VM+SD In-Store Digital Media Survey

The complexity of using in-store digital media (ISDM) – confusion over who's in control, high price tags and justifying those price tags – has been overshadowing the promised potential of these dynamic signage systems from the start. That may explain why retailers have been reluctant to try it and why they have to defend the cost to get approval to bring those LCDs and plasma screens into their stores.

But as VM+SD's first annual in-store digital media survey suggests, a growing number of retailers are working to overcome these issues. According to our survey, a third of the respondents said they plan to implement electronic digital signage technology in the next six months. That may not seem like a huge trend yet, but considering the cost of entry, it's a move in the right direction.

While the technology is highly advanced, methods to measure the ROI associated with these systems are still primitive. According to our survey, most respondents use increased sales as the primary measurement for ROI, despite the fact that so many other variables affect sales tallies. So some retailers have told us they conduct controlled sales studies to further prove ISDM's effectiveness.

CompUSA (Dallas) spent roughly $3 million on its ISDM system, which is installed in 200 stores and is standard in all new-builds, and conducted a study to determine product movement. “Items featured on our in-store network had an 11 to 61 percent lift compared to products at our control stores,” says Jim Paddock, CompUSA's vp, store planning department.

Another frequent measurement, according to our survey, is customer response surveys, which are likely more popular with those relying on ISDM for brand-building rather than to drive product sales. Wachovia Corp. (Charlotte, N.C.) uses its ISDM system primarily to entertain customers waiting in teller lines at its financial centers. So the company looks at customer loyalty to gauge effectiveness. “There's a link between higher customer service scores and lower perceived waiting times,” says Gary De George, Wachovia's vp, corporate merchandising manager.

To add visual excitement to its first store in the U.S., Biotherm asked DSI Connect (Maspeth, N.Y.) to
create a variety of digital media installations for the space. Shown is DSI's “what's hot” screen cluster,
which highlights new Biotherm skincare products available at the store in Glendale, Calif.

More than half of our respondents said they expect to track ROI in some way to support the effectiveness of their ISDM systems. But for those that didn't expect to measure ROI, the majority said that they would use electronic digital signage nonetheless, supporting the idea that retailers are finding value in implementing this technology in their store environments, whatever the return.

“We all just know that electronic digital signage is more compelling,” says De George, “and shoppers retain it more.”

While our survey shows that there's more than one way to measure ROI, our results also indicate there's a growing number of ways that this technology is being put to work in the retail setting. Back in the introductory days of ISDM, retailers relied on electronic digital signage primarily to promote products and provide an alternate source of revenue by selling ad spots on networks to vendors. But “enhancing the in-store experience” is moving up the list, according to our survey, which is good news for store planners and designers. (See chart H.)

Two years ago, CompUSA's focus was on delivering product information to customers. But today, the electronics, computer and entertainment systems retailer sees a broader reason for using electronic digital signage. “I use it to educate customers and as a branding tool to tell them why they should shop here,” says Paddock.

J.C. Penney (Plano, Texas) is testing a pilot electronic digital signage program at its Frisco, Texas, store, experimenting with plasma screens at the store's main entrance and in the escalator wells. Plans call for rolling the program out to additional stores in 2006. And the company's not getting bogged down by ROI as it makes a significant investment to develop its ISDM system.

“We are not focusing on the return on investment to drive this,” says Karen Meskey-Wilson, J.C. Penney's vp/director of store design and merchandise standards. “Our strategy is to enhance the shopping experience while supporting our brand.”

Cautious Spending

While retailers seem to have grasped the potential of ISDM, our research suggests that they are still just dipping their toes into this technology pool. ISDM requires a significant financial investment.

According to our survey, the majority of new users have budgeted less than $100,000 for a new system. For those already using it, a majority have allotted $50,000 or less over the next 12 months. (See charts E and F.)

