The Secret to a Successful Kiosk? Location, Location, Location

The Motley Fool is on the road in Seattle! Recently, we visited Coinstar -- now officially renamed Outerwall  (NASDAQ: OUTR  ) -- to speak with CFO-turned-CEO Scott Di Valerio about the 22-year-old company's well-known coin-cashing machines, as well as its more recent acquisition of Redbox, and future initiatives to expand into other aspects of the automated retail market.

Coinstar works with most of the leading grocery and mass merchandise chains. In this video segment Scott discusses which types of kiosks are best suited to which channels, and who the company would really like to work with. The full version of the interview can be watched here.

A full transcript follows the video.

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Austin Smith: You guys, it seems, have retail relationships with everybody. You've got Safeway, Wal-Mart, CVS, Walgreen's I think we talked about earlier. I'm sure they're all great partners, but what's your favorite retail partner and why?

Is there one that just provides really great entry points for you, that you really enjoy working with, or do you see a lot of use from your machines at certain locations?

Scott Di Valerio: It really depends on the business. For the coin business, what we've found is grocery and mass merch is the best way to go. It has enough traffic and has a high enough traffic pace to where people come into the stores and utilize machines and those kinds of things. The drug and convenience channel really don't work for the coin business.

We look at it from that perspective. A new, emerging market for us -- channel for us, I should say -- for the coin business is the financial institution business. We just put 350 kiosks in, in TD Bank Canada, and are processing points for TD Bank, and we're looking to expand.

We have a few machines in the U.S. today in the banking or financial institution channel and we're looking to expand that out as we go out.

It really depends on business from a channel perspective. When we look at Redbox, for example, we're in the grocery channel, we're in the mass merch channel, we're in convenience and we're in drug, but we have the machines located at different places.

For convenience and drug, we're primarily outdoors. What that allows us to do is be open for 24 hours a day, it allows customers to see the machine, and it gets the right amount of traffic, both for us and as well for our retailers. And, again, it utilizes space that's very underutilized and turns it into very profitable space as well.

We really do focus based on the channel. If I look at some of our new businesses like Rubi, the grocery channel will be a very good channel for us. The mass merch channel will be a very good channel for us as well. I think we really do try to take a look at it based on the channels, as opposed to an individual retailer that's out there.

Austin: It's the right channel, the right placement, and the right machine is really what dictates it.

Di Valerio: Exactly.

Austin: Who would be the best retail partner that you don't already have? Who do you really want to become a partner with, that you haven't already tied the knot?

Di Valerio: We're very fortunate in the Redbox business, for example, that we have the top 10 national grocery chains under our banners. We have Wal-Mart, which is the largest mass merch center, as well as CVS and Walgreen's in the drug channel, and 7-Eleven and Circle K in convenience, so we have very, very strong channel space there.

With the coin business, we have nine of the 10 grocery chains under the coin banner, and Wal-Mart as well in the mass merch, so we have very strong relationships, as you've mentioned, across there. Certainly there are a couple on the coin side.

There's one grocery chain that we don't have, which we would love to bring up underneath the banner, which is Publix. Certainly, we always are looking and talking to Target as another large mass merch, to see if there are some opportunities with them for some of our businesses on a general basis.


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