Can POS and AV integrators make the leap to digital merchandising?

Author: Bill Gerba on 2006-03-20 16:33:09

A little less than a year ago, I blogged about a ProAV Magazine article that focused on digital signage as a hot new product for AV integrators to pitch to their existing client base. In brief, the article focused on sample implementations in retail stores, banks and even moving screens on cars and taxis, but given the magazine's target audience (namely, AV integrators), the implications were clear enough: digital signage can be a high margin product with the potential of ongoing revenue for VARs - many of whom are often stuck selling low-margin commodity parts and services.

As the digital signage marketplace continued to expand through the latter half of 2005, other publications released articles (here and here, for example) on selling high-margin digital retailing services into existing customer accounts, and I've seen articles this year continuing the trend as well. But I don't think that any of these articles have really told the whole story about what's involved in getting either a kiosk or digital signage network up and running, and where the real ongoing revenue opportunities are. What's worse, in my opinion, is that some authors have expressed sentiments that are either inaccurate (at best), or downright detrimental to VARs trying to make a start in the industry. In the section below, I've detailed what seem to be the top four misconceptions about doing business in the digital merchandising space and provided my own perspective on how they should be approached.

Myth 1: Writing an interactive kiosk application is just like writing a touchscreen POS application.
While both applications will need to have some things in common (e.g. touchscreen-friendly buttons and navigation), the target audiences are vastly different, and that means the applications need to be different as well. For example, a POS application is written to be as concise as possible, as these applications get used by trained personnel who must perform the same tasks many times a day. Thus, POS integrators can write applications that sacrifice ease-of-use for speed, since they know their operators will receive instruction on how the system works and will likely be using the POS terminal multiple times a day. Kiosks, on the other hand, are public-facing, and need to provide step-by-step guidance to users who have never used the system before -- often when there is no human assistance standing by for training. To see how this plays out in the real world, consider the number of buttons on the screen: the main sales entry screen for a POS program can easily have dozens of options, while a well-designed kiosk should present the user with no more than 3-5 options per page.

Myth 2: Kiosks and digital signage = instant recurring revenue
While there are many opportunities to generate recurring revenues from the installation and maintenance of digital retailing systems, it's certainly not a sure thing. Remote management, application upgrades, content management, and analytics all create ongoing work that can be billed for. Extended warranties and on-site repair services are also popular additions that many customers utilize. However, in all of these cases the ongoing revenues are tied to delivering ongoing services, and if your customers don't typically recognize the value in these services, you won't have as good of a chance to create a recurring revenue stream. This makes sense when you think about it, but sometimes I get the feeling that a lot of VARs start to forget about the "VA" part of things when recurring fees come into the picture. Put another way: it's very difficult to realize ongoing margins with kiosks and digital signage unless you're delivering something of value to the customer over time.

Myth 3: Digital signage is a one-size-fits-all product
There must be 500 companies purporting to provide some sort of digital signage product or services these days. I have no idea who their customers are or how many of them will actually be able to stay in business in the long run, but the sheer volume makes one thing clear: when it comes to retail technologies like self-service kiosks and in-store display networks, there's more than one way to do things. While any good POS or AV integrator will already be used to having multiple tiers of products to meet different client needs, many digital merchandising technologies are still so new that there are no standards to guarantee interoperability or performance targets. Thus, as an integrator you'll have to do a lot of legwork up front to determine which mix of products and services you'll want to rep.

Myth 4: AV integrators can easily make the jump to selling ad space on digital signs they install
I'm going to go out on a limb here and guess that most VARs - of any type - don't make their living selling advertising. Yet just because ads will often appear on digital screens and kiosks, some hardware manufacturers and industry analysts have suggested that integrators will have the in-house expertise and sales team to sell them. While this service would be extremely valuable to customers who rely on ad revenues to make their screens profitable or useful, selling ad space is about as far away from installing and servicing POS or AV networks as you could possibly get. If you want to build out an in-house team to provide this kind of service, that's great, and you can be successful given the proper amount of drive and determination. But there are many digital merchandising business models that don't rely on advertising that might be a better fit for both you and your customers. You might be better served focusing on those instead, since an ad-supported digital retailing network without any advertisers is a surefire loser for all parties involved.

So there's my take on things. Despite the issues listed above, ongoing growth in our industry does provide opportunities for AV and POS companies to get involved with next-generation digital retailing services, and the aforementioned articles are right in trying to get integrators excited about them. However, like any new product, the vendors need to understand both the needs of the marketplace and all parts of the solution -- especially with regard to how value is delivered to the end users -- before they can compete effectively.