We're always looking for ways to better serve the needs of our customers, and this technology gives us that chance to interact daily and better respond to their travel expectations."

TALKINGPOINT INC., delivers in-store, incentive driven research campaigns via wireless, interactive devices. Sun Country is their first commercial airline client.

"TALKINGPOINT saw this as a great opportunity for two innovative companies to collaborate closely on what matters most to any business- understanding their customers," said Phillip Hotchkiss, President and CEO of TALKINGPOINT INC. "Our customer research, registration, and relationship development platform fits perfectly with Sun Country's desire to better understand and meet their constantly changing needs."

TALKINGPOINT has activated two touch screen monitors at Sun Country's departure gates at the Hubert H Humphrey Terminal in the Twin Cities and plans to activate another screen at Sun Country's kiosk when it opens at the Mall of America, later this spring.

Sun Country Airlines is a low cost, low fare, scheduled service carrier specializing in leisure destinations, as well as offering daily non-stops to cities such as Dallas/Ft Worth; Denver, Los Angeles, New York, Orlando, and Phoenix.

For more information and FAQs related to Sun Country Airlines: visit www.suncountryairlines.com

SOURCE: Sun Country Airlines

Sun Country Airlines, St. Paul
Jim Stack, 651-681-4840 or 651-775-9112
jstack@suncountry.com

VoIP

Nice blog from ther defacto authority on VoIP Jeff Pulver....The Jeff Pulver Blog

Mega Grocery

Retail Innovator Meijer Now Adapting to Compete with Wal-Mart, Other Stores

By Greta Guest, Detroit Free Press

Feb. 24--GRAND RAPIDS, Mich. -- Meijer celebrates its 70th anniversary this summer by reinventing the supercenter concept it created in 1962 and then watched as Wal-Mart cloned the concept to become the largest company on the planet.

Meijer Inc., the nation's 9th largest private company, with an estimated $11.1 billion in annual revenues, has aggressive remodeling projects planned for the chain's 158 stores along with several new stores in the next few years.

It is testing new grocery and general merchandise strategies by New York designer and architect David Rockwell at two stores near Meijer's Grand Rapids headquarters. Rockwell is best known for designing the Kodak Theater in Los Angeles and the Planet Hollywood restaurants.

Meijer plans to compete with Wal-Mart on price, in some cases, and with offerings not typically found at a discount supercenter. Besides Wal-Mart, the company sees competitors in Kroger, Target, Kohl's, Whole Foods Market, Costco, Walgreen and others.

The test stores are offering items like sushi, $120 bottles of wine, organic food, gourmet food to go and hand-painted chocolates. They also are testing a drive-through pharmacy and have placed the pharmacy, along with health and beauty products, at the entrance.

Hank Meijer, CEO and cochairman, says the competition has made the company his grandfather founded in 1934 more frugal. Inside costs are being pared, from selling one of two corporate jets to laying off 1,900 salaried workers last month. And he's trimming the cost to build a new store by a third.

"It's a new climate in which there is an imperative for us to be low-cost in our operation so we can be low cost for our guests," Meijer said during a recent tour of the retailer's test stores.

"In a sense, part of what makes what we do exciting is that we are in competition with as formidable a competitor as anyone has ever conceived of. That has a sense of adventure about it that I guess also implies a lot of risk," Meijer said.

Meijer now leads its competitors in market share in eight metropolitan areas including Detroit, Ann Arbor and Columbus, Ohio, according to Mass Market Retailers, a New York-based industry publication.

In comparison, Wal-Mart, with about $245 billion in annual sales, is the dominant general merchandise retailer in 73 of the top 100 markets, the publication said. And Wal-Mart plans a major expansion in the next two years, including seven new Michigan stores this year.

Meijer plans to open five stores this year and then start opening supercenters at a rate of eight per year.

One Meijer pilot store is testing the grocery operation and the other is testing out the new general merchandise design. Company spokesman John Zimmerman said the supercenter plans to remodel up to 45 stores this year with the new concept, including stores in Commerce and Chesterfield townships.

The new grocery and general merchandise concepts will be combined in the new Southfield store in the Tel-Twelve shopping center in 2005. Meijer plans to demolish the former Kmart at that location and build a 194,000-square-foot supercenter.

Zimmerman said that Meijer competes head-on with 50 supercenters, most of them Wal-Marts. By 2007, he projects the company will be competing with 350.

