Business Solutions, October 2006
Written by: Chris Loringer
The popularity of digital signage is apparent in just about every facet of our lives. Digital signs are commonly installed in transportation hubs, arenas, schools, stadiums, convention centers, banks, airports, corporate facilities, and retail businesses. They can deliver relevant, meaningful content in the right place at the right time to invoke a desired response from the viewer. A networked digital sign can provide customized messages based on a number of factors such as time of day and/or location. The communication value of digital signage is apparent. However, is this an opportunity for VARs to add more sales?
"Absolutely," says Mike Strand, president and CEO of StrandVision Digital Signage, a company that provides Internet-based digital signage services. "Companies outside of the traditional retail space that are interested in digital signage rely heavily on the VAR for the entire process and are willing to pay close to manufacturers’ list prices."
As a digital signage service provider, StrandVision does not sell the signage hardware components. Instead it offers an Internet-based subscription service that provides customers with sign content and management services. The VAR can sell StrandVision’s subscription service; sell and install computers, screens, mounting and cabling hardware; and sell the installation and content creation services. "Depending on the capability of the VAR, they can profit greatly from all of those components," adds Strand. "A single-screen digital signage system often yields more than $2,500 in profit in the first year, with residual profits continuing for as long as the customer is running the system." StrandVision has a network of distribution partners who provide additional discounts to its VARs. "It’s like a buying group which enables all of us to share information about which equipment works best for which applications, and it provides additional profit," says Strand.
Steve Demarais, president and CEO of Trilogy Touch Technology, agrees with Strand regarding the market opportunities for digital signage. "Market research indicates digital signage to be a $1.5 billion market by 2008," he says. Trilogy is a partnership with Chi Mei Optoelectronics and Chi Lin Technology, CMO’s sister company. Chi Lin Technology produces digital signage products that are sold to OEMs and also marketed under the Chi Lin brand.
"We think the price curve of large-sized LCDs [27 inch to 56 inch] will decrease over the next few years, which will increase capacity to produce these products in high volumes," explains Demarais. "The market desires large-sized LCDs for digital signage, and the increased capacity means the technology will become affordable for more customers. That trend will create sales opportunities for VARs."
"A VAR has to be realistic about its opportunity to succeed in this market," warns Jon P. VanderMeer, sales manager for The Kiosk and Display Company, LLC, a VAR that provides kiosk, iPosters (a combination of an electronically updated sign and a service to provide the updates), and electronic tickers. "VARs have an excellent chance to succeed if they are supplying a service that is needed by the client — specifically helping them achieve a sales, marketing, or messaging goal. Target has a useful digital signage installation because it gives customers actionable information. Conversely, there is a McDonald’s restaurant down the street that has a plasma sign that displays news, trivia, weather, car dealer ads, and a stock ticker. It looks like a junk drawer of information. In my opinion, that type of digital sign does not provide value to anyone — especially customers."
If you’re thinking about jumping into this market, our experts have some advice. "A VAR should do a few small projects with a few different established digital signage vendors to test the waters," says VanderMeer. "If the VAR finds success and a partner it trusts, the VAR can increase its revenue by taking on more pieces of the product sales and delivery cycle from the partner." The Kiosk and Display Company’s core product is the iPoster server, which manages information between the display screen and the central server. "If one of our VARs wanted to coordinate installations and long-term content management, we would be willing to hand off the revenue to allow us to free up our time to focus on delivering more servers," explains VanderMeer.
"Any VAR who knows how to run a Web browser and has the capability to set up a computer with a basic Internet connection can implement the StrandVision solution," explains Strand. "The VAR should also be equipped to install the signage hardware in a business setting [e.g. mounting of the equipment]. Wireless technologies can also reduce or eliminate the need for wiring expertise. For those VARs who need the assistance, we can help with recommendations."
"Traditional kiosk and retail application VARs are logical candidates to sell digital signage," says Demarais. "VARs can get started by talking to their customer base to gauge interest. They should also contact digital signage manufacturers and distributors to begin a dialogue and build a reseller relationship."
VanderMeer refers to point of sale/digital signage integration as the Holy Grail of digital signage. "Imagine the credit card reader at a movie theater sending the customer’s name to a sign. For example, when you buy your tickets at a theater with a credit card, a screen over the door can say, "Enjoy the movie, Jon." Privacy advocates will undoubtedly be upset with that example, but VanderMeer makes a good point about personalizing the retail process with digital signage. He adds, "Imagine a Wal-Mart sign that changes ads based on the purchase profiles of the last 20 checkout customers." This type of solution can also be adjusted by changes in inventory.
StrandVision’s Strand continues, "Most digital signage solutions have scheduling built into the systems. The scheduling can be used to compare POS sell-through reports on the advertised items to determine the upsell that resulted from the messages." The results of those comparisons can be used to adjust the timing of the messages to gain the optimum sell-through for each item.
Internet-based signage systems also have the ability to gather information from other Web sites. Adding weather, news, and trivia to digital signage can keep customers entertained and watching the signage in between the advertising messages. This capability creates a dynamic signage system that appears to be updated every few minutes, without the intervention of store employees.
Because digital signage technology is maturing, VARs entering this market can avoid some common mistakes by learning from those who have gone before them. For instance, "Reselling home market LCD TV products instead of professional grade LCDs is a big mistake," according to Trilogy’s Demarais. "Home LCD TV products will not last over time."
"The biggest mistake I see is when VARs undercut the profit opportunity," explains Strand. "Many VARs come from the world of selling commodity products where the margin is a few percentage points. Digital signage offers the capability to offer a package that includes everything at manufacturer’s suggested retail price or above. The competition is so slim that the customers don’t even spend the time to shop around."
"Some VARs are in such a hurry to slap a plasma screen on the wall that they forget there needs to be useful information displayed," concludes VanderMeer. "VARs will flourish with a long-term relationship with their clients, not a hit-and-run project." Whether VARs are interested in selling digital signage as a managed service, a hardware solution, or integrated with a POS system, it’s clear that the digital signage opportunity is now.