It is one year ago to the day since supermarket giant Tesco launched its in-store television network with great fanfare.
Not known as a company to take the back seat and cede territory to its competitors, Tesco was predictably bullish about the prospects for its new venture to generate advertising revenue and boost sales at the till.
Likening the customer traffic of Tesco with the viewing figures of ITV, the retailer committed itself to the ambitious goal of capturing 1% of the TV advertising cake – although it was not specific about when.
Competitors such as Sainsbury's and Asda are now trialling their own versions of in-store TV, Woolworths is due to start trials by the end of summer, WHSmith has screens in selected outlets, Blockbuster has in-store TV and there have been a number of niche launches elsewhere in the retail sector, including the Pharmacy Channel.
But Tesco, as one of the pioneers of in-store TV and the largest supermarket chain in the country – and the third largest retailer anywhere in the world – is arguably the bellwether of the in-store TV experiment in the UK, with more than 5,000 screens across its top 100 stores.
So, has Tesco TV lived up to expectations in its first year and what does this mean for the rest of the sector? The short answer is that while the in-store channel is still on course, it seems to be encountering a few speed bumps on the way.
The number of advertisers on Tesco TV is still lower than many had predicted and a few weeks ago JCDecaux, which holds the sales contract, was forced to slash its rate-card prices.
Spencer Berwin, group sales director at JCDecaux, is adamant that Tesco TV has fulfilled the expectations of both Tesco and Decaux. "We're exactly where we thought we were going to be 12 months down the track," he says.
But many media agencies remain sceptical about whether the consumers are actually watching and whether the medium is effective as more than a point-of-sale marketing tool.
James Davies, board director at Posterscope's new and creative media division, Hyperspace, says in-store TV has not been the overnight success people were hoping for, but the medium has potential in the long term.
"It would certainly be fair to say that take-up has been slower than everyone expected, certainly on the media owner side, and that pretty much applies across the board with all different operators," Davies says.
"I don't think the slower growth is necessarily down to there being less demand than there should have been – it was more a case that expectations weren't realistic," he adds. "It's well documented how much money Tesco expected to generate from their screens when they launched, but they set an unrealistic target."
Brian Caulfield, client director at Meridian Outdoor Advertising, says: "Tesco expected clients to be immediately enthused, but that instant success failed to materialise and they've been trying to consolidate ever since."
Tesco now has more than 1,700 stores nationwide, employs more than 250,000 people and takes one in every eight shopping pounds in the UK, according to the company.
It would be a grave mistake to underestimate the retailing juggernaut, which has left all competitors in its wake. All the signs are that the supermarket chain will fight to ensure its in store experiment is a success.
In recent weeks, JCDecaux has changed its pricing structure, slashing the rates to encourage advertisers to run campaigns across the entire store, rather than in specific areas, such as frozen foods or laundry.
There have also been rumours that Tesco approached ITV – or that ITV approached Tesco, depending on which story you believe – with a view to the broadcaster taking over sales of its in-store channel.
Fuelling the rumours is the fact that ITV chief executive Charles Allen is a non-executive director on the Tesco board.
JCDecaux's Berwin insists that the outdoor contractor's relationship with Tesco - which also includes six-sheet and other in-store advertising – is strong and the TV contract is not at risk.
He says the 1% of TV ad spend target is "still a goal," but one that it will take some time to achieve.
But he admits that in-store TV is still a misunderstood proposition with many in the advertising industry.
"What's been interesting, 12 months down the track with Tesco TV, is who gets it and who doesn't," Berwin says. "It's not entirely surprising that advertisers themselves understand their brands, how they're set up on the shelf and how customers use them – they're very much used to the in store experience and understand how it works for them. It's more challenging for more mainstream agencies to get to grips with it."
JCDecaux makes up to half its sales for Tesco TV direct to advertisers rather than through an agency – an extraordinarily high proportion for the company and the outdoor sector.