Fred Marx, a Farmington Hills retail analyst and public relations consultant, said Meijer has survived because it keeps evolving.

"I think Mejier has kind of met the barbarians at the gate," Marx said. "Meijer is to be commended for getting out in front of this. I think they are far better prepared to withstand the assault than other players in the country who have had Wal-Mart coming in."

Key changes for shoppers in the grocery area include:

An expanded deli with gourmet food to go, including prime rib and grilled salmon.

An expanded bakery with specialty cakes and hand-painted chocolates.

An expanded cheese section with 200 varieties.

An expanded wine area with bottles priced at $6.99 to $120. The area has hardwood floors, and wine is displayed in long polished wooden bins.

In the second test store, highlights of changes in general merchandise are:

New signs and lower shelving for a more open floor plan.

More private-label brands including At Home with Meijer by Rockwell, which includes bedding, doormats and other items.

Kitchen supplies and baby clothes displayed directly across from the grocery section.

Wood and carpeted floors in the clothing section. New brand names include Sag Harbor and Gloria Vanderbilt.

A new electronics section called E4. The area has televisions, computers, digital cameras, video games and small electronics.

Bob Phibbs, a Long Beach, Calif.-based retail consultant and author, said that while Meijer has a history of innovation, it might overreach its core customer with the new concept.

"People shop at a wine merchant because they know everything about wine and they can help you out with it. I doubt a $7-a-hour-clerk can do that," Phibbs said. "It's good to have the upscale merchandise, but you have to have the upscale help to go with it."

Tony Camilletti, senior vice president of JGA, a design firm in Southfield, said the firm consulted with Meijer two years ago on its fashion presentation.

With recent layoffs, he wonders if Meijer is moving toward a more self-service approach while offering more upscale goods.

"A very large superstore concept to approach a luxury market I think is kind of like an oxymoron," Camilletti said.

Still, what has differentiated Meijer from the beginning, Camilletti said, is that you could buy a T-shirt and a gallon of milk on the same trip.

That appeals to Karen Hembrough of Ada. Steering around a cart loaded down with food, she said she spends at least $200 a trip, "and that's when I don't wander into the other section.

"I got the cutest suede coat here that I love to brag about where I got it for $50. You can get your lettuce and suede coat on the same trip," she said.

Hank Meijer said the company has a better sense of itself now than it did two years ago. It plans to expand by 6 percent a year.

"We all want to be part of a team that's not merely going to cling to survival," Meijer said.

MEIJER FACTS:

--Founded: 1934 in Greenville by Hendrik Meijer

--CEO: Hank Meijer

--Headquarters: Grand Rapids

--Annual revenue: $11.1 billion (estimated)

--Employees: 75,000

--Stores: 158 in Michigan, Illinois, Ohio, Indiana and Kentucky

--Innovations:

1938: First offers shopping carts.

1954: Starts using automated conveyor belts at checkout lanes.

1962: Opens first Thrifty Acres, a food and general merchandise store, in Grand Rapids.

1977: Lane scanners are introduced in a pilot program and expand throughout the chain.

1988: Starts 24-hour service at all stores.

1995: First in the market to open self-checkout terminals.

2004: Introduces new six-bag carousel bagging system to make checkout faster.

-----

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Drugstores

Albertsons Announces Major Operational Changes

FEBRUARY 23, 2004 -- BOISE, Idaho - Albertsons Inc. on Friday announced major changes in its senior leadership ranks and organization structure, including new programs to promote customer service, quality and new format development.

First, Albertsons said it would launch a business-wide Six Sigma Quality program, bringing "a new level of productivity and customer service" to the food and drug retailing industry. Albertsons' chairman, c.e.o. and president Larry Johnston, a former executive with General Electric, added that Six Sigma has transformed industrial giants like GE, Allied Signal and 3M, and said it holds the same potential in food and drug retailing. Leading the effort will be Jim Gentile, who has been named s.v.p. of Six Sigma Quality.

The company also announced it is establishing a new centralized customer service operation, consolidating customer service operations for every major banner in all 2,300-plus stores under one leadership team. The new team will have responsibility for front end operations, the national customer service center, the national "Service Challenge", store process implementation and the "Customer First Second to None Program," among others. Pam Powell, currently group v.p. of marketing, has been chosen to lead the new effort and has been named s.v.p. of customer service.

