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Big Brother Is Grocery Shopping With You



Sales pitches in the aisles, on carts, and at the checkout counter

Imagine a supermarket where store shelves talk to you. Blinking lights lure you to coupon dispensers. Overhead electronic boards urge you to buy, buy, buy. Your shopping cart suggests a recipe for fettuccine Alfredo--and tells you where the Pampers are. At the checkout, you watch ads on a TV monitor. And as the cash register scans the barcodes of your purchases, other gizmos flash commercials at you, spit out even more coupons, and keep track of your frequent-shopper points.

It may be your vision of supermarket hell, but to marketers and retailers, it sounds like paradise. Their logic: If they get you where you shop and at the actual moment when you decide to buy, they can score gains not possible with plain old TV ads and coupons in the Sunday papers.

WHO'S BORED? But the problem with heaven, as the old saying goes, is what you have to do to get there. Already, high costs and unforeseen glitches have produced heavy casualties among in-store marketers. In late February, Turner Broadcasting System Inc. took a $16 million write-down to pull the plug on its in-store Checkout Channel. The venture installed TV monitors to beam Cable News Network at bored shoppers in checkout lines. But the ads on CNN weren't necessarily for things stocked by the stores. And consumers didn't need to be entertained. "Four and a half million copies of the National Enquirer are read on supermarket lines" each week, says Alan Gottesman, media analyst at PaineWebber Inc. Turner will stick with a similar program for airports.

Another highly promoted venture, VideOcart Inc., recently reported a 1992 loss of $25 million on sales of $7 million. The stock is bouncing around 4, down from 17. "There are skeptics galore on VideOcart," admits VideOcart Chief Executive John Malec. VideOcart's product: a shopping cart equipped with a monitor that can, for example, offer electronic couponing or store maps. The problem: It costs VideOcart $100,000 to install the system in a store, and the company needs to be in 400 stores to make money. So far, shoppers are pushing VideOcarts in only 230. Malec says that VideOcart will hit the critical mass to churn out profits by 1994.

Not all in-store marketers are coming to grief on Aisle 3. Catalina Marketing Corp. of Anaheim, Calif., is turning a profit on a relatively simple system it has installed in 5,500 stores. To encourage consumers to switch from another cookie brand to, say, Nabisco's Chips Ahoy, Catalina's system spits out a discount coupon for Chips Ahoy each time the scanner reads the barcode for a rival brand. If Nabisco wants Chips Ahoy munchers to try other Nabisco products, Catalina can spit out a coupon for those. "The name of the game is to market directly to the right consumer," says Catalina President George W. Off.

According to data trackers A.C. Nielsen Co., an average of 9.4% of Catalina's checkout coupons are eventually redeemed at stores, compared with 2.5% of free-standing coupons--the kind that appear in the Sunday papers. This year, PaineWebber's Gottesman figures that Catalina will generate $72 million in revenues, a 38% hike from 1992, and profits should double to almost $10 million.

Still, Catalina has a cost problem of its own. Its coupons cost an average of 7 apiece, compared with less than a penny for those in the Sunday papers. Both Clorox Co. and PepsiCo Inc., one-time customers that both acknowledge strong results from Catalina, have stopped using the service while they decide whether it brings in enough new customers to warrant the expense. Even so, Catalina will probably introduce its service in another 1,500 stores by 1994. And it will soon move into music stores in a joint venture with San Francisco-based I-Station Inc., whose electronic kiosks enable customers to hear excerpts before buying recordings.

A few other in-store programs also show promise. Advanced Promotion Technologies Inc. has developed an electronic checkout device that dispenses coupons and plays short commercials on a video screen. In 34 stores now, but soon to be in 722, APT's Vision Value Network offers credit or debit cards that double as frequent-shopper cards. Users can log points redeemable for items such as VCRs. The card also provides manufacturers and retailers with demographic data to target specific buyers and bring in repeat customers. A Nielsen study concluded that an APT program in one chain delivered a 9% boost in market share for participating brands. The six-year-old Deerfield Beach (Fla.) company lost more than $11 million last year because of startup costs. But Vons Cos., Southern California's largest supermarket chain, has agreed to pay $5 million for nearly 10% of APT. And Procter & Gamble owns 24%.

Actmedia, based in Norwalk, Conn., has long had a simple recipe for in-store success: coupon dispensers located next to products in store aisles. Now, the $186 million company is testing a device that, perched next to a product, emits a 10-second promotional message at the press of a button. Of course, in-store marketers hope that shoppers will be the ones who get their buttons pressed as they wheel their carts down the aisle. Ronald Grover in Anaheim, Calif., Laura Zinn in New York, and Irene Recio in Miami

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