Is Coinstar (CSTR - News) positioned to become the Amazon.com (AMZN - News) of kiosks
Coinstar on Tuesday said it will roll out 500 "Rubi" kiosks by the end of this year, selling Starbucks' (SBUX - News) Seattle's Best branded coffee. The kiosk company plans to station as many as 15,000 of the machines, which will sell gourmet coffee starting at $1 a cup, at airports, grocery stores and mall outlets over the next few years.
The pact expands Coinstar's reach into a third arena after it established itself in two core markets, coin-counting machines and Redbox DVD rental kiosks. Its bright red boxes dominate the sector, helping drive Blockbuster into bankruptcy in 2010, and slicing off a big chunk of DVD-by-mail and online video streamer Netflix's (NFLX - News) business.
Leveraging Retail Model Like Amazon, which started as a small online bookseller and leveraged its e-commerce expertise to become a global Internet retail giant, Coinstar wants to expand its kiosks into a host of product lines.
"More than 1 billion people a week walk by our kiosks," Coinstar Chief Financial Officer Scott Di Valerio told IBD.
"We look at ourselves and say there's no reason we can't double the size of the company in four to five years. Our New Ventures business will contribute a steady pipeline of new businesses," Di Valerio said.
The opportunity is huge. IHL Group in a 2011 study estimated self-service kiosk transaction revenue is growing 10% a year, and will rise to about $1.14 trillion by 2015, up from $715 billion in 2010.
New Ventures is the umbrella name for Coinstar's program to expand use of its kiosks to other industries, and become a giant retailer. It has eight projects at various stages of rollout. Di Valerio expects to launch one or two more in the coming year.
For example, Coinstar is testing 55 "ecoATM" kiosks in front of some stores. The kiosks pay cash for old cell phones. Its nine "Gizmo" kiosks sell quality consumer electronics including video game consoles, tablets and Apple (AAPL - News) iPods. And it's testing 14 kiosks that let consumers trade in unused gift cards that they've been given for cash.
"The New Ventures push in general will be helpful in getting people away from the concept that this is a (DVD rental) movie company," said analyst Steven Dyer at Craig-Hallum. "It's not. It's a direct-to-retail kiosk company. It just so happened that Redbox was a monster success.
B. Riley analyst Eric Wold says Coinstar "has great expertise in products for value-conscious consumers.
Expanding on that expertise, Coinstar last month announced a deal to put Redbox kiosks in front of Family Dollar Stores (FDO - News), and has a similar pact with discounter Dollar General (DG - News).
The company also recently partnered with eBay's (EBAY - News) Paypal online bill paying service, to allow consumers to insert coins and cash into Coinstar machines to load up Paypal accounts, or withdraw cash from them.
"Their coin-counting business will get new growth as they focus on Paypal operations and, in effect, set up a money transfer operation," Wold said.
Coinstar on April 26 said Q1 earnings tripled to $1.39 a share. Revenue jumped 34% vs. a year earlier to $568.2 million, the second straight quarter of accelerating growth. Redbox revenue grew 38.8% to $502.9 million, about 89% of the total.
