Box on shelf on box on…

If someone were to offer a media channel that provided access to more than 70 per cent of the UK population, it is unlikely that many brand owners would be able to ignore it. They might even go so far as to question the proportion of their advertising budget devoted to traditional media, in particular television with its mass-market appeal, and decide to shift some of it into that new media channel. That channel exists – it is supermarket retail.

The UK’s leading supermarket, Tesco, hopes that advertisers will do just that if, as expected, it decides to go ahead with plans to roll out Tesco TV – a digital media network that will be broadcast in up to 300 stores through plasma screens hanging from the ceiling (MW last week).

Check out those figures

Tesco TV is expected to reach about 10 million shoppers each week, a major audience given that ITV’s most successful show so far this year, I’m a Celebrity… Get Me Out of Here!, pulled in an average of 10.4 million each night, across a two-week run.

An estimated 70 per cent of the UK population passes through the doors of one of the big five grocers – Tesco, Asda, Sainsbury’s, Safeway and MorrisonsÂ-Âeach week and the stores have begun to see themselves as potentially valuable media channels that, unlike traditional media such as TV and print, communicate to customers at the point of purchase.

But it is only in the past few years that supermarkets have been able to think in this way. Twenty years ago, there were tens of thousands of independent retailers and more than a dozen major food retail chains – consolidation and competition has changed all that. The wider media landscape has changed in the opposite direction, becoming more fragmented. ITV is no longer the only commercial TV channel in the UK, having been joined by Channel 4, Five and hundreds of satellite and cable channels. The national press is also finding that its circulation is being eroded. As time-pressured consumers become harder to target, advertisers are being forced to consider alternative routes that deliver mass-market audiences.

Former Nestlé Rowntree marketing director Andrew Harrison, now managing director of Müller UK, has been vociferous about the potential of retail, labelling it the “new media”. Although he has never said that retail media will replace radio and TV,ÂHarrison has repeatedly made the point that marketing of brands such as Kit Kat has changed. In the past, if a company wanted to reach 70 per cent of housewives in one week, it would buy a centre break in Coronation Street; nowadays, it would instead consider the more cost-effective option of a gondola end in Sainsbury’s or Tesco.

Brands may also consider trolleys and floorspace, six-sheet store posters, shop windows or a TV or radio digital media network.

But retail media is potentially bigger than just the supermarkets. Lunn Poly, WH Smith and Boots are testing screens, and Toni & Guy has screens in most of its salons. Safeway uses them in the entertainment aisles of its larger stores, signing up film and music companies to promote DVDs and CDs, while Sainsbury’s and Spar, are also trialling screen networks. Lloyds Pharmacy and Dixons have joined Asda, Kwik Save and Somerfield in investing in radio – something Iceland is also rumoured to be considering. Then, too, there are non-retailer- specific media networks such as Immedia Broadcasting’s Newsagents Radio and Magnetic, the 300-strong bar TV channel developed by Translucis and now owned by Avanti.

Billetts Media Consulting managing director Tony Squires says: “There’s a massive opportunity for retail to be the last true broadcast medium. People walk down the high street every day and other forms of media are finding it harder to cut through.”

Squires believes that retail media – whether in stores, windows or shopping centres, has a captive audience and – a crucial advantage over TV and radio – consumers are already in shopping mode. This is supported by research from Point of Purchase Advertising International (POPAI) showing that just 25 per cent of consumer purchasing decisions are pre-planned, while 75 per cent of decisions are made in store.

The right ingredients?

Tesco hopes that its screens will capitalise on this mindset. Tesco TV, which has been on trial in seven stores across the UK, offers customers a mixture of news and sport updates (both supplied by Sky), customer information about Tesco’s own products and services, promotional offers (sometimes linked to content such as “how to make the perfect Pimms”), and third-party advertising. Areas of the store such as drinks, entertainment and health and beauty have been earmarked for Tesco TV.

Ensuring that the content is of sufficient quality will be key to Tesco TV’s success. Thirty-second TV ads have been deemed inappropriate for the medium, which has been found to be more suited to ten-second information-based ads, owing to the short dwell time of consumers. On the proviso that the screens get the go-ahead, Tesco is now understood to be debating whether to install them at checkouts and whether to clean up the in-store environment by removing hanging promotional material.

At last week’s Digital Media Networks 4 Retailers conference, Tesco media manager for revenue generation, corporate purchasing Bill Pennell was at pains to stress that Tesco TV “is all about adding value to the customer’s shopping experience”. But it is clear the service is very much a commercial exercise in generating additional revenue. Tesco has undoubtedly taken note of the reported £62m advertising income generated by Wal-Mart’s in-store TV.