Major changes are also occurring in food operations, as several division consolidations and new leadership appointments were announced as follows:

� Four former divisions -- Southwest, Intermountain, Northwest and Rocky Mountain -- have been consolidated to form the new Intermountain West Division headquartered in Boise, Idaho. Bob Butler, formerly e.v.p. of Western Operations, has been named to lead the new division and is also being named e.v.p. of food operations for the entire company with the responsibility for co-coordinating all division presidents.

� The former Acme and Florida divisions have been consolidated into one new Eastern Division. Carl Jablonski, currently president of Acme Markets, becomes president of this new division headquartered in Philadelphia. Larry Wahlstrom, currently president of the Florida Division, moves to Boise, and becomes assistant to the chairman for special projects reporting to Larry Johnston.

� Donna Robbins has been named president of the Northern California Division succeeding Jim Gentile. This division continues to be headquartered in the San Francisco area.

� As announced two weeks ago, Judy Spires has been named president of the Dallas Ft. Worth Division serving Texas, Oklahoma, Nebraska & Louisiana. The division will continue to be headquartered in the Dallas area.

The company now has seven operating divisions (six food and one Drug).

Finally, a new division is being formed to develop new formats and also manage the company's large store construction and remodel programs. Roe Cefalo, who has served as e.v.p. of Eastern Operations for the past four years, becomes e.v.p. of real estate, construction, store development, and new formats for both food and drug. In this new role, Cefalo will have responsibility for the company's $1.3 Billion Capex Program as well as operating responsibility for new format development.

Mike Clawson, formerly president of the Northwest Division, has been named president of the company's new price impact division reporting directly to Cefalo.

In the future, the company plans to open price impact stores in multiple cities across the U.S. This new division will be completely autonomous and operated separately from Albertsons' traditional food and drug operations.

Based in Boise, Idaho, Albertsons employs more than 200,000 employees and operates approximately 2,300 retail stores in 31 states across the United States, under banners including Albertsons, Jewel-Osco, Acme, Albertsons-Osco, Albertsons-Sav-on, Sav-on Drugs, Osco Drug, and Super Saver.

Albertsons Announces Major Operational Changes

Convenience Store Business

7-Eleven Canada Making a Move to the Mall

February 24, 2004

VANCOUVER, CANADA -- 7-Eleven Canada Inc. is taking convenience to where the customers are--including malls, colleges, airports and hospitals.

The new stores will be smaller than the typical 7-Eleven store with more of a concentration on fresh food, Vice President of Development at 7-Eleven Canada Jim Waldron told the Globe and Mail.

The 7-Eleven store at the Vancouver International airport has surpassed sales projections.

"We do serve a different niche, a different customer...a customer who needs to move in and out quickly and who looks for the convenience. We're looking to develop aggressively over the new few years," said Waldron.

Competition for consumers' convenience dollars has intensified in Canada, leading retailers to look for "innovative ways to attract a time-starved consumer who is looking for faster, more convenient methods of getting the shopping done," writes the Globe and Mail.

Expanding into nontraditional settings could be a savvy move for convenience stores, say industry analysts.

"In the right facility and the right venue, convenience stores can be very effective and very productive. Wherever you have high traffic, you can generate high volumes of sales"--which will be necessary to be successful in high-rent locations, such as malls and airports, said convenience store consultant Hugh Large.

Waldron said 7-Eleven plans to open more small stores in urban locations as well as in malls and hospitals. These stores are fashioned after the units parent company 7-Eleven Inc. developed for Japan, where space is tight and rent is high.

7-Eleven Canada Making a Move to the Mall | NACS Daily

Locations in Retail Space

Tom Moseman has advice for retailers that put their store displays in high-traffic areas.

Beware the "butt-brush" factor.

INSIDE RETAILING
Badly placed store items can get brushoff

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BECKY YERAK
Published February 17, 2004

Tom Moseman has advice for retailers that put their store displays in high-traffic areas.

Beware the "butt-brush" factor.

Moseman, whose Envirosell Inc. is sort of a feng shui adviser to merchants, banks and fast-food chains, spoke at the National Retail Federation's Retail Advertising Conference, which ended Friday in Chicago.

Among Moseman's tips for customer-pleasing store designs: Think twice about putting point-of-sale displays in busy areas, including where checkout lines creep back.

"We're posterior-sensitive beings," said the senior vice president for the New York behavioral research firm, whose clients include Wal-Mart Stores Inc. and Lowe's Cos.

Invade shoppers' personal space, and they're likely to move on and not buy the product being highlighted. "Understanding the butt-brush factor is extremely important."

