METRO's Future Shoppers See a New Advertising Medium In Store

July 10, 2003

By Jason Deign, News@Cisco

The mighty world of advertising is about to be irreparably altered. Not by legislation, globalization or even the economy - but by a small supermarket in Rheinberg, Germany.

There, the retailer METRO Group is testing - besides many other future technologies - content-sensitive plasma screen advertisements which, it is believed, will become one of the most effective advertising media of the next decade.

In-store advertising is not new; static promotions, customer information stands, leaflets and other point-of-purchase (PoP) merchandising items have been a staple of the average consumers' shopping experience for some time.

And they work. According to the industry body Point Of Purchase Advertising International (POPAI), in its report In Store Advertising Becomes a Measured Medium, PoP advertising can generate incremental sales ranging from two per cent to 65 per cent.

This is hardly surprising, when you consider an estimated 75 percent of buying decisions are made once a shopper is in a store - not before.

Retailers and advertisers are aware of this - and are spending large amounts of money to target in-store audiences, although the exact value of the market in advertising terms is difficult to gauge.

In the UK, for example, where five big supermarket groups are visited by 70 percent of the buying public every week, the media buying agency Starcom Motive says about £35 million (around US$58 million) a year is spent on commercial messages in shopping carts, in car parks and so on.

POPAI, however, claims its UK and Ireland member companies - covering roughly a third of the market - invest £790 million (about US$1.3 billion) a year on in-store promotions. Either way, it is clearly an area of major importance.

Hence a great deal of interest from retailers, advertisers and advertising agencies in trying to replace today's somewhat crude in-store promotional efforts with something more like the polished TV commercials that currently absorb most of companies' marketing budgets.

Much of this interest could soon be focused on Rheinberg, where METRO Group, the world's fifth-largest retail chain with 2,300 outlets in 26 countries, is piloting a new form of in-store advertising in its Future Store concept supermarket.

Future Store opened on April 28, 2003, to "impart additional impulses to the worldwide technical innovation process in retailing," as Dr. Hans-Joachim Kvrber, METRO Group's chairman and CEO, said.

Involving the collaboration of 39 renowned technology, software, service and consumer brand companies, the project is a showcase of the latest in retail innovation - including a concept called Store as a Medium, from Cisco Systems.

Store as a Medium comprises two technology solutions: in-store kiosks and digital communications to the store. Kiosks provide a new way to deliver information direct to the consumer and promote customer interaction within the retail environment. They also enable greater levels of self-service.

Digital communications technology, relies on the Cisco Application and Content Networking System (ACNS) to establish reliable, new, highly efficient and measurable channels of information into the store. Cisco ACNS enables retailers to manage the distribution of rich media from a central location to any number of networked based delivery points.

In essence, Store as a Medium allows retailers to send commercials - in high-quality video format - to specified information kiosks and plasma screens exactly when and where a shopper is most likely to make their purchase decision.

Store as a Medium is part of a wider Cisco Systems platform called Real-Time Retail, which bundles a number of different technologies together to provide retailers with a range of network-based tools for improving efficiency and productivity.

Even on its own, though, Store as a Medium has the potential to deliver significant benefits to the retail industry. Besides lifting in-store sales, it is likely that consumer brands would want to pay to advertise their wares on the system - treating it just like TV or any other media.

"The business model for this kind of in-store marketing is still in its infancy," says Dimitris Nikolatos, Cisco business development manager for retail solutions in EMEA, "but it is likely consumer packaged goods companies will be contributing content and fees."

There is a further bonus for retailers, in that the combination of plasma screens and Cisco ACNS can be used to help with staff training through e-learning packages - an area of particular interest where cost savings need to be balanced against the need for ever-improving customer service skills - as well as with optimizing WAN bandwidth through caching and URL filtering services.

METRO Group is not the only retailer currently experimenting with this kind of technology.

In the UK, a number of supermarket chains - including the two largest, Tesco and Sainsbury's - are carrying out in-store TV advertising trials. And in the Netherlands, McDonald's has been trialing the concept with television and interactive kiosks in four of its restaurants.

Other companies are using similar systems for in-store training. A large hardware chain in the UK, for example, is using e-learning packages to help its 30,000 staff learn about areas such as health and safety. It reports lower costs and increased customer and employee satisfaction.

Meanwhile, POPAI predicts that spending on audio-visual systems for point-of-purchase use is likely to reach £350 million (around US$580 million) by 2003 - in the UK alone.

"A lot of companies in retail, advertising and branded goods are thinking about what this means for their industries right now," says Nikolatos.

Jason Deign is a freelance writer based in Barcelona, Spain.