Stores Magazine - October 2007 - (Page 52) WORTH WATCHING / KIOSKS Stand (Alone) and Deliver Redbox DVD kiosks finding their niche BY CRAIG GUILLOT K iosks may be one of the purest and simplest forms of retailing. With new technological advancements and the advent of high-speed Internet connectivity as a communications tool, a wide variety of products and services can be bought and sold at machines. Redbox Automated Retail unveiled a DVD rental kiosk in select McDonald’s restaurants in 2005. Redbox will have machines in more than 6,000 locations by the end of this year; the company recently surpassed 38 million rentals from four million unique customers and projects a high level of continued growth. Redbox is collaborating with Solectron to design and build its kiosks and expects to be situated in more than 20,000 locations worldwide by 2011. One of the major challenges in automation and kiosks is the design and production of the technology. Franz Kuehnrich, vice president of engineering for Redbox, says a kiosk is not just a point-of-sale device: it is a customer service rep, cash register and showroom all wrapped in one. When one element of a kiosk fails or doesn’t meet customer expectations, the entire location fails. When Redbox approached Solectron 52 STORES / OCTOBER 2007 about designing the kiosks, it needed an optimized supply chain that would produce just-in-time units to meet an aggressive marketing timeline. Solectron would have to manage all technical aspects of the kiosks, from system design through manufacturing, software development, integration and regulatory and ADAcompliance. Units would need to be efficient, cost-effective and capable of consistently delivering high levels of service. “We needed a manufacturer that would be able to grow [with us] without upsetting their internal infrastructure,” Kuehnrich says. Interchangeable parts Modeled after a Toyota production system, Solectron’s system offers manufacturing flexibility and involves crosstraining employees to work across multiple products. With the ability to scale back and add or move employees as needed, the company can build units as quickly as the orders come in, says director of communications Corey Olfert. “For our customers like Redbox, their value comes through software, service or some unique retail solution, where the hardware is really not a differentiator,” says Solectron vice president Phil Metz. Solectron produces 120 units per week, which are stored in warehouses until shipped. Redbox communicates the shipment needs on a regular basis and Solectron’s supply chain manages the process to meet demand using level-loading and other principles. Since the beginning, Solectron has seen reduction in material costs of up to 25 percent; machine-related problems resulting in field calls are a mere 0.25 percent. Redbox, a joint venture of Coinstar and McDonald’s Ventures, relies heavily upon placement in grocery stores and competes not just on convenience, but on savings. New releases can be rented in the machines for $1, compared to $4 at major chains. Redbox customers need no membership and can quickly rent and return a DVD at any Redbox kiosk. Competitive advantage “It’s an infrastructure that allows us to tap into an infinite amount of points and control them — essentially to drive down operational costs,” Kuehnrich says. “We can pass those savings on to the customer and use it as a competitive advantage.” Redbox movies are bought from distributors, who pack them into cases and ship them out to each region. DVDs are loaded and taken off of the machine by a quick-load module with a capacity of StORES approximately 500 DVDs. Craig Guillot is a New Orleans-based writer and photographer. WWW.STORES.ORG http://WWW.STORES.ORG
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.