If you’ve seen one at your local US grocery store, you know that “vending machine” is an inadequate description for Redbox, the sleek, red (of course) kiosks that dispense new-release DVDs and video games at the swipe of a credit card.
“Automated retail sounds better,” suggests Gregg Kaplan (MBA 1997). Recruited by McDonald’s to help start new businesses within the fast-food giant, in 2002 Kaplan oversaw the installation of six kiosks in restaurants in the Washington, DC area that offered a number of convenience items, including DVD rentals. By 2005, McDonald’s had allowed Kaplan to spin off Redbox and seek outside investors for the business (which came to focus exclusively on DVD rentals); in 2009, McDonald’s sold its share to Coinstar, an early investor that now owns a controlling stake of the company. (Formerly CEO of Redbox, Kaplan now serves as interim president of Redbox and president and COO of Coinstar, Redbox’s parent company.)
“Value, simplicity, and convenience,” is how Kaplan explains Redbox’s success, citing its $1.20 price point, a growing consumer comfort level with automatic credit-card transactions, and, for those frustrated by slow downloads, the low-tech ease of popping a DVD in the player. With more than 30,000 US locations, a planned expansion into Canada, and a “rent and return anywhere” policy, Kaplan expects Redbox’s expansion to continue, albeit at a somewhat slower rate than the 300 percent annual growth it saw from 2002 to 2007. (Redbox lets would-be renters search locations and reserve titles online.)
With a background in high-growth start-ups, Kaplan is already involved in a number of new ventures in the automated retail realm, including a partnership with Starbucks/Seattle’s Best. “This is not a coffee vending machine,” he clarifies. “These are real beans, being ground to order for a high quality cup of coffee priced at $1.” There are currently about 50 coffee machines on the market, with 500 expected by year’s end. Another venture, ecoATM, is a self-service kiosk system that evaluates and buys back used cell phones and MP3 players from consumers for cash. Found currently in southern California, Kaplan expects this concept to roll out as well.
Kaplan recently returned to HBS for reunions, where he attended a presentation by his former LEAD professor, now Dean Nitin Nohria. “He is a super smart, humble, and thoughtful man,” he says. “I was excited to hear what he was going to say about new developments at the School, and he didn’t disappoint.”