The origins of in-store screen networks and the role of CAPEX

Having a screen network for advertising in stores is not a novelty. They’ve been here for a few decades now for different purposes and with variable success rates. Retailers have used them for promoting the products on their own and some have even experimented in detail on how having on-screen ads affects the buying decisions of customers. In brand stores screens are more often for creating a shopping space in which consumers want to spend their time.

Still, having the screens in stores is by no means a common nominator for physical retail. Why is that? It is because of CAPEX. CAPEX in short means the actual investment needed for the network. For a retailer considering investing in the network, there should typically be a clear business case proving that the screens are able in some way and in some meaningful timeframe to be able to pay back the investment.

Building a bulletproof business case for making the considerable investment hasn’t been too easy in this case. As in most forms of advertising, showing that presenting the ad has a direct consequence in a customer buying the product has for many business developers proven to be a formidable task. When the screens have also other functions than presenting the ads, such as loyalty building, guidance, and acting as an information channel or using the screens for creating experiences it becomes even more complicated.

Audiences to the rescue

Here in the Nordics some of the more progressive retailers have had a different approach to CAPEX for nearly a decade. Screen networks in stores have been acquired for one task particularly: media sales. Yes, they’re also used for private-label advertising and loyalty content, but when we think of CAPEX, the investment will be covered by media sales revenue. This way, the time to get even with the investment is self-explanatory to calculate.

When selling media, a screen network transforms quickly in the minds of the decision-makers from a cost item with benefits to a genuine revenue generator. The screen network investment starts to follow the same business logic as most other investments: shortest pay-back times and most profitable targets will be selected.

In media sales, the exchange value is of course in the audiences. As audience-based businesses are born, they usually start with very rudimentary media products. In the case of selling in-store audiences, media products typically at the start may cover all the customers in certain store types nationally, let’s say hypermarkets for example. This is a good way to get the business going.

But in recent years, the exponential growth of online retail media has shown us the huge potential of retailer audiences. Everybody who’s already involved and those thinking of jumping in now must solve how to operate in-store retail media as a very rapidly growing business. And this is where the nature of audiences as an asset will reveal its true value.

In-store retail media = selling audiences at scale

What then has changed in in-store media sales with the rise of retail media? In one word: The scale. The number of advertising customers and the number of campaigns they want to run grows exponentially, and the growth speed is only gaining momentum.

To manage this growth, the retailer must be able to sell to far more granular audiences than before, meeting the exceedingly heterogeneous needs of the advertisers. And by this granularity, the intrinsic value of the total audience of a retailer keeps rising steadily. The audience is turning to an actual asset.

But first, a new toolset is needed to manage the growing audience business.

First of all, we need the data about the customers. All retailers have at least some of the most relevant data sources for this. You can read more about the role of data in this blog post.

Secondly, we need tools to make the audiences out of data and package them into media products.

And thirdly, we need the means to distribute the targeted advertising to the wanted audiences on a single-screen level.

In every stage of the process, from audiences to creating campaign content from retailer systems, automation is the key to scaling the operations to the level current in-store retail media requires. As minimal amount of manual labor is needed for daily operations, it’s simple to raise the number of campaigns and the plurality of available audiences.

A platform capable of operating all the needed stages for end-to-end retail media provides a retailer with a robust base to scale up the business. With the right platform and organizational capabilities, it becomes possible to sell even more sophisticated media products to advertisers. Advertisers are willing to invest more in quality audiences that produce better results.

Higher ROI for advertisers with Algorithm Driven Targeting

In addition, it is not only that retailer gets more revenue per campaign – when campaigns are distributed by intelligent algorithms the retailer can also fit in far more campaigns in total. This means your inventory value also rises remarkably.

Higher inventory value with optimisation - Algorithmic Yield Management

Thus, audiences prove to be an asset for retailers that can hold and gain value in numerous ways. As competition in traditional fields gets fiercer day by day – in-store retail media will surely continue its success.

In conclusion

As the real value of in-store retail media business lies in sophisticated media products your organization must concentrate on the right decisions when considering jumping into the game. Choosing the right platform and partners should be done by estimating how capable they are in helping you harness the value from the most important retail media asset you have – your audiences.