Yes, all V4S Mobile Users must necessarily be Contacts in your Salesforce Org.  Before creating V4S Mobile Users add all Users as Contacts. Then when you create V4S Mobile Users, link them to the appropriate Contact records. 

Also, each contact should have his/her own unique email ID.  We use the email Id to send an  OTP when the User has forgotten his/her V4S Kiosk/ Personal password.