Beyond Redbox

Coinstar testing other kiosk concepts, including coffee, cellphone recylcing

BELLEVUE, Wash. -- Coinstar, which has become a force in self-service retailing through the rise of Redbox, its movie rental subsidiary, hopes to do the same with vending machine coffee and other kiosk concepts. When a visitor to its headquarters in Bellevue, Wash., swipes a credit card in the coffee machine in the cafeteria, the machine grinds a batch of beans and serves a $1 cup of fresh coffee that "tastes pretty close to a cup from any upscale coffee bar," said a report in the New York Times.

The coffee kiosks are the first of what Coinstar expects to be a wave of new vending machines from the company, according to the report. It is testing the machines in locations around the country and expects to have about 500 installed by the end of the year.

Paul Davis, CEO of Coinstar, told the newspaper that he envisions the 3-foot-by-3-foot kiosks going into supermarkets, gas stations and office buildings, though he does not see a need for them in retail locations that already have a small Starbucks or some other coffee chain. Coinstar joined with Starbucks on the kiosks, which are labeled with the company's Seattle's Best Coffee brand.

Michael Pachter, an analyst at Wedbush Securities, said he believed the coffee kiosks represented a meaningful growth market for Coinstar. "The retailer relationship is their biggest competitive advantage," he told the paper. "If every place has a coin box, they know how to get another 12 square feet."

Another kiosk concept Coinstar is experimenting with in about eight retail locations in Texas and California is called Gizmo, through which it sells used video game consoles, iPads and other electronics, the report said. Many of the items in the kiosks are refurbished by a manufacturer or another party with prices that are up to half off retail.

Other concepts it is testing include ecoATM, a kiosk created by a startup Coinstar invested in that allows consumers to trade in old cellphones and other electronics for cash. The machine uses a camera to evaluate the condition of the devices. Coinstar said the traded-in phones often end up being sold in developing countries, a more environmentally friendly outcome than going to landfills.

Davis said Coinstar had about eight or nine kiosk ideas in various stages of development, part of an effort it established about 18 months ago. It tests concepts in public locations, often in primitive form and with employees nearby to observe how customers are interacting with them; the early prototypes of Gizmo, for example, were made out of cardboard.

"What we try to do is plant a lot of seeds," Davis said. "We know the math says only about half are going to work."

The company will need new kiosk successes as physical movie rentals, its biggest business, face an uncertain future, said the Times. About 85% of Coinstar's $1.85 billion in revenue last year was from Redbox. The number of movies rented in DVD and Blu-ray formats last year in the United States fell by 11% from the year before, as chains like Blockbuster closed more bricks-and-mortar stores and viewers switched to online movie watching, according to the report, citing NPD Group, a research firm in Port Washington, N.Y.