Pennell admits that Tesco will be targeting brands’ advertising budgets, rather than their trade marketing money, but says Tesco TV won’t be a threat to TV. “It won’t be in the power of commercial buyers to say: ‘By the way, put your brand on Tesco TV.’ It will be a different person and different pot of money to be spent.”

There is little point in Tesco taking money from suppliers’ point-of-purchase budgets: the system will be more viable if it pays for itself through sales increases and third-party advertising from suppliers’ above-the-line budgets.

But it is unclear whether Tesco TV will be able to persuade brands to pay for screen space out of their advertising budgets, in effect taking money away from other media. Many in the industry believe that the retailer will be more successful in leveraging its close relationship with suppliers so that the screens are funded through trade marketing budgets.

While figures from POPAI show more than £1.15bn is spent each year in the UK and Ireland on point-of-purchase marketing, it is estimated that only £35m to £50m is spent advertising on retail media such as trolley and basket posters, floor-space and six-sheet posters at supermarkets.

Ian Laing, head of marketing for The Media Vehicle Group, which sells space on trolleys, baskets and floors for some of the UK’s top supermarkets, does not believe retail media will ever be as big as TV. He sees it principally as a complementary medium, but also an alternative for “certain brands that can’t afford TV because of the high entry costs”.

Tesco has appointed JC Decaux to sell space on its screens, but it is not yet known who the contractor will target – the brands themselves; outdoor specialist buying agencies that have experience of similar digital media networks such as Magnetic; or TV buyers.

Many outdoor buyers believe that, because the screens are located out-of-home, they are better placed to trade the airtime – though they feel that larger budgets should be made available to do so, perhaps at the expense of TV. “We see screens as animated posters,” says Poster Publicity account director James Copley.

Looks lovely, but does it work?

However, the retail environment has yet to prove itself as an advertising medium. Procter & Gamble associate director of UK media Bernard Balderston says: “The issues for advertisers are: ‘How effective are the screens and how efficient are they?’ There are plenty of statistics around to say that a lot of in-store media is not necessarily effective.”

He believes that when consumers enter a retail environment, they are there primarily to shop. There is a danger for brands and retailers that they will cause irritation by bombarding them with commercial messages.

Unlike TV and radio, whose audiences are measured by BARB and Rajar respectively, in-store media does not have a formal tracking and measurement mechanism.

Starcom Motive UK buying director Steve Parker says: “A media owner has to articulate the value of its medium through research. If retail becomes more accountable, media agencies will be more confident in trading on it.”

In the past, point-of-purchase material has not always made it as far as the shopfloor – compliance has been a major issue – but proponents of digital media networks argue that the system ensures that brands get the exposure they have bought and that this can be linked directly to sales information.

Spar has just completed a nine-week in-store TV trial in conjunction with POPAI and digital media network operator IQ Group, using ten stores, of which four acted as controls. The chain has made its results public: on-screen brand messages achieved average weighted sales increases of ten per cent, while price promotions secured an average weighted increase of 24 to 25 per cent.

Spar is considering whether to extend the trial to 100 stores, but, once again, there is a major problem determining how suppliers are prepared to pay to use the screens.

Spar advertising and promotions manager Simon Fisher says: “Are we able to get money out of marketing or the above-the-line media spend, or will it be a case of taking money out of trade marketing, which is less attractive?”

A sound strategy

In-store digital radio networks have produced some impressive results. Dixons’ trial of live radio in 50 of its stores, through a contract with former Radio 1 DJ Bruno Brookes’ company Immedia produced average sales increases of nine per cent, and in some case as much as 35 per cent. Advertisers included Freeserve, Grundig, Kodak and Sky.

But not all trials have proved a success. Somerfield marketing controller Nicholas Hall says: “We have looked at in-store TV a couple of times in the past few years, but we have discovered that customers find it very intrusive. Although we got a lot of supplier and advertiser interest, it was not enough to make it commercially viable. So we decided to look at a less intrusive medium – radio – which sits better with a lot of our stores’ size and ambience.”

Another ominous sign that supermarket screens may not work is the demise of Forecourt TV, which supplied TV ads to petrol stations. It ceased trading in September 2002, after the company failed to attract enough interest from advertisers. “People wanted to get petrol as quickly as possible and get back in their car,” says Maiden managing director David Pugh. “They found the noise levels of the advertising an irritation, and barely looked at the ads.”

Pugh, whose company has run tests of screens in Safeway, is sceptical about Tesco TV: “People actually enjoy shopping in supermarkets. Whether they still find the experience pleasurable when there is a TV blaring at them is one thing, and whether a marketing director wants his brand on something that is deemed irritating is another.”

Retail may be the new media, but it has much work to do prove itself to media buyers and planners, not to mention clients, before it can secure a regular place on media schedules alongside radio and TV.