Corner The Kiosk Market

Look out, bank tellers. ATMs (automated teller machines) are becoming the banking interface of choice. Some analysts project they will soon beat branch offices as the highest-volume banking outlet in the country, with more than 13 billion transactions processed annually. This is music to the ears of John Zurborg, general manager of Skilcraft Kiosk Systems. Skilcraft is a study on a company that has evolved with changing market opportunities. It started out making stainless steel sink basins, then shifted its focus to manufacturing security enclosures for the banking industry when that market opened up. Its work took a hard turn towards the manufacturing of ATM and related kiosks a few years ago.

When it decided to tap into the secured kiosk industry, the company drew on its years of experience making heavy-duty night depository boxes and bank vaults for companies like Diebold and Hamilton Safe. While automated teller machines had been a mainstay at banks for some time, their presence was, and remains, in demand in retail and hospitality locations. But to get a piece of the action, the company needed more knowledge than how to shape steel into an unbreakable frame. In 1999, President Ron Anderson hired Zurborg, an electrical engineer with a business background, to help make it happen.

Why Kiosks?
"We wanted to build up a portion of the business that would utilize our banking experience. We recognized the retail ATM marketplace as that opportunity," says Zurborg. While it doesn't want to typecast itself as an ATM company, the financial market remains Skilcraft's strength, specifically in building low-end retail ATMs for gas station, bar, drug, and convenience store environments. "I think we have a leg up on our competition as far as providing secure kiosk systems, that is, kiosk applications where you have to secure money and valuable information. You have to design systems that are tough enough for a public environment," he says.

Zurborg estimates that 10,000 to 15,000 ATMs were installed last year. While some of the major players might call it a saturated market, he says otherwise. "At our competitor's price point, they can't get into the smaller organizations. We're able to offer a price point that allows us to get into the lower end of the retail spectrum," he says. Depending greatly on form and functionality, kiosks can cost anywhere from $1,000 for low-end applications such as ATMs and bridal registries to upwards of $50,000 for multiterminal, multiservice stations. Typically, small ATM kiosks like those found in convenience stores retail for less than $3,000. "The low-end market might have hit a plateau for some, but we're still anticipating growth in 2002," Zurborg says.

The company further defines itself by specializing in low- to medium-volume installations (fewer than 500). Though its facilities are capable of handling high-volume, Zurborg is cautious about the perception of high-volume dealers. "I've had a lot of people tell me that the service they get is minimal with the leading kiosk companies unless you have high-volume with them," he says; and for now, he's using that perception to his advantage in the low- to medium-volume market space.

How Kiosks Generate Profit
In the financial services market, the expense of a kiosk is justified by the transaction fees and marketing program revenue it generates. Gaining face time with franchisers and conveying the revenue opportunities that money dispensing kiosks present is the most direct approach Skilcraft sales representatives take. In traditional ATM environments, end users can be charged to make withdrawals from their machines, resulting in a direct cash return. Convenience store ATM installations offer a logical venue for promoting in-store specials, or even electronic advertising space that the store can sell. Zurborg says that sales efforts are best concentrated where opportunities for multiple installations are present, as opposed to one- and two-store businesses.

Taking the evolution of the ATM a step further, the company is focusing on hybrid kiosk opportunities that offer multiple services and, in turn, offer multiple revenue opportunities to end users. "This kiosk goes outside the realm of your traditional financial market where it's just a straight ATM. The machine handles online banking functions, has the ability to file for a loan, transfer funds, buy stocks, and more," says Zurborg. So, on top of transaction fees for withdrawals, users can be charged dial-up fees and trading fees, for instance. According to Zurborg, the opportunity here has been with credit unions and other small banking institutions. "While I think all banks are heading this way, the real growth is in the smaller market segment, because it needs to match the services of the bigger banks, but with less manpower," he says.

Beyond retail ATMs, Skilcraft finds success selling kiosks in the travel and tourism industry. In airports, hotels, rest stops, and malls, the company installs kiosks that provide free dining and entertainment information to travelers. Its experience in this market has led to the creation of another hybrid kiosk, which incorporates an ATM on one side and tourism information on the other. "On one side, tourists can figure out what they want to spend their money on. On the other, they can withdraw the money to spend," says Zurborg. Besides advertising and media companies, the company has found success selling these units to local governments and chambers of commerce.

Find A Growth Partner
Skilcraft has a unique relationship with POS and AIDC (automatic identification and data capture) distributor BlueStar. It purchases hardware from BlueStar to build kiosks, but it also builds a kiosk for BlueStar, which the distributor markets as its own basic system. This kiosk is customizable for POS, self-service, information, and industrial applications, which strengthens Skilcraft's case as it looks for kiosk applications beyond ATMs. Zurborg is also often consulted when the distributor needs a solution that pushes the envelope. "BlueStar has an OEM group that I work with. When they come across custom kiosk opportunities, where customers are interested in having something that looks and feels a certain way or does something particular that they wouldn't get in a standard product, they'll call me," he says. Skilcraft representatives have even attended tradeshows with the distributor to promote its products.

Broach New Markets, But Keep The Old
With a huge investment in an 80,000-square-foot plant full of lasers, press brakes, and punching turrets that cut and shape metal, the company isn't likely to neglect its manufacturing roots any time soon. "The goal is to build ourselves into a niche where we can make and sell durable public service-type kiosk systems that integrate new technologies," Zurborg maintains. Skilcraft is looking to implement biometric fingerprint scanners in addition to its card-swipe mechanisms for ID verification in the financial market, as well as for security purposes in online kiosk environments. "Our goal right now is to find POS kiosk opportunities that match our history of building with metal, combined with our new focus on integrating the latest electronic technologies."

Zurborg envisions a day when kiosks will be the go-to disseminators of information for the general public. "No doubt the day will come when every downtown building has a kiosk in its lobby, where you'll be able to get whatever information you want." With that kind of mindset and the number of ATM kiosks in the United States near 300,000 and climbing, there's no reason orders will quit lining up for Skilcraft.