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IoT sensors tattle on stores that neglect promo displays

Whether it's a pharmacy, a supermarket, or a clothier, when you walk into a retail store in the U.S., you are sure to encounter a flashy promotional display featuring products from a specific brand.

It's a marketing strategy that's been to be highly at boosting sales. Brands carefully plan display campaigns, signing contracts with retailers that specify when to install the exhibits and for how long. They often provide financial incentives to encourage compliance.

But a new study from Ashish Agarwal and Ioannis Stamatopoulos, both associate professors of information, risk, and operations management at Texas McCombs, reveals a major problem with the strategy: the stores. They're failing to place promotional displays according to plan—or at all.

The study, titled "Promotional Inventory Displays: An Empirical Analysis Using IoT Data," is in Manufacturing & Service Operations Management.

In the past, it's been difficult to fully monitor compliance by individual stores, Agarwal says, making penalties a rarity.

"If you have thousands of stores, how do you know it's being done well and correctly?" he asks. "In the old setup, the only way to do it is by running audits, and that's very expensive and it's very ad hoc."

For this study, however, he found a new and comprehensive data source: internet of things (IoT) technology, which embeds sensors in displays to provide real-time reporting over the internet.

Agarwal and Stamatopoulos—along with Jacob Zeng of Gonzaga University—worked with a startup company that deploys IoT to help retailers. It provided data from one client, a Fortune 500 brick-and-mortar chain, for a six-month period ending in March 2018. The data covered 10 campaigns, 4,786 stores, and close to 15,000 promotional displays.

Major brands strategically timed the displays. Johnson & Johnson's campaign ran in conjunction with the start of flu and allergy season, while Coca-Cola's promoted new packaging for Diet Coke.

Thanks to the IoT, the researchers could track when and whether those displays made it to store floors at the planned times. They found that:

• One-third of the displays—about 5,000—were never installed.
• Those that were installed were in place for just 62% of the specified periods.
• Only 2% of displays were placed on and removed from the floor on time.

"One major issue is poor execution, leading to missed sales opportunities," says Stamatopoulos.

Botched displays cost sales

Poor execution deprived brands of substantial sales, the researchers found. Displays boosted sales of targeted products 2.3% more when they were installed during the specified campaign period, rather than during a noncampaign week.

"If it's done correctly, it can actually boost sales," says Agarwal.

Why aren't stores doing it correctly? By visiting stores and interviewing employees, the startup company learned that busy managers often saw the displays as a nuisance.

"From their perspective, displays are a hassle to assemble and to dismantle," Agarwal says. "They take up space in the backroom, and they clutter the sales floor."

Drilling deeper into the data, the researchers found correlations that supported the nuisance diagnosis.

• Larger, more complex displays were far less likely to make it to the floor.
• So were ones that arrived too early or on weekends.

Agarwal says the most obvious solution to the problem is to invest in IoT technology, as did the companies in the study. Installing sensors in every store and promotional display might be cost-prohibitive for some, but it could pay off over time, as brands recouped lost sales.

Absent technology, another solution would be to offer financial incentives to store managers, to encourage them to install displays correctly.

Ultimately, it's up to retailers to decide what's best for them.

"This study is showing you the value of promotional displays," he says. "The next step would be to do a cost-benefit analysis to determine whether you should implement the technology or not."