For stores that stack jeans, Moseman recommends putting husky sizes on top. It saves the amply proportioned from bending over.

Likewise, petites don't have to scale shelves.

And avoid displaying merchandise close to store entrances. Here's why: Shoppers entering a store need to pass through a "decompression zone," giving them the chance to slow their gait and scope things out. Shoppers who haven't decompressed tend to breeze by goods.

Considering displaying interactive devices? Don't bother unless you want children to use them.

Sinking sales: Spiegel Inc. said sales at its Eddie Bauer stores open at least a year dropped 7 percent in January compared with the same month last year.

The Downers Grove company also said catalog and online sales fell 28 percent, mostly due to a planned reduction in catalog circulation and a change in mailing dates.

Spiegel debuted its revamped semiannual catalog and Web site in late January. The comparable 2003 semiannual catalog was mailed in late December 2002.

Environmental Sears: The U.S. Environmental Protection Agency and the U.S. Department of Energy, which give an "Energy Star" seal of approval to products reducing greenhouse gas emissions, recognized Sears, Roebuck and Co. for selling more environmentally friendly appliances than any other U.S. retailer in 2003.

Of course, Sears sells more major appliances, green or otherwise, than any other retailer.

Sears increased the dollar volume of its sales of Energy Star-qualified appliances, including Kenmore, Frigidaire and Maytag brands, by 30 percent in 2003. The goods account for 60 percent of appliance dollar volume for Sears and 40 percent of unit sales.

The least expensive Kenmore dishwasher is $229; the Energy Star version starts at $279.

Energy Star appliances use a third less energy.

Lowe's was recognized last year.

Bad break: What if you opened a store and then broke your right wrist?

"It's not very easy," said right-hander Elisabeth Brusson, who in November opened French jewelry store Renaissance Ethnique at 2050 N. Halsted St.

Last month Brusson, who moved from her native France eight months ago for her husband's job transfer, took a spill on ice and now has her arm in a cast.

"I've learned to write a little with my left hand," she said.

But arranging product displays is next to impossible. That duty now falls largely to her one employee.

It's Brusson's first stab at entrepreneurship. How are things going? "Not bad," she said. "You have to learn to be patient."

Chicago Tribune | Badly placed store items can get brushoff

Windows Tricks

Simple way to kill Windows Explorer and run dedicated task

I was sent this simple trick of how to kill Windows Explorer.

"Access Start->Shutdown, then while holding CTRL-ALT-SHIFT, left click on CANCEL. This will kill Windows Explorer, leaving a system where you can only access the last application you used. Great for Internet Cafe's and libraries, since you cannot access the TaskBar, StartMenu, Desktop or anything else."

The way back is to use Ctrl-Alt-Del to get up the Task Manager, New Task, type in "Explorer", but with a limited keyboard it might work for you.
Posted by timdaw at February 17, 2004 12:36 PM

KNO - KioskNews.Org: Cheap Trick

Standards research

Sarbanes-Oxley: Road to Compliance

As the initial June deadline for complying with the Sarbanes-Oxley Act nears, publicly traded companies across the United States are scurrying to deploy software packages that will put them in compliance.

Not surprisingly, IT departments view the act as an opportunity to show their impact on the company's bottom line by helping forge tighter links between business processes and technology. However, the compliance process is turning out to be more costly and time-consuming than originally expected, and in many cases, according to at least one study, companies are not turning to their IT departments to manage compliance.

The law, officially known as the Public Company Accounting Reform and Investor Protection Act and enacted in July 2002, requires companies to make new disclosures on internal controls, ethics codes and the makeup of their audit committees on annual reports.

The act is better known by its nickname, after its co-sponsors, Sen. Paul Sarbanes, D-Md., and Rep. Michael Oxley, R-Ohio, who chair the House-Senate conference committee meeting on corporate accounting reform. The initial phase of the act focuses on Section 404, which requires companies to perform a self-assessment of risks for business processes that affect financial reporting.

Public companies with market capitalizations of $75 million or more must be in compliance with Section 404 for their fiscal year ending on or after June 15. Smaller companies have until the fiscal year ending on or after April 15, 2005, to comply.

But according to several large companies embroiled in the process, compliance isn't turning out to be quick or cheap.

Tom Martin, audit operations manager for Boise Cascade Corp., in Boise, Idaho, estimates that his company will spend about $7 million a year on Sarbanes-Oxley compliance, including 20,000 auditor-hours this year, after recording 17,000 auditor-hours on Sarbanes-Oxley compliance last year.