In-store digital media networks are popping up in a variety of venues, including more than 100 independent
diners in New York, New Jersey and Connecticut. The screens, operated by OOH Vision Networks LLC
(Hazlet, N.J.), run ads, promotions and daily specials, along with a news ticker.

Many in-store digital media installations include an interactive component, such as these touchscreen kiosks located at the ordering island in the Sheetz Convenience Restaurant in Altoona, Pa.

“Those sound like pilot figures to me,” says Rick Hutcheson, vp, marketing for Convergent Media Systems, (Alpharetta, Ga.), which designs, implements and maintains networked digital signage systems.

Considering that just one plasma screen can go for $15,000, and that doesn't even account for content development, supplies or accessories, those numbers may seem small. Hutcheson says $100,000 could cover maybe a plasma screen in six stores with some content. But, he adds, it's difficult to put a blanket figure on the cost of a new ISDM system because each retailer has to consider several variables, including type of distribution path, number of stores, content creation and how often content will be refreshed.

Feeding the beast

Although retailers may be cautious about investing large sums of money in ISDM, they do understand that once they install electronic digital signage, they need to treat it as more than just TVs showing ads inside stores. Savvy shoppers expect to see more than a clip of yesterday's marketing message put on a glossy plasma screen, and they also expect that content to change more often than static signage can change.

“Once you build this thing, you have to feed the beast,” says Wachovia's De George.

According to our survey, in-house creative staffs are handling the majority of content design and management. The nearest competitors are ad agencies, followed by design firms. (See chart G.)

For the past 10 years, Wachovia had been playing cable news programming on televisions located near the teller stations. The goal was to distract customers with CNN's Headline News and features. However, customers began complaining about some of the TV content. Mothers standing in line with their young daughters to cash a check said they didn't want to see commentary about Michael Jackson's latest sex scandal. And Wachovia also saw some of its competitors' commercials showing on the network.

So the company is working with a service provider to create a new network programming system that will be installed in a third of Wachovia's 3300 financial centers in early 2006. Its new network provider will supply business content, while Wachovia will produce its own branded materials, starting mainly with existing commercials and moving into all new content. “It allows us to control content within the Wachovia brand,” explains De George.

He says the bank also wants to show both product promotions and educational material, like how to protect yourself from identity theft. “We want people to perceive their bank as helpful and not just trying to sell something,” he says.

Dan Reynolds, director of new media at FRCH Design Worldwide (Cincinnati), who has created video content for such retailers as Disney and Timberland, says his clients are looking beyond creating a promotional product video to telling a more provocative story about their brand. “It's the best opportunity to envelop customers in the brand,” he says.

As retailers' comfort levels with ISDM grow, says Reynolds, companies are beginning to take more creative chances with their content. “Retailers are becoming more artful and more profound about their brands and products,” he says.

Many in-store digital media installations include an interactive component, such as these
touchscreen kiosks located at the ordering island in the Sheetz Convenience Restaurant in Altoona, Pa.

Who's in control?

However, content-creation is just one piece of the ISDM puzzle that challenges retailers. Another issue to sort out is who controls the system once it's in place. According to respondents, the majority of people involved in specifying ISDM are store planners and designers. But, the majority of those charged with making the final decision to employ ISDM are in marketing/advertising departments, not store planning/store design departments. (See charts A and B.)

J.C. Penney had to address the control issue as it was developing its new network. Meskey-Wilson said the store environment department was given “a leadership role” over the program, while other departments support it. In addition, marketing provides all the content, but store planning collaborates on the final approval.

A Bright Future

The educational curve for ISDM is speeding up. Convergent's Hutcheson said he's moved from introducing retailers to the benefits of ISDM to explaining how retailers can bring it into their stores.

“They get it now, but they're scared to death on how to do it,” he says. “Digital signage is not just TV screens in a store. It's a content-managed network with highly customized content.”

As the price of equipment continues to drop, and more retailers become comfortable using this latest technology in their store environments, the sky's the limit on how ISDM will alter the retail landscape.