The adoption of digital signage is becoming more and more noticeable as we go about our daily lives, but what is it exactly? Gartner says it refers to the infrastructure and applications that disseminate dynamic media content to displays or monitors on the sales floor of a retail store. In retail, it is often referred to as ‘narrowcasting’, ‘interactive signage’, ‘electronic signage networks’, ‘digital communications’ or ‘digital media networks’.
Stuart Armstrong, President of The Digital Signage Association (DSA), based in the USA says, however, that it "continues to be a confusing term" because its use is not solely confined to the retail sector and it "encompasses all signage that is displayed on a digital screen whether it is outdoor billboards or in-store, or whether it is networked or supported with DVD or flashcards".
How much, and where?
While the digital signage net can be cast fairly wide and apply to a number of verticals, its natural home is in retail; therefore, much of the data that is available focuses on this sector. Unsurprisingly, China is said to lead the world in the number of digital signage displays deployed, with the country’s biggest digital signage firm, Focus Media Holding, alone operating more than 112,000 flat-panel displays in 90 cities across China.
In the Anglophone markets, American-based ABI Research predicts that the total revenue from the digital signage equipment market in the United States – including hardware, software, installation, and maintenance – was expected to grow by about 33% in 2009. Despite this healthy prediction, research firm Gartner says: "Digital signage is far from a mature technology in retail. Gartner estimates that in the US alone there may be somewhere between 5000 to 10,000 storefronts with digital signage networks in place, although these networks are run or managed from a number of operators versus operated as a single-source media channel. While vendors continue to hype their installations in retail locations, even in the aggregate this still represents less than 1% of all retail storefronts; there are more than a million retail store locations in the US." (
Business Case Remains Challenging for Retail Digital Signage Projects, Gale Daikoku, Gartner.)
Daikoku adds that although many retailers are evaluating these networks, only a few chain-wide rollouts by tier one retailers exist: Wal-Mart, Sam’s Club, Best Buy and Costco.
As such, market penetration stands at 1% for stand-alone networks, as positioned by Gartner’s
Hype Cycle for Retail Technologies, 2009. "Digital signage is now solidly positioned in the Trough of Disillusionment, and Gartner does not expect it will move out of the trough for at least a few years," the whitepaper states.
Nonetheless, in the
Business Case whitepaper, published later in the year, Gartner’s Daikoku refers to numbers from PricewaterhouseCoopers predicting that out-of-home advertising (OOH advertising) in North America will grow at a 2.4% compound annual rate, from $US7.7 billion in 2008 to $US8.7 billion in 2013, as compared with a projected decline in overall ad spending of minus 1.6% for the same period.
Similarly, PQ Media forecast that the digital OOH (DOOH) market – a subset of OOH media – would grow 11.2% to $US2.43 billion in 2008, of which $US1.4 billion is attributed specifically to video ad networks (VANs), the category into which digital signage networks fall.
It’s not just an advertising gimmick
A study published by MillerZell showed that shoppers make brand decisions 60% of the time after entering the store, while 91% of all shoppers make unplanned purchases in the store (cited by Gartner). As such, end-users are interested in exploring digital signage networks because of their appeal as a new potential revenue opportunity. However, according to Gartner’s Daikoku, this revenue opportunity still faces a number of hurdles, including difficulty in quantifying return on investment and a highly fragmented vendor market, with few vendors having a good understanding of the retail environment.
If digital signage is to be employed, it needs to be done as part of the whole business strategy. It is no longer just an advertising initiative, but an extension of a company’s mechandising and branding activities that can also serve as recruitment drives or employee communication devices.
Armstrong of the DSA says he has seen the integration of digital signage by retailers as part of their overall enterprise and not simply a communications overlay at stores. "What that means is that retailers are beginning to understand the full power of this medium to drive product sales, increase customer loyalty, increase adoption of loyalty programs, and bring additional efficiencies to their supply chain and inventory management. Additionally retailers are ‘sweating the asset’ using shopper-facing digital signage off-hours to perform staff-facing communications such as HR, training and corporate communications," he explains.
Future forward thinking
To do this, digital signage projects need the collaboration of a range of functional areas – especially marketing, merchandising, corporate communications, legal, store operations, HR/training, finance, supply chain and IT – to ensure the project can deliver results for the retailer.
Added to this, Gartner and the DSA have both observed that the emergence of web-enabled mobile devices and web 2.0 technologies is creating interest and new ways for consumers to use their own personal technology to find and use information during the shopping process, enhancing the shopping experience and strengthening brand recognition and loyalty.
The DSA’s Armstrong says there are innovations around cross-channel communications that integrate in-store digital signage with mobile smartphones and web presence to execute integrated marketing campaigns. "Digital signage should be thought of as a ‘digital on-ramp’ to get people to pull out their smartphones and engage with the content on the screen," he says.
Armstrong says when it comes to resellers choosing a vendor, most of the leading software packages will meet your needs. "However, because the industry is still in its formative stages you want to make sure you have a supplier that has the financial strength and commitment to be around for a while and continue to invest in the development of their software," he warns.
Digital signage isn’t just the deployment of a few plasma screens and a box to drive them. There are a large number of areas associated with digital signage including hardware, software, content creation, programming (for scheduling), content execution and maintenance, analytics and optimisation, billing management, installation and ongoing maintenance, network installation and system integration, maintenance and field services, network optimisation and analytics, and data provision.
As we exit the recession and hardware costs for digital signage come down, potential customers will perhaps begin to reconsider digital signage as part of their business strategy and customer experience.