Interview with Alaric Bates of Celestica
You Want It, You Got It
KIOSK EUROPE: What is Celestica’s background and how did it get involved in the kiosk market?
ALARIC BATES: Celestica is an electronics manufacturing service company which operates in multiple locations around the world, with a strong focus on emerging markets in Asia, Mexico, and Eastern Europe. Kiosks are a part of our core industrial strategy.
Where kiosks are concerned, over the last few years the company has reengineered itself. We recognised that in traditional core EMS companies, people invariably end up getting into discussions where everything is related to cost. As consumers and OEMs want cost driven out, you end up in a spiral which takes the margin of the business and ultimately turns the shareholders away. So we have developed a business model where we can get engaged in design and in helping the customer to satisfy a market need. Companies bring their kiosk designs to us, and we offer a service which allows customers to focus on marketing and defining their USP while letting us worry about manufacturing the product, sourcing materials, and getting it to market.
KE: What do you offer in terms of self-service?
AB: I don’t like to say we have a standard self-service offering, because we don’t. When a customer comes to us, we sit down with them and try to understand what their business challenges are.
Companies can be constrained by design resources, prototyping, logistics etc. Celestica is able to take concepts, prototypes or early face production models and apply our engineering background and our strength in design to them, and enable the customer to get their product to market more quickly and more efficiently and therefore improve their revenue margins.
A kiosk needs kerb appeal. It needs to attract the customer, particularly if it’s a retail kiosk and the pricing model is based on cash throughput. We don’t profess to be experts in industrial design and ergonomics, but we can take attractive design and really turn them into something that’s manufacturable.
KE: So how does this service work?
AB: An OEM or retail kiosk company can come to us and say “I’ve just designed this kiosk, which goes to this application. Can you enable me to get it to market?”
We will take their design and source all the materials that are needed to be able to manufacture that product: the plastics, the sheet metal, the screens, the IT equipment etc. If a customer wants to take some of the cost out of their design, we can bring in our experts and use our leverage to find ways of doing this.
We will then manufacture the kiosk to whatever level of requirement that the customer asks for. We have invested heavily in our centres of excellence and can produce both simple kiosks and highly complex transactional systems. Some OEMs are happy for us to build, configure and ship direct, while others still like to have a last touch. Then, we will deliver the finished product. Should the product require upgrading or recycling in the future, we offer a service where we can take back products into Celestica, even if they have not been manufactured by us. It’s a true cradle to grave service based on customers’ designs.
KE: Which vertical markets are you particularly targeting?
AB: If I look at transactional systems, our biggest markets are in the financial sector and the photokiosk market. We’re also playing around with the cash management market as well.
However, if you read analysts’ reports, the retail kiosk market is probably the fastest growing market in the transactional systems sector. We are consciously working to penetrate that market and help customers within it.
We are trying hard to understand where the technology is going to go in this retail space. Today, there is a smorgasbord of offerings on the market and everybody seems to have a unique solution. I think we’re going to see a level of consolidation of these solutions to a point where there is a base core which will be built on for certain levels of applications.
KE: What do you see as being the major benefits of self-service in today’s marketplace?
AB: For me there are two major points. The society we live in today is starting to demand instant gratification. Gone is the traditional model where people will happily queue 17 deep for an airline check-in. Now, check in can be done at a kiosk; it’s quick, you can get through, you can clear security, and you can go and relax and enjoy your flight. So by promoting self service, we satisfy that human need for instant gratification.
In addition, as well as the obvious staff reduction or redeployment opportunities arising from self-service, there are clear advantages in speedily getting a consumer through what is, for both the consumer and the airline, effectively a non-value add transaction, and into an environment where they can actually spend their own hard earned money. If you can get 100 people through the boarding pass generation in the time it takes to get 10 people through a conventional check in, those people are more likely to be in the departure lounge, and more likely to be spending their dollars in the duty free, in the restaurants and in the bars.
KE: How do you see the European kiosk market developing?
AB: I think there is a division between the ‘developed’ markets in Western Europe, and the emerging markets in the east. In Western Europe we are seeing a shift towards different applications of self-service. For example, you can go into a cosmetics store – not that I do it particularly often! – and as opposed to there being a rack of girls selling different products, you may be able to go to a machine which is sponsored by a major cosmetics brand and from that choose a high value and high revenue product. The machine might even be able to identify your skin tone and find the best product to suit you. This is a typical example of greater added value being generated from self-service.
In the emerging markets of the East, we are seeing the introduction of what we in the West now regard as the de facto standard, for example, the airline check-in terminals. As airports as an infrastructure grow, these technologies are now being implemented from the beginning as standard. So you have a kind of step function, with the high value add applications being installed in the western side of Europe, and more of the basic self service being implemented in the east. I think this will change with time, and the East will start to come up the value chain very much like we’ve seen Western Europe do. But at the moment we have almost a two-tiered system.
KE: So is there still room for growth in the west?
AB: Yes, I think there is. In the west, people are starting to use kiosks in far more creative ways, in an effort to increase the value for the customer. Designers are therefore starting to look at more tailored solutions. I read an article a couple of days ago about kiosks in banking and the importance of individualising the user experience for every customer. So if I went into a bank and used a kiosk it wouldn’t be showing me generic advertising, it would be displaying specific advertising based on my spend patterns and so on. I think we’re starting to see the application of self service really move to a new level, and a deeper level in terms of customer engagement. In the east I think we’re probably still in the transactional phase. Nevertheless, both markets present growth opportunities; they are just different growth opportunities.
KE: How does the European marketplace compare to global markets, particularly the emerging markets in Asia and South America?
AB: Asia, particularly Japan, is very strong when it comes to photokiosks. We’re also seeing strong rollout of kiosks in places like India. These tend to be at the lower transactional end of the market – rail tickets, prepayment cards, sim cards etc. It’s a similar model to what we’re seeing in Europe. You’ve got developed nations that are reaching into that MVA (market value added) curve and developing nations that are looking at building the right infrastructure, and at including in that infrastructure the self-service technologies that exist today.
KE: Looking into 2011, how do you see the market developing?
AB: We are going to see the transactional system market, typically cash handling and cash sorting, continue to grow. Reports I’ve read, and I’m sure your readers will have read as well, forecast between 3 and 5% growth. So, not a stagnant market but not a market that’s positively booming, either.
At the same time, I think we will see an explosion in growth of retail kiosks. We are still very much riding a wave of not-quite-novelty, getting the new types of products and new types of kiosks into the public domain. We are in a phase where some of the ideas will work and some will fail. I think we will see an explosion of demand in 2011 and into 2012. We will also probably start to see some level of consolidation; so, as opposed to walking into a high street chemist and seeing 17 different types of kiosk which would allow you to select different products, there will be one or two. Retailers will start saying: “I don’t want 6 different styles of kiosk, I want one, and it has to be branded with my name and it needs to have multifunctionality and be able to do x and y.”
As far as Celestica is concerned, while we like to think we have a good understanding of what’s going on out there, ultimately we will be directed by what our customers tell us they want.
Tuesday, January 25, 2011