CHAMPAIGN, Ill. – Video advertising in stores is a moneymaker for retailers, but a growing threat to already cash-strapped print and broadcast media, according to a new study co-written by a University of Illinois business professor.
Yunchuan “Frank” Liu says in-store marketing has surged in the last decade, fueled by on-the-spot commercials that have proven persuasive with shoppers and lower advertising rates that are popular with manufacturers.
Retailers have a pricing edge over traditional media outlets because stores profit from both advertising revenue and sales increases sparked by the ads, according to the study, which will appear in Marketing Science, a peer-reviewed journal.
“Commercial media only gains from advertising, with no direct stake in how much product is sold,” Liu said. “Retailers have incentive to subsidize rates because the more manufacturers advertise, the more sales could increase.”
The study, based on economic models, is the first to examine the impact of in-store advertising on the product-distribution chain, said Liu, who co-wrote the study with University of Southern California economist Anthony J. Dukes.
Liu says the findings are another dark cloud for newspapers, magazines and broadcasters already wrestling with audience and revenue declines in a market spread thin by the growth of online, cable and other options.
“In the future, we see more advertising available in stores, and more advertising shifting from commercial media to in-store media,” said Liu, a professor of business administration.
He says print and broadcast media may have to adjust their sights, forgoing ads for food, cleaning supplies and other staple products and focusing instead on brand-awareness campaigns, services such as movies or health care and big-ticket items that consumers ponder before buying.
“Commercial media could become a high-quality platform for branding, long-range buying and services not available in stores,” Liu said. “But for impulse purchases