"We should be in compliance by the end of the year," Martin said. "Then we'll have to do it all again next year."

Boise Cascade began an implementation of Movaris Inc.'s Certainty product late last year to build a repository of accounting controls that share the same framework across the company's multiple divisions.

"We have to have a description of our controls and evaluate our controls on an ongoing basis and be sure they're in place and work," Martin said. "We needed something that could be accessible throughout the U.S. and the world. And we knew we needed a Web-based system, something that was very easy to use, since folks would only be doing it once a year."

To Martin, Sarbanes-Oxley compliance is a five-phase project: planning; scoping, which is determining what's material to the company and needs to be documented; looking for information gaps; and implementation, evaluation and monitoring.

Boise Cascade is now in the implementation, evaluation and monitoring phase and expects to be audit-ready by Sept. 30, Martin said. The company is doing a pilot project at its distribution centers, then will roll out Certainty to its other business units.

"The product has enabled us to look at our controls environment in one package," Martin said. "We knew our controls were similar, but not the same, so we look for opportunities to standardize the process."

Forming a central repository of documented controls for multiple business units is also the task at hand at Volt Information Sciences Inc. The New York-based company needs uniform, complete documenting of controls, business processes and risks, according to its chief financial officer and senior vice president, James Groberg.

"The basic task may not be that difficult, but it's extraordinarily difficult if you have many business units," said Groberg. "We need to be able to get at [the controls] quickly in a format the business units themselves can understand. We want an audit trail."

Volt is using OpenPages Inc.'s Sarbanes-Oxley Express product to build its controls repository. Groberg agreed that the process was expensive but described it as a "wake-up call," one that his company could benefit from in the long run.

"[Section] 404 [compliance] is extremely difficult and very expensive, but in the long run, it's a benefit for the management of the company," Groberg said. "We'll be more certain that we have the internal controls in place that we need to have so we'll avoid the costs of finding errors."

Having the right financial controls in place is nothing new at Volt and most other companies, Groberg said.

"We've always had these controls in place," he said. "It's a question of organizing them properly so that we have a better monitoring overview from the management standpoint and can prove to the public that we have the controls in place that can prevent a material misstatement."

Sarbanes-Oxley compliance requires more than just a new documentation system.

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John Imperato, vice president of finance at Viasys Health Care Inc., saw compliance as an opportunity to get a standardized financial reporting system in place at his company's multiple business units. Until recently, each unit had its own reporting system, with nonstandard processes and consolidations done manually by e-mailing Microsoft Corp.'s Excel spreadsheets back and forth.

Viasys is now in the final stages of implementing Cartesis Inc.'s Magnitude financial reporting software companywide for internal and external reporting.

"The same general product categories [at different business units] did not update together," said Imperato. "Every one of the companies had their own reporting systems."

Keeping up with Sarbanes-Oxley

Five steps to compliance

# Planning Form compliance committee, select software to assist in compliance process

# Scoping Determine what information needs to be documented and is material to company

# Documentation Document business processes and controls in place to ensure information is accurate

# Gap analysis Identify and remediate inadequate controls

# Implementation, evaluation and monitoring of controls Document and update controls as needed, then turn them over to audit team, which evaluates depth and effectiveness of controls; develop ongoing process for monitoring controls

With Magnitude deployed throughout the company, all accounting systems update at the same time and link to a central consolidation system, Imperato said. Magnitude also allows Viasys to drill down into reports to get general ledger and sales information on specific products.

"Compliance was a big issue, but there were management issues as well," Imperato said. "Now we'll have a lot more confidence that our information and numbers are complete and accurate."

At Viasys and other companies, Sarbanes-Oxley compliance is spearheaded by and is the ultimate responsibility of the finance department. But as the examples illustrate, compliance ties into typical IT department challenges, such as application and data integration, particularly when different divisions and companies are involved

IT can't shy away from playing an important role in compliance. Yet a recent Hackett Group survey indicates that more than 50 percent of public companies aren't getting IT involved in the process.

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"IT can be a huge, huge enabler," said Scott Holland, senior director at the Hackett Group, an Answerthink Inc. company. "Technology and processes need to be in the same room. One cannot be successful without the other."

Hackett analyst David Oppenheim said Sarbanes-Oxley could make the public company CIO a "superstar."

"Having an understanding of what different technologies are in an organization and how they're connected to each other is critical to the analysis asso