But for Tesco TV and its counterparts to recoup the cost of installation and content, they need to attract the likes of Toyota and BT, rather than rely on supermarket suppliers such as Unilever and Procter & Gamble, Meridian's Caulfield and others argue.
Caulfield says it is essential for Tesco TV to move beyond a point-of-sale tool and promote itself as broadcast medium in order to succeed, simply because there are not enough point-of sale advertisers to fill the vast swathes of airtime in any two-week period.
But the problem is that there is still a lack of evidence to show that in-store advertising is effective and should be used above television, outdoor, press or any other medium.
"The challenge is for Tesco to prove that customers are receptive to more general advertisements," Caulfield says.
"Most people don't enjoy going to the supermarket and, if they're trying to get in and out as quickly as possible, are they going to be receptive to an O2 advert for example?
"The audience volume argument isn't enough – just because 18 million people go through on a two-week basis doesn't mean they're engaging with the screens."
JCDecaux's Berwin says the evidence suggests consumers are responding well to Tesco TV and detailed effectiveness research is underway.
One agency executive says her company is "publicly supportive" but privately she is worried that in-store telly is an innovation too far for shoppers already suffering from "sensory overload".
"The only people likely to watch are young children or unemployed people who hang around malls, neither of whom are going to be able to respond directly as consumers," she says.
"There's too much out there for most people – and that's all on top of the increasing number of commercials being stuffed into television ad breaks. There's a danger of a complete backlash, where people might start demanding ad-free zones. This form of relentless targeting can go too far and this might prove the final straw. We shall see."
Perhaps not surprisingly, Tesco is not the only retailer taking a more optimistic line.
Within the past few weeks, supermarket chain Sainsbury's has launched a six-month trial of digital TV at three of its largest stores – in south London, Ipswich and Edinburgh. Each store has about 120 TV screens, with 150 screens dedicated to specific product areas.
Sainsbury's says 70% of the output relates to customer information, helpful consumer tips and the company's own brand products, with the remaining 30% advertising branded products, including Heinz, Coca-Cola, Müller, Goodfellas, Kingsmill and Bernard Matthews.
Rob Crumbie, business development manager at Sainsbury's, is full of enthusiasm for the experiment and believes that it has enormous potential.
"This is a totally new model for digital TV – one that puts the customer at the heart of our decision-making. We’ve done extensive customer research, which shows that they would welcome the kind of information and advice that digital TV can provide, as long as it is done in the right way," he says.
Sainsbury's is privately critical of other supermarket models for digital TV that feature up to 50 screens and have up to six channels, which it says makes it difficult to target information to the customer.
Crumbie stresses: "We understand the importance of creating a contract of acceptance with our customers through the network, through providing engaging, enticing and relevant content.
"We believe we have the balance right between commercial considerations, such as income generation and profit, and what customers have told us they want."
He adds that the success of the pilot project can only measured at its end in December.
While advertisers might debate the effectiveness of in-store TV, many in the industry do see it as an effective way of communicating with customers and generating new revenue streams.
It may not be growing as fast
as many expected, but Tesco, Sainsbury's and other leading retailers
still see it as a medium of the future.
Who else on the high street has screens?
While Tesco and other retailers have grabbed the lion's share of the attention in the in-store TV story so far, screens are popping up elsewhere on the High Street.
Bars, hair salons and fast-food outlets are all installing screens as a way to generate more revenue and keep customers entertained, using companies such as Avanti Screenmedia, I-Vu and Brightspace.
Media agencies feel this is a very different proposition to retail in-store TV because of the longer dwell time.
"In shopping centres, putting exciting content on screens is not going to do much to keep consumers looking at the screens for longer, because it's a mobile audience and they're not looking for entertainment when they're in that frame of mind," says James Davies, board director at Hyperspace. "Whereas with hairdressing salons, people are spending quite a bit of time in there and there's only so much chat you can make about your holiday this year."