Aisles of Opportunity: New retail categories spark 8.7-percent growth.

It’s spreading. A marketing medium used for years almost exclusively in grocery stores, in-store services are finding their way into other retail categories. But suppliers are expanding their product offerings in the traditional supermarkets channel as well.

Growth in those two areas pushed in-store services revenues up 8.7 percent to $870 million in 1999, according to promo estimates based on industry sources. “[Manufacturers] want to build a communications bridge with their customers,” says Al Witteman, executive vp-marketing and sales for Creative Solutions Group, Fairfield, NJ.

Many in-store service suppliers say they’re being contacted by all types of retailers looking to inject in-store marketing into their chains. NewsAmerica Marketing’s SmartSource Direct arm, created through the 1999 acquisition of Boston-based Consumer Card Marketing, is already calling on some of them. “We’ve been inundated with retailers looking to get into this business,” says Henri Lellouche, a senior vp with New York City-based NewsAmerica.

Retailers outside the traditional food, drug, and mass sectors are fertile ground for in-store marketers – if the stores generate enough volume to make it worth a CPG’s while, says Cary Siegel, vp-business development with St. Petersburg, FL-based Catalina Marketing. Catalina, the first in-store services giant to venture outside food, drug, and mass merchandise when it rolled into PetsMart stores last summer, is currently testing its services in other non-traditional areas, says Siegel.

Other companies – some of them retailers themselves – are developing non-traditional offerings. Dallas-based Blockbuster, Inc., for example, has teamed with Retailer Services in Dallas and created Freebie, Inc., a new company that will service Blockbuster stores and other retailers. Called Smart Offers, the system allows retailers to tie into their own loyalty programs and membership databases to offer either targeted store-specific offers or offers from outside companies.

“We know that success is based on the customer relationship,” says Greg Smogard, division president of Blockbuster Business Solutions, the business-to-business subsidiary created last January. “With this we can develop timely, relevant, value-added offers for our members.” Companies that have already tested Smart Offers include T.G.I. Friday’s, General Nutrition Center, Eckerd, and AMC Theatres.

OLD DOG, NEW TRICKS

The lion’s share of in-store marketing dollars still goes into supermarket programs, as manufacturers look to move merchandise and score appropriate levels of trial any way they can.

The use of in-store coupon networks stayed strong in 1999. Brand managers kept paying for the targetability and heightened response rates (Siegel claims the return rate is eight times that of FSIs) associated with in-store coupon machines. NewsAmerica, which operates systems in 15,000 grocery stores and 14,000 drug stores, broke the one-billion coupon distribution mark in 1999, a figure that rose about two percent from 1998. Redemption rates for Catalina’s in-store coupons (from 14,000 stores) rang in at 8.7 percent, up from 8.3 percent in 1998.

Manufacturers also continued their push to create innovative co-marketing efforts. CPGs are mixing and matching in-store activity based on retailer needs, says Lellouche. Example: A brand may use store radio systems and shopping cart ads in some stores, but coupon machines and shelf-talkers in others. “We’re seeing a lot more regional and chain-specific buys,” adds NewsAmerica’s group vp-business management Jesse Aversano. Packaged goods makers are also letting retailers bundle coupons for non-competing private-label brands with their own products. And more than 10,000 stores now have frequent-shopper programs, compared with 9,000 a year ago, according to Retail Systems Consulting, Naples, FL.

Suppliers have responded to burgeoning in-store budgets with a rash of new offerings that include shelf-talkers, floor-talkers, and products that simultaneously leverage loyalty cards and in-store media. Catalina last year introduced One-to-One, a syndicated direct-mail program that allows retailers to send consumer-specific offers to loyalty card holders. Twelve retail chains are currently using the product.

NewsAmerica later this month begins testing a Smart Card product in 15 Furr’s Supermarket stores in New Mexico. The company will reissue 150,000 Furr’s frequent-shopper cards. Store aisles are peppered with digital machines proffering discounts and cross-promotional offers. Consumers dip the new cards into the machines, which log discounts that are activated at check-out. The cards can hold up to 100 different offers.

Look for similar programs to roll out later this year and in 2001. Also look for retailers to start aggressive in-store pushes for their own private labels.

– Spending on in-store services jumped 8.7 percent to $870 million.

– In-store services are expanding beyond food and drug retail channels.

– More than 10,000 stores now have frequent-shopper programs, compared with 9,000 a year ago.

– The use of in-store coupon networks stayed strong in 1999.