*Kiosks Are Part of Kmart’s Multichannel Plans

BlueLight.com has installed Web kiosks in more than half of Kmart Corp. stores nationwide as part of a plan to align with its mass merchandiser parent.

More than 3,500 BlueLight shopping kiosks are in 1,100 Kmart stores, offering nearly 200,000 products for sale – twice the inventory in stores. The total effort so far cost $2 million for BlueLight, San Francisco.

“In our case, it was a relatively low investment for us to do what we’ve done because we had a pre-existing system that we were retrofitting,” said Steve Chaffin, director of in-store marketing at BlueLight, which is 60 percent owned by Kmart and the rest by Martha Stewart Living Omnimedia Inc. and Softbank Venture Capital.

The kiosks took the place of Kmart-installed personal computers that served as an intranet for employees. That intranet listed 1,000 products that couldn’t be stocked at a regular Kmart store. BlueLight made the computers able to access the Web, and it tacked on its own site. The only expense was on wiring and adding desks.

The kiosks can be found at the service desk and electronics and sporting goods departments of Kmart stores. The kiosks connect to bluelight.com, which accepts and fulfills all orders. Products bought via these kiosks can be returned at any Kmart store, a functionality that further marries the retail chain’s online and offline operations.

Plans call for installation by next year of BlueLight kiosks in all Kmart stores nationwide, though at a higher cost because the remaining stores lack intranet stations. Kmart has 2,106 stores and is the country’s No. 2 discount retailer after Wal-Mart Stores Inc.

“It adds a new distribution channel,” Chaffin said, “more touch -points for the consumer and creates awareness, both among consumers and Kmart’s employees. Kmart has 275,000 employees.”

These employees will be educated about the kiosks and how to direct consumers there if the items are out of stock in the bricks-and-mortar store.

A sticky point, however, is the pricing structure.

“That is tricky,” Chaffin said. “Where possible, we try to align ourselves with the store pricing. In some cases, we just cannot and it’s generally handled. If the consumer’s upset, it’s handled on a store-by-store, case-by-case situation. If it’s more expensive than the Web site and if the consumer’s upset, the store will issue them a credit for the difference.”

Kmart’s kiosk effort arguably is one of the most ambitious undertaken by any major retailer nationwide.

While Lids, Staples, REI, Wal-Mart, Service Merchandise, Borders, Gap and other retailers have launched in-store Web kiosks, none match the national reach of Kmart.

Presence in Kmart stores will give BlueLight access to the 30 million shoppers who walk in each week to shop. But the kiosks also benefit Kmart.

“It helps them to capture potential lost sales and generate incremental sales and overall really satisfy consumer needs,” Chaffin said. “In the future, it could provide operational efficiencies in terms of certain functions that might be handled by the kiosk through a self-service mechanism.”

Indeed, Web kiosks are now on the minds of many retailers.

Market researcher Computer Economics Inc., Carlsbad, CA, estimated last year there would be 298,000 interactive kiosks installed in stores nationwide and 584,000 installed worldwide. By 2004, the United States will have 785,000 such kiosks; an estimated 1.7 million will exist worldwide.

“In general, there’s a lot of activity in this space,” Chaffin said. “A lot of people have been playing with this idea.”

But he agreed that the success of in-store Web kiosks depended on attitudinal changes, both among consumers and employees.

In-store kiosks failed for Ames Department Stores. Kiosks in 20 stores over three months yielded only one customer a day. The typical Ames customer did not have a PC or didn’t use one so the technology was wasted.

“It’s very difficult,” Chaffin said. “There are challenges around marketing to consumers and understanding the behavioral things that go on when people are shopping in the physical store to get them to go on to something which is a virtual world, an interactive catalog. That’s not easy, but a lot of people see potential.”

Plus, there’s the issue of shopping and buying on the Web, itself a late 1990s phenomenon.

“This is one of those adoption things,” Chaffin said. “E-commerce is very new. So it’s really coming into the mainstream. As it moves into the mainstream at home, the adoption rate within a store eventually will go up.”

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