787: Mitch Lowe | Lessons in Disruption Part Two

Kiosk Deployment

Deploying Redbox kiosks nationwide was a monumental task, requiring meticulous planning and data analysis. Mitch Lowe explains that the company opened a new kiosk every hour, 24/7, for three years, totaling over 8,200 kiosks annually 1. This rapid expansion necessitated precise calculations to ensure each location had the right inventory, balancing popular titles like "John Wick Two" to meet demand without overstocking 1. The challenge was compounded by the need to test various machine designs and configurations to optimize user experience and efficiency 1.

We were manufacturing them, we were shipping them, installing, and then manning them, you know, operating them all internally.

--- Mitch Lowe

The strategy also included innovative ideas like the Netflix Express project, which tested kiosks in grocery stores to facilitate easier DVD returns and rentals, proving successful in Las Vegas 2.

   

Fraud Prevention

Fraud prevention was a significant hurdle for Redbox, with losses exceeding $150 million annually due to scams involving prepaid gift cards. Mitch Lowe describes how fraudsters exploited the system by using gift cards to rent DVDs and games, which they never returned 3. To combat this, Redbox developed a risk assessment system that evaluated rental patterns, such as transactions occurring between midnight and 4 a.m., to identify potential fraudsters 4.

We identified not looking at the bin number, but what are the characteristics of a customer that has a high likelihood of ripping us off.

--- Mitch Lowe

This system, although effective, sometimes mistakenly flagged legitimate customers, but it successfully reduced fraud losses by half 4.

   

Inventory Optimization

Optimizing inventory for Redbox kiosks involved complex logistics and predictive analytics. Mitch Lowe explains that 43% of movies were rented at one location and returned to another, requiring sophisticated models to predict inventory needs and movements 5. The placement of kiosks was strategically planned, with locations on the right side of the road capturing morning returns and those on the left facilitating evening rentals 6.

Every time we add a location on the way to work that was on the right, that would get the morning returns.

--- Mitch Lowe

This strategic placement, combined with a pricing model that charged a dollar per night, maximized the return on investment by ensuring high turnover and utilization of inventory 6.