Sign Of The Times
The ubiquitous UPC bar code is giving way to radio frequency identification (RFID) tags, which are thin, thumbnail-size integrated circuits that retailers scan to get information about the products that they're attached to. Applications include tracking merchandise from the factory to the store shelf, catching shoplifted products, and identifying perishable goods that have passed their expiration date.
The rise of RFIDCustom sales pitchesIntegrator opportunities
THE UBIQUITOUS UPC bar code is giving way to radio frequency identification (RFID) tags, which are thin, thumbnail-size integrated circuits that retailers scan to get information about the products that they're attached to. Applications include tracking merchandise from the factory to the store shelf, catching shoplifted products, and identifying perishable goods that have passed their expiration date.
Another evolution in retail is wider use of video displays in order to draw shoppers' attention to products. For example, Wal-Mart is in the midst of replacing ceiling-mounted CRTs scattered throughout each store with 42-inch LCDs positioned directly adjacent to the merchandise that they're supposed to help sell.
The convergence of those two retail trends could expand the digital signage market. One company betting that it will is BTV+, which designs and operates private satellite networks for applications such as training and retail display. Based in Mississauga, Ontario, Canada, BTV+ is developing an interactive digital signage system — branded as ADvantage RFID —that uses an embedded RFID scanner to identify nearby merchandise and then present ads and other information that aims to improve the chances of a sale. (For video demos of the company's RFID signage, see “More on www.proavmagazine.com.”)
“This probably will be trialed in the December time frame in a sporting goods store,” says Lyle Bunn, the company's director of digital display and rich media. “So we'll get some pretty good data about the impact in the store environment.”
In RFID, information is essentially pulled from the tag by a scanner, which can be up to several feet away. (The scanner creates a electromagnetic field that powers the data exchange, so the tag doesn't require a battery.) In retail, RFID is used for inventory control, but the technology is used in a wide variety of non-retail applications, too, including baggage tracking at airports and ID cards. As a result, retail isn't the only industry driving the RFID market.
By 2010, North America's share of the market for RFID hardware and software will be the world's largest, at an estimated $2.7 billion, according to Datamonitor, a London-based research firm. One major market driver is Wal-Mart: In 2004, the company required some of its suppliers to start tagging pallets and cartons to help track inventory. By January, Wal-Mart expects to have about 330 suppliers using RFID, up from 130 in October 2005.
For companies that want to leverage RFID, one wild card is how quickly the tags move from pallets and cartons to individual products. The speed of adoption hinges largely on the cost of the tags, which currently run 10 to 30 cents apiece.
“Wal-Mart hasn't put item-level tagging in their mandate other than pharmaceuticals,” says Sara Shah, an analyst at ABI Research, based in Oyster Bay, NY. “Best Buy hasn't publicly made their item-level tagging initiative very clear, but I know that it's something that they're definitely pursuing. What's happening is that tag prices are coming down, but it's still too expensive to put even a 12-cent tag on something that costs 50 cents.”
Wal-Mart's use of RFID is noteworthy because as the world's largest retailer, its volumes help drive down the cost of tags. The cheaper tags get, the easier it is for suppliers to make a business case for putting them on more products —including low-cost items. That ubiquity helps expand the market for technologies that leverage the growing installed base of RFID-tagged merchandise.
BTV+'s ADvantage RFID displays currently read only the tags added to products for its application. The company plans to add support for the ones that vendors attach to products during manufacturing. “That's a natural next step,” Bunn says. “We'll probably announce something on that in the next month or so.”
BTV+ also is working on technology that would customize the sales pitch beyond just presenting a one-size-fits-all-audiences video clip. Known as “biometric triggering,” the process works by identifying a person's physical characteristics and then tailoring the information to their specific needs and wants. “We're finding 87 percent accuracy in capturing sex, ethnicity, and age range,” Bunn says. “That's too inaccurate, but definitely steps in a right direction toward ‘audience-of-one' marketing.”
