Wal-Mart Preps Next Phase of In-Store TV

Smart Network Is Said to Echo Retailer's Project With P&G's Olay for You

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BATAVIA, Ohio (AdAge.com) -- Despite growing talk about and investment in shopper marketing in recent years, relatively little money has flowed into in-store media. Now, Wal-Mart Stores is looking to change that as it readies a second-generation in-store digital TV and signage network.

Screeners: In-store media is under increasing pressure to show effectiveness.

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Wal-Mart is preparing to unveil more details of its next-generation network, dubbed the Wal-Mart Smart Network, to marketers and advertising and media agencies at dual presentations in New York and Northwest Arkansas on Sept. 3, said a sales executive for one of its partners in the project, the analytics and technology firm DS-IQ. He said he was otherwise sworn to secrecy on the plans.

Another executive recently briefed on plans for the network said the concept involves moving TV screens–or digital signage–much closer to eye level, incorporating them into product displays, and creating interactive "virtual assistants" from which shoppers can get product information or refine choices in key categories such as health and beauty aids. The idea resembles a project Wal-Mart began testing earlier this year in which it adapted Procter & Gamble Co.'s Olay for You online recommendation engine for use in stores.

Executives of Wal-Mart didn't return calls or e-mail for comment.

The payoff is potentially huge for Wal-Mart and an in-store-media industry that faces new pressure -- and opportunities -- to show effectiveness. Nielsen Co. last month began full rollout of its Prism system to measure in-store audiences and sales impact from in-store promotions and media. Wal-Mart has been a charter backer of the system, allowing Nielsen limited access to scanner data it otherwise withholds from syndicators.

One stated goal of Prism's backers, including Wal-Mart, P&G and their joint media agency Starcom MediaVest Group, is to provide data on in-store marketing and media comparable to that for other media, so that it's easier to tap media rather than sales promotion budgets to pay for it.

For years, Wal-Mart executives have compared growing foot traffic in their stores, now north of 130 million weekly, to declining network TV audiences. Yet the Wal-Mart Television Network has never become a big media player. It's operated by PRN, a unit of the French company Thomson, which owns Technicolor and sells a variety of products and services for the movie and TV industries.

Advertising revenue for Wal-Mart TV totaled about $61 million in 2003, according to documents PRN released as part of an aborted initial public offering in 2004. Thomson hasn't broken out PRN revenue separately since acquiring the company in 2005, but the unit of which it's part has been shrinking in the past year, and financial reports suggest the entire PRN business (including other networks for such retailers as Best Buy and Costco) couldn't have grown much more than $250 million, with Wal-Mart TV ad revenue not much higher than $100 million to $150 million.

Any way you cut it, Wal-Mart TV's mega-reach has delivered revenue only on par with thinly rated cable networks rather than anything approaching the $64 billion advertisers spent last year on TV in the U.S., per TNS Media Intelligence.

Still, Wal-Mart TV hasn't been a bad deal for Wal-Mart. PRN's 2004 IPO papers show Wal-Mart made up a combined 89% of PRN's $112 million in business in 2003, including around $39 million paid by Wal-Mart to PRN to operate the network, which the retailer also uses to hold virtual meetings with more than 1 million U.S. store employees. Based on a thin 8% operating margin for PRN, Wal-Mart appears to have been getting back more money from ad revenue than it paid PRN to operate the network. Essentially, it gets a corporate video network fully financed by suppliers, with some additional ad revenue to boot.

But it could be getting much more if it can tap dollars earmarked for other media. Wal-Mart and others are banking interest in its new system will be so intense that people will pay to attend a sales presentation. Besides the Sept. 3 presentations, a session on the new network -- open only to agency and marketer executives at a price of $275 a head -- is set for the In-Store Marketing Institute's expo in Las Vegas in November.
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