BTV+ won't elaborate on how its biometric triggering works, so it's helpful to look at other systems. One example is a prototype digital merchandising system from Mitsubishi Electric Research Laboratories (MERL), based in Cambridge, MA. It uses technology for identifying facial characteristics in real time in order to ascertain, for example, a shopper's race or age. That demographic information then triggers the projector to deliver a brief presentation that plays to that group's perceived needs and wants. (For more details about MERL's technology, see “More on www.proavmagazine.com.”)
The BTV+ and MERL systems both assume that if you stop at a shelf and pick up an item, you're already interested — or at least curious. So unlike a video display that plays an endless loop of ads to try to entice shoppers to walk over to the shelf, their systems are trying to complete the sale rather than just attract attention. Both systems also cater to retailers' need to minimize personnel costs and still have enough staff to answer questions and nudge shoppers toward a purchase. Although surrounding a shelf of merchandise with brochures is one low-cost way to provide information, digital signage goes beyond even what the best salesperson can provide: a multimedia pitch that speaks directly to the shopper's heart or gut by helping them visualize how the product would improve his or her life.
If the heart or gut can't be won over, there's always an appeal to the wallet. In the case of BTV+, that includes the option of a one-time discount to seal the deal. That could be delivered in the form of a code that shoppers provide at check-out to get the lower price, or it could be a coupon that's issued by a printer attached to the video display. “Research tells us that coupon redemption is twice as high in stores if an electronic coupon is available,” Bunn says. “Coupon redemption typically is about 5 percent. It rises to 10 percent with a coupon provided on the spot.”
The discount strategy also could be used to help sell items in another part of the store — a sales approach sometimes referred to as “goes with.” For example, when shoppers pick up a box of granola cereal, the video reel could make a pitch for soy milk, with a coupon printed as an added incentive. The system also could be used to make comparisons. For example, when shoppers pick up an item that's available nearby in generic form at a lower price, the display might alert them to that option, with a split-screen pitch driving home the side-by-side comparison.
Split-screen support also would help when two people visit a shelf at the same time, or when a single shopper picks up two different items simultaneously, such as to compare labels. The decision about which product gets top billing is up to the retailer or whatever party controls the system.
“That option is built into the system,” Bunn says. “It could be that the more expensive product is displayed first. It could be that the screen is split, with two products compared side-by-side, and the audio suppressed on one.”
BTV+ describes the upcoming sporting goods store trial not as an attempt to see if the technology actually works, but rather as an opportunity to learn more about how consumers react to ADvantage RFID. That research will help the company refine its product, and give retailers more insight into how to use it effectively.
BTV+ plans to leverage its existing products and services for retail applications when rolling out ADvantage RFID. The company would sell a total solution, including software, a network for distributing content, management services, and the displays themselves. However, it's possible that the RFID scanner module could be integrated into a retailer's existing displays, reducing a barrier to adoption. “The RFID module basically creates a trigger,” Bunn says. “If the signage software that a company is using can accommodate that trigger, then they can implement this module.”
If a retailer is already buying products or services from BTV+, adding ADvantage RFID to existing digital signage would cost about $900 per display. Justifying that expense depends on whether the retailer believes that the technology will increase sales enough to earn back its cost.
Besides providing hardware, software, and network services, BTV+ also would offer installation. But unless the company can justify the expense of sending crews to each site or opening satellite offices, at least some of that work would be farmed out to AV integrators.
“We believe that that group of professionals is key to the success of digital signage because they understand those elements and how to install them professionally,” Bunn says. “Many of them have existing relationships with the organizations that want to use this technology. So we see AV firms being part of the long-term delivery of digital signage into organizations.”
Tim Kridel is a freelance writer and analyst who covers telecom and technology. He's based in Kansas City and can be reached at firstname.lastname@example.org.
For more details about MERL's technology, see What's Next: Birth of A Salesman — Mitsubishi mixes projectors and facial-recognition technology to take digital merchandising to the next level, May 2005.
For video demos of BTV+'s RFID signage, visit http://www.btvplus.com/index.php?id=6,85,0,0